GATS and Services Negotiations Prepared by Wenguo Cai Senior Trade - PDF document

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) GATS and Services Negotiations Prepared by Wenguo Cai Senior Trade Expert, TPSA The Conference Board of Canada Jakarta, Indonesia September 9-10, 2015 1 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Presentation Outline (1) Introduction to Trade in Services (2) General Agreement on Trade in Services (3) Services Negotiations in the WTO 2

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) (1) Importance of Trade in Services • Increasing Importance of Trade in Services in the World Economy: – Services represent about 2/3 of world’s GDP (for example, 70% Canada, 54% Indonesia, 27% Nigeria) – Trade in services is increasing its economic importance (about 22% of the world trade) – Developed countries: strong on trade in services (a CBoC study: 44% of Canada’s exports from services) – Developing countries are increasingly becoming more active in exporting services (e.g. Thailand’s tourism sector, India’s IT services; foreign direct investment in China’s services sectors; How about Indonesia? 3 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Developing Countries & Services Trade: Some Facts The share of developing countries in world services • exports increased from 20 to 26% (1990-2014). • Travel and transport account for over 60% of developing countries’ services exports. • India’s success is well known – software and BPS, accounting for 33% of India’s exports. • Brazil, Costa Rica and Uruguay are also exporting processional services. • Philippines and Egypt have developed world-class call centers. 4

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Trade in Services: Some Differences with Trade in Goods Simultaneity of production and consumption • • Services also support trade in goods • No tariff duties: market access conditions determined by regulations, and restrictions • Strong government involvement – Existence of natural monopolies, public service obligations – Infrastructural importance of services (transport, telecom) – Role of non-economic objectives (social, cultural and safety) 5 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Trade in Services: Increasing Importance for Indonesia • The service is the largest sector – 7% growth rate - 54% of GDP, & 50% of employment • 7.1 million jobs depend on trade in services • Transport, travel, trade, ICT, transport, construction financial, health, education and social services are key service sectors. • Promoting services exports from Indonesia: – Creating a more competitive service industry – Delivering high quality services abroad – Negotiating better service package (WTO, FTAs) – Making good use of MODE 4 and MRAs 6

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) (2) General Agreement on Trade in Services (GATS) • Objectives and Principles – Expansion of trade in services – Progressively liberalization of trade in services – Increasing participation of developing countries in services – Flexibility for developing countries, particularly LDCs 7 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Architecture of GATS • Framework of general rules and disciplines for all sectors (e.g. MFN, Transparency, etc.) • Annexes addressing special conditions relating to individual sectors listed in national schedules of commitments (e.g. Market Access, National Treatment) • Work plan for progressive liberalization (built-in negotiations) 8

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) GATS: Scope, Coverage, and Definition • Measures affecting trade in services at all government levels (including central, regional, and local governments and their delegates) • All Services sectors (except for governmental services and air traffic rights) • No definition of services but a definition of trade in services is based on four (4) modes of supply – Mode 1 – Cross Border Supply – Mode 2 – Consumption Abroad – Mode 3 - Commercial Presence – Mode 4 – Presence of natural persons 9 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) 10

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) GATS: Sectoral Coverage (CPC) • Business services • Health services • Communications • Financial services • Construction • Tourism • Distribution • Recreation, culture and sports • Education • Transport • Environmental services • Others 11 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) How to Read GATS Schedule (Example: Health) Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons Sector or Limitations on Limitations on Additional subsector market access national treatment commitments 8. HEALTH RELATED AND SOCIAL SERVICES 1) Unbound 1) Unbound A. Hospital Services 2) Unbound 2) Unbound (CPC 9311) 3) Only through 3) None incorporation with a foreign equity ceiling of 51 per cent 4) Unbound except as 4) Unbound except as indicated in the indicated in the horizontal section horizontal section 12

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) “Horizontal” Commitments • To avoid repetition, measures applied to a number sectors are listed at the front of he schedule. Like sector-specific entries, they are legally binding. Listed by column and mode • Some may relate to one mode of supply – Example: overall limitation on foreign investment (commercial presence) • Others may affect more than one mode of supply – Example: tax measures contrary to national treatment 13 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Typical Horizontal Commitments • Measures can relate to one or more modes of supply – Restrictions on land ownership, investment, entry of natural persons – Discriminatory tax measures • Horizontal commitments condition all other entries unless otherwise specified: – “None” in sector-specific section - >except as set out in horizontal section – Departures must be clearly and consistently indicated 14

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) GATS Obligations Regarding Listed Sectors • A member may withdraw or modify a specific commitment – On 3 month’s notice to the Services Council • WTO members may claim compensation in the form of trade concessions for lost benefits: – May be determined by arbitration if not agreed – Compensatory adjustment extended on MFN basis to all WTO Members 15 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Special Provisions for Certain Sectors and Activities • Financial Services – Annex on Financial Services • Definition: banking, securities and insurance • Carve out for central bank activities and prudential measures – Higher customized commitments taken by some members • Right of commercial presence • Cross-border supply and consumption abroad (insurance) • Access to payment and credit clearing servics • Membership in self-regulating body • No discrimination in government procurement 16

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Special Provisions for Certain Sectors and Activities • Telecommunications – Annex on Telecommunications – Members must provide non-discriminatory access to public communications services for services providers in the listed sectors – Many WTO members committed on the basis of a “reference paper” • Specific competition on “major suppliers” – E.g. cross subsidization prohibited • Commitments on interconnection • Transparency of interconnection procedures • Regulator independence of major supplier 17 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) Special Provisions for Certain Sectors and Activities • Movement of Natural Persons (Mode 4) – Annex provides that • No obligations regarding access to employment, residence or citizenship on a permanent basis • Air Transport – Air traffic rights under the Chicago Convention excluded from GATS 18

Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) GATS and Developing Countries • Increased participation of developing countries in the services trade • Progressive liberalization of services • Improved market access of developing country services suppliers • GATS contact points for information • Technical assistance to be provided by the WTO Secretariat as decided upon by the Trade in Service Council 19 Canada-Indonesia Trade and Private Sector Assistance Project (TPSA) (3) Services Negotiations in the WTO • It was the first time that trade in services was included in the trade negotiations in the UR that created the WTO in 1995. • The services negotiations in the UR were unfinished business – continuing negotiations from UR to DDA • WTO members continued negotiating sectoral services agreements (Basic Telecoms; Financial Services; etc.) • WTO members also committed to services negotiations in order to progressively liberalize the services sectors. However, the progress was slow and limited. • 24 WTO members (EU as one) are trying to negotiate a plurilateral Trade in Service Agreement (TiSA) • Many WTO members are also moving to FTA negotiations, including services. 20