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TRADE: Lamy Pushes Ahead With Services Liberalisation

Analysis by Aileen Kwa*

GENEVA, Apr 21 2008 (IPS) - World Trade Organisation (WTO) Director General Pascal Lamy announced at the end of last week that there will be a limited ministerial ‘‘signalling’’ conference on services trade chaired by himself.

No dates were given but it is expected that it will take place with a mini-ministerial meeting planned for May 19 which deals with the issues of non-agricultural market access (NAMA) and agriculture. He indicated that senior officials will already begin negotiations in Geneva on May 5. Most in Geneva, however, do not believe that this timeline can be met.

The ‘‘signalling’’ conference will focus specifically on market access: participants are expected to ‘‘signal’’ to each other the extent to which they are prepared to liberalise their services sectors.

According to Lamy, ‘‘any outcome on market access among participants in the plurilateral process will be automatically extended on an MFN (most favoured nation) basis to all members’’. This comment has worried many developing country negotiators.

‘‘Plurilaterals’’ refer to negotiations between a subset of WTO members. The outcomes of such talks are, in theory, only binding on those members. MFN refers to each member state granting trade advantages equally to all trading partners.

He also said that ‘‘participation in the signalling conference would be, more or less, among members participating in the plurilateral request and offer negotiations, plus representatives of regional groupings – all in all, similar to the format of the ministerial Green Room.’’

This would mean that only the developed countries, the emerging developing countries and a few others will be included in these meetings. These are the countries that account for most of world services trade. The bulk of WTO members, however, would not be involved.

As chairperson of the signalling conference Lamy said he would provide an oral report to the trade negotiations committee, where he made the announcement on April 17.

The main elements of the report would include ‘‘a description of the sectors and modes of delivery discussed and the signals exchanged regarding new or improved commitments which participants would be ready to undertake’’. The conference will probably last one day.

In the corridors of the WTO there was great unhappiness about this signalling conference by those who have been excluded from the small group services meetings and who will not be party to the conference. Many are worried about the implications for their countries.

One African delegate, whose delegation is not involved, spoke to IPS on condition of anonymity, given the sensitive nature of the issue. He said that ‘‘the conference is being pushed by the developed countries. Even though we are not involved, our fear is that what they agree among themselves will impact on us.

‘‘This can happen in two ways. One, the outcome can be used as a benchmark for other members who are not participating.

‘‘Second, we cannot refuse or oppose other members from coming together. However, what is the implication in terms of the multilateral process when we have the secretariat directly involved? The director general (DG) is chairing the meeting himself. The involvement of the DG (undermines) the neutrality we expect of the secretariat’’.

He went on to ask, ‘‘will the DG then say, the plurilateral group has achieved this. Those who have not participated, can you achieve two-thirds of what was achieved?’’

Services trade is of major interest for both the U.S. and the European Union (EU). There has been intense lobbying by U.S. and EU business groups in Geneva in recent weeks.

What could happen – and this would be very dangerous for all countries, including those who are not participating – is that the conference becomes the starting point for ‘‘sectoral’’ negotiations. Sectoral negotiations constitute the formalisation of negotiations on specific services sectors.

It takes place when there is a ‘‘critical mass’’ of countries involved, as was the case after the Uruguay Round in telecommunications and financial services. ‘‘Critical mass’’ refers to the countries that contribute to most of the trade in that sector. The eventual outcome is a common template of liberalisation in each sector under negotiations.

This regulatory template or framework tends to put liberalisation, ‘‘pro-competitive’’ objectives and the rights of foreign firms ahead of national objectives such as universal provision of services. This may therefore not advance developing countries’ interests.

In 2004, the WTO’s dispute panel ruled against Mexico in a case brought to the WTO by the U.S.. The U.S. said that Mexico’s regulations were anti-competitive and contravened the Telecoms Reference Paper – the regulatory framework that resulted from the telecommunications sectoral negotiations.

The panel ruled that Mexico had failed to provide American basic telecommunication suppliers with equal access to and use of public telecommunication networks and services. The Mexican company Telmex had charged the U.S. supplier higher interconnection rates.

Mexico tried to defend its regulations on the basis that they were designed to include the costs for rolling out telecommunications infrastructure, a need of many developing countries.

The panel, however, accepted the U.S. argument that the rates charged should be based solely on the specific services foreign companies required. No contribution to the development of Mexico&#39s telecommunications infrastructure could be included in the rate because Mexico had adopted the Reference Paper.

Even though countries may choose not to sign on to such a regulatory template, once such a template has been adopted by a ‘‘critical mass’’ of states and it is formally part of the multilateral framework, there is a de facto, hidden obligation on all.

In theory, the countries that are non-signatories can ignore such a ‘‘benchmark’’. However, in practice, bound under international law, it becomes a minimum norm which would be used by foreign investors and trading partners to evaluate countries. This norm will be seen as the minimum guarantee to protect their interests.

*Expert writer Aileen Kwa is an independent trade policy analyst on leave from Focus on the Global South, a non-governmental organisation that engages in policy research and activism to generate critical analysis and debate on globalisation and neo-liberalism. This article is the first in a series of two.