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Services: What's at stake in Cancún?

Taken from: Rough Trade; A Critique of the Draft Cancun WTO Ministerial Declaration by Scott Sinclair, senior research Fellow, Canadian Centre for Policy Alternatives, September 5, 2003.

It is fair to say that, although they are of central importance, services will not be one of the more contentious issues among governments in Cancun. As is the case with agriculture, the WTO treaty on services-the GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)-contains a commitment for members to engage in repeated rounds of negotiations to expand the reach of the treaty. Negotiations on the current round began in early 2000 and were, like agriculture, incorporated into the Doha round negotiations. However, in contrast to agriculture - where there are deep divisions among the Quad countries - the Quad is united in its push for broader and deeper GATS commitments. To date, developing countries have taken a fairly passive role in the services negotiations, although there are some signs that this may now be changing.

The Doha declaration set specific deadlines for the services negotiations, namely that

"Participants shall submit initial requests for specific commitments by 30 June 2002 and initial offers by 31 March 2003."

By the end of August this year, just over 60 member governments had tabled formal requests of other countries to make certain specific commitments in their services sector. But only about 30 govern-ments, mostly developed countries, have made initial offers for the increased application of certain GATS rules to aspects of their own domestic service sectors. Key developing countries that have yet to table offers include Brazil, China, most of South East Asia, and India. This so-called REQUEST-OFFER PROCESS is scheduled to proceed continuously until the conclusion of the Doha Round.

The request-offer negotiations occur mainly in Geneva and proceed on a bilateral, country-to-country basis. These meetings and the requests themselves are secret, although a number of requests have been leaked. The most notable leak was of the draft of the EU's intial requests, which revealed that the European Commission (EC) is making sweeping demands of other countries. For example, in the case of Canada the EC demanded the elimination of the following measures that Canada has exempted in its current GATS schedule,

The leaked text of the EC GATS requests also demands commitments in sectors or sub-sectors that Canada has not yet fully covered under the GATS. Examples include:

There were no specific EC GATS requests regarding education or health services.

Although most requests remain secret, their cumulative effect, if acceded to, would be to eliminate all LIMITATIONS (that is, country-specific exceptions) in country schedules and to commit every sector fully to GATS restrictions. Beginning in March 2003, a small number of countries tabled their initial formal offers in the GATS negotiations. Some governments, including Canada, made these offers public. Canada's initial offer is primarily a commitment to bind liberalization that Canada has undertaken since January 1, 1995. The offer states that Canada will not make further commitments in health, public education, social services and culture. Like Canada's offer, the other country offers that are in the public domain show that most governments have, so far (with certain exceptions in some sectors) mainly offered to lock in, or bind, existing levels of liberalization. That is, they have offered to lock in those changes that they have made to their domestic services regimes since the GATS came into effect on January 1, 1995. It is important to stress that these initial offers are simply the starting point for ongoing request-offer negotiations. As the EC requests reveal, there will be strong pressure on Canada and other countries to increase their offers. The pressure for further Canadian commitments will likely be most intense in telecommunications, energy, financial services, professional services, private education, and water distribution. A final deal will be struck only in the last days, or hours, of the Doha Round negotiations. The services paragraph of the draft Cancun declaration is designed to intensify and accelerate the GATS request-offer process. It calls upon "those participants that have not yet submitted their initial offers to do so as soon as possible." It would also require those countries that have already tabled offers to submit "improved offers" by a deadline to be agreed at Cancun, most likely before the spring of 2004. Troublingly, the draft text also calls on members to compete the negotiations on rule-making under GATS Article VI.4, [DOMESTIC REGULATION] X [EMERGENCY SAFEGUARDS], XIII [GOVERNMENT PROCUREMENT], and XV [SUBSIDIES] in accordance with their respective mandates and deadlines." These rule-making talks include the controversial proposals under Article VI.4 to establish new restrictions on non-discriminatory domestic regulation. The subject matter of these proposed restrictions (e.g. "licensing procedures" and "technical standards") is very broad, cutting across a wide swath of vital public interest regulatory measures. The proposed restrictions are being designed to include some form of "necessity test" - that is, domestic regulations affecting services must be demonstrated to be not more restrictive than necessary; and that any measures adopted must be necessary to achieve a specified legitimate objective. If ever agreed to, these proposed restrictions would be an extraordinary and dangerous intrusion into democratic public policy-making.

As noted previously, the impasse in agriculture has begun to slow the pace in other areas of negotiation, including services. Brazil, for example, has made this linkage clearly, stating that it sees no point in tabling a services offer until there are clearer prospects of gains in agriculture. The converse, however, is that if and when there is a breakthrough in agriculture, there will be overpowering pressure for all governments to ante up substantially in the services negotiations. As a prominent US business coalition stated in a recent letter to President Bush, if agriculture issues can be resolved in Cancun, "on services, the stage is set for an accelerated effort to negotiate major reductions in barriers." As at the very end of the Uruguay Round, major new services restrictions could be enforced and controversial new rules imposed without careful consideration or broader public debate. For those concerned about the GATS' negative impacts on public services, industrial policy and public interest regulation, this is a very troubling scenario.