11

ISSUES AND CONCERNS OF LDCS IN ISSUES AND CONCERNS OF LDCS IN MARKET ACCESS: PROSPECTS OF MARKET ACCESS: PROSPECTS OF

BALANCED OUTCOMESBALANCED OUTCOMES

ICRIER International Seminar on ICRIER International Seminar on Developing Countries and Developing Countries and

Services NegotiationsServices Negotiations6-7 June 2006, New Delhi6-7 June 2006, New Delhi

22

STRUCTURE OF PRESENTATIONSTRUCTURE OF PRESENTATION

Where are LDCs in trade in services?Where are LDCs in trade in services? What are the challenges faced by What are the challenges faced by

LDCs in trade in services?LDCs in trade in services? Does the current direction of market Does the current direction of market

access negotiations benefit LDCs? access negotiations benefit LDCs? What is important for LDCs to see a What is important for LDCs to see a

balanced outcome in services balanced outcome in services negotiations?negotiations?

33

Where are LDCs in Where are LDCs in trade in services?trade in services? LDCs are mainly net importers of LDCs are mainly net importers of

services services LDC share in world trade in LDC share in world trade in

commercial services is 0.4%commercial services is 0.4% However services features as a However services features as a

critical sector for achieving critical sector for achieving development objectives and can development objectives and can constitute 40-50% of GDP constitute 40-50% of GDP

44

Comparison of Services Imports/Exports Comparison of Services Imports/Exports (Selected Regions, 1980-2002) (Selected Regions, 1980-2002) Source: South Centre, 2004, The WTO Services Negotiations – an Source: South Centre, 2004, The WTO Services Negotiations – an Analysis of the GATS Analysis of the GATS and Issues of Interest to LDCsand Issues of Interest to LDCs

0 200000 400000 600000 800000 1000000 1200000 1400000

Developed import

Developed export

Developing excl. China import

Developing excl. China export

Developing Asia import

Developing Asia export

Developing America import

Developing America export

Sub-Saharan Africa import

Sub-Saharan Africa export

LDC import

LDC export

Millions of dollars

1980 1990 2002

55

Where are LDCs in Where are LDCs in trade in services?trade in services? Despite low level of participation in world Despite low level of participation in world

trade in services, Mode 4 is of particular trade in services, Mode 4 is of particular importance to LDCs yet it remains the least importance to LDCs yet it remains the least liberalised and current commitments do not liberalised and current commitments do not apply to categories of interest to LDCsapply to categories of interest to LDCs

Interests do exist in sectors such as tourism, Interests do exist in sectors such as tourism, professional services (ie. outsourcing professional services (ie. outsourcing potential), construction and maintenance potential), construction and maintenance services, cleaning services services, cleaning services

The ability to realise the full potential in such The ability to realise the full potential in such areas is hampered by various constraints and areas is hampered by various constraints and challenges at domestic and international challenges at domestic and international levelslevels

66

What are the challenges faced What are the challenges faced by LDCs in trade in services?by LDCs in trade in services?

Domestic level:Domestic level: Lack of adequate infrastructure (eg. telecommunications)Lack of adequate infrastructure (eg. telecommunications) Weak regulatory frameworks and related regimes (ie. Weak regulatory frameworks and related regimes (ie.

standard setting)standard setting) Weak investment climateWeak investment climate Weak human resource capacity, training and developmentWeak human resource capacity, training and development Lack of adequate services related data and understanding Lack of adequate services related data and understanding

of benefits and costs of services trade liberalisationof benefits and costs of services trade liberalisation Struggling with basic necessities related to universal Struggling with basic necessities related to universal

access in public services (ie. education, health)access in public services (ie. education, health) Capacity issues at trade policy level due to lack of Capacity issues at trade policy level due to lack of

resources in identifying potential areas of interest, policy resources in identifying potential areas of interest, policy coordination and formulation and participation in coordination and formulation and participation in negotiationsnegotiations

77

What are the challenges What are the challenges faced by LDCs in trade in faced by LDCs in trade in services?services?International level:International level: Market access (and regulatory) barriers in mode Market access (and regulatory) barriers in mode

4 – related to recognition and qualification 4 – related to recognition and qualification issues; ENTS and labor market tests; onerous issues; ENTS and labor market tests; onerous visa and licensing requirements; non-visa and licensing requirements; non-transparent procedures; limitations on transparent procedures; limitations on establishment and local presence; citizenship establishment and local presence; citizenship and residency requirementsand residency requirements

Competition related issues (ie. global market Competition related issues (ie. global market structure characterised by domination of MNCs structure characterised by domination of MNCs especially in the higher end of the value-added especially in the higher end of the value-added chain, rapid technological change)chain, rapid technological change)

Lack of access to financial resources; know- Lack of access to financial resources; know- how capability/skills transfer and technology how capability/skills transfer and technology

88

Does the current direction Does the current direction of market access of market access negotiations in services negotiations in services benefit LDCs?benefit LDCs? The most recent round of offers on the table by The most recent round of offers on the table by

developed countries do not reflect meaningful developed countries do not reflect meaningful commercial opportunities for LDCs, clearly illustrating a commercial opportunities for LDCs, clearly illustrating a development deficit:development deficit:- - Mode 4Mode 4: : same barriers remain; in most sectors committed same barriers remain; in most sectors committed mode 4 remains ‘Unbound’ except as indicated in the mode 4 remains ‘Unbound’ except as indicated in the horizontal section; focus remains on the high skilled categories horizontal section; focus remains on the high skilled categories and in cases where new categories are being introduced, these and in cases where new categories are being introduced, these remain subject to conditions, such as qualifications remain subject to conditions, such as qualifications requirements.requirements.- - The level of commitmentThe level of commitment tends to be lower than actual levels tends to be lower than actual levels of liberalisation, therefore, in most cases commitments do not of liberalisation, therefore, in most cases commitments do not go beyond the status quo.go beyond the status quo.-There are cases of -There are cases of one limitation being replaced with anotherone limitation being replaced with another..--Few existing sectors/sub-sectors of interestFew existing sectors/sub-sectors of interest to LDCs are to LDCs are liberalised as a result of improvements to the revised offer.liberalised as a result of improvements to the revised offer.

99

Does the current direction Does the current direction of market access of market access negotiations in services negotiations in services benefit LDCs?benefit LDCs? MA negotiations are not an end itself and must be MA negotiations are not an end itself and must be

based on the objectives of the GATS laid out in the based on the objectives of the GATS laid out in the premable:premable:

- as a means of - as a means of promoting growth of all and promoting growth of all and development of developing countriesdevelopment of developing countries- for promoting - for promoting interests of all on a mutually interests of all on a mutually advantageous basisadvantageous basis and securing overall balance of rights and securing overall balance of rights and obligations with due respect for national policy and obligations with due respect for national policy objectivesobjectives- - recognises the right to regulaterecognises the right to regulate, introduce new , introduce new regulations and particular need of developing countriesregulations and particular need of developing countries- for facilitating increased participation of developing - for facilitating increased participation of developing countries in services trade including through countries in services trade including through strengthening of domestic services capacity, strengthening of domestic services capacity, efficiency and competitivenessefficiency and competitiveness- taking into account - taking into account difficulties of LDCsdifficulties of LDCs

1010

Does the current direction Does the current direction of market access of market access negotiations in services negotiations in services benefit LDCs?benefit LDCs? It is now up to Members along with the LDCs to turn It is now up to Members along with the LDCs to turn

the political commitment into reality by supporting the political commitment into reality by supporting effective and expeditious implementation of the LDC effective and expeditious implementation of the LDC ModalitiesModalities

The LDCs have been active in pushing implementation The LDCs have been active in pushing implementation of the LDC Modalities having submitted various of the LDC Modalities having submitted various proposals for taking it forward over 2005 which was proposals for taking it forward over 2005 which was met with little support or meaningful responsemet with little support or meaningful response

Since Hong Kong LDCs have continued to take the Since Hong Kong LDCs have continued to take the mandate for implementation of the LDC Modalities mandate for implementation of the LDC Modalities seriously having submitted a proposal on an seriously having submitted a proposal on an Understanding on according special priority to LDCs Understanding on according special priority to LDCs and more recently a collective request on mode 4 and more recently a collective request on mode 4

1111

Does the current direction Does the current direction of market access of market access negotiations in services negotiations in services benefit LDCs?benefit LDCs? Part of giving effect to these important Part of giving effect to these important

objectives has been recognised in the objectives has been recognised in the Negotiating Guidelines and the LDC Negotiating Guidelines and the LDC Modalities Modalities

Moreover at Hong Kong, Members gave the Moreover at Hong Kong, Members gave the highest political commitment to highest political commitment to implementation of the LDC Modalities and it implementation of the LDC Modalities and it is worth noting that it is the only is worth noting that it is the only development orientated objective of Annex Cdevelopment orientated objective of Annex C

The Hong Kong Ministerial Declaration also The Hong Kong Ministerial Declaration also recognises that LDCs are not expected to recognises that LDCs are not expected to undertake new commitments undertake new commitments

1212

What is important for LDCs What is important for LDCs to see a balanced outcome to see a balanced outcome in services negotiations? in services negotiations? For LDCs, the LDC Modalities reflects the heart of their For LDCs, the LDC Modalities reflects the heart of their

interests in the services negotiations because it is interests in the services negotiations because it is gives effect to Article IV:3 of the GATS which gives effect to Article IV:3 of the GATS which recognises the situation of LDCs recognises the situation of LDCs

The current situation is that any special priority given The current situation is that any special priority given to LDCs in MA is nullifed due to the MFN principleto LDCs in MA is nullifed due to the MFN principle

Hence, Paragraph 7 of the LDC Modalities which Hence, Paragraph 7 of the LDC Modalities which provides that:provides that:

‘ ‘ Members shall work to develop appropriate Members shall work to develop appropriate mechanisms with a view to achieving full mechanisms with a view to achieving full implementation of Article IV:3 of the GATS and implementation of Article IV:3 of the GATS and facilitating effective access of LDCs services and facilitating effective access of LDCs services and service suppliers to foreign markets’.service suppliers to foreign markets’.

1313

What is important for LDCs What is important for LDCs to see a balanced outcome to see a balanced outcome in services negotiations? in services negotiations? Implementation of the LDC Modalities (ie. Implementation of the LDC Modalities (ie.

Understanding on Special Priority) and Article IV is Understanding on Special Priority) and Article IV is importantimportant

Assessment and review of progress of negotiations Assessment and review of progress of negotiations based on the Negotiating Guidelines is critical based on the Negotiating Guidelines is critical

Given the links with MA, pro-development disciplines Given the links with MA, pro-development disciplines in domestic regulation which take into account the in domestic regulation which take into account the particular situation of LDCsparticular situation of LDCs

Progress in rules negotiations, especially Emergency Progress in rules negotiations, especially Emergency Safeguard Measure (ESM) as a safety net to safeguard Safeguard Measure (ESM) as a safety net to safeguard national development objectives especially if MA national development objectives especially if MA liberalisation is undertakenliberalisation is undertaken

Targeted technical assistance to effectively participate Targeted technical assistance to effectively participate in negotiationsin negotiations

1414

CONCLUDING CONCLUDING REMARKSREMARKS For LDCs, the services negotiations For LDCs, the services negotiations

must be development centered and must be development centered and focus on strenghthening domestic focus on strenghthening domestic services capacity (in line with their services capacity (in line with their own national development own national development objectives and priorities) and with a objectives and priorities) and with a view to enhanced competitiveness view to enhanced competitiveness and efficiencyand efficiency

1515

THANK YOUTHANK YOU