Sharp "asymmetries" in levels of ambition emerge in TiSA talks

Original Publication Date: 
20 April, 2015

Third World Network

Published in SUNS #8003 dated 16 April 2015

Geneva, 15 Apr (D. Ravi Kanth) -- As the technical experts and negotiators engaged in the controversial plurilateral initiative on Trade in Services Agreement (TiSA) prepare a report on their overall progress during the last three years, it has emerged that there will be sharp "asymmetries" in the levels of ambition in different services sectors, according to several members familiar with the negotiations.
[Former trade negotiations and trade experts suggest such a plurilateral accord will be contrary to the WTO, and cannot be lodged as a plurilateral agreement in the WTO's annex, nor would it qualify as a "services integration agreement" among participants under Art. V of GATS. See Raghavan (2014) "The Plurilateral Services Game at the WTO", pp 367-370, Third World in the Third Millennium CE, Vol. 2, "The WTO - Towards Multilateralism or Global Corporatism", TWN, Penang]
The TiSA negotiations which were launched in early 2012 made limited progress until now, as there is still no clarity on the level of ambition between capital-intensive services on the one side, and movement of short-term services providers (Mode 4), maritime transport, road transport services, and even health services, on the other.
The United States, the European Union and Switzerland, among others, want a high level of ambition in areas such as banking and insurance sectors, telecommunications, distribution and retail services, and even electronic commerce.
But the US and several developed countries are less inclined to accept even a modest outcome in Mode 4 as proposed by Turkey and Pakistan, among others. The US has also expressed strong reservations in domestic support, an area of interest to Hong Kong-China, Australia and New Zealand, among others.
More crucially, the US remains indifferent to any opening in maritime services as demanded by Norway along with several TiSA members which include both developed and developing countries.
The US and the EU are not willing to support any liberalisation of road transport services as demanded by Turkey and Mexico.
The US continues to turn a deaf ear to air transport services as demanded by several members such as Australia and Switzerland, among others.
Against this backdrop, the technical experts and negotiators of the 24-member TiSA group are going to identify the possible "deal breakers" in their report that will be finalised in this week's negotiations.
That report is likely to be adopted at the upcoming July meeting in which ministers of the group could take part. But there is no final decision yet on the ministerial participation in the July meeting, said a TiSA participant.
Members in the TiSA group include Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the European Union, Hong Kong-China, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Panama, Peru, South Korea, Switzerland, Turkey, the United States, Pakistan, Paraguay and Uruguay.
China, which had evinced interest to join the TiSA negotiations, is unable to become a member because of continued opposition from the US and Japan, among others.
Mauritius, the first African country, has formally applied to join the negotiations.
The current 12th round of talks began at the EU mission last Monday. They will largely focus on five areas: financial services, telecommunications, domestic regulation, maritime transport services and movement of short-term services providers in Mode 4.
Besides, the participants will also discuss their initial market access offers. Barring Pakistan, Paraguay, and Uruguay, the remaining 21 TiSA members had submitted their initial offers until now.
As regards the financial services, the US remains a strong demandeur. Washington presented an ambitious proposal on financial services last year, seeking market access in a range of areas that include insurance and insurance-related services, banking and other services.
The US, for the first time, included areas such as cross-border trade in maritime shipping and commercial aviation, and electronic payment of services based on its TPP (Trans-Pacific Partnership) proposal.
It pressed for inscribing in their schedule of commitments on "the supply of financial services through commercial presence [Mode 3]" and "the supply of financial services listed in Article 4 with respect to the supply of a financial services from the territory of one Party, or in the territory of one Party to the service consumer of another Party [Mode 1 and Mode2]."
The US had raised the bar high in all financial services, including curbing monopoly privileges, and public enterprise entities.
Activities in insurance and insurance-related services under which market access is demanded by the US include life, non-life, reinsurance and retro-cession, insurance intermediation (brokerage and agency), direct insurance (including co-insurance) and services auxiliary to insurance, such as consultancy, actuarial, risk assessment, and claim settlement services, according to the proposal.
In banking and other financial services, the US proposal had listed areas like acceptance of deposits and other repayable funds from the public; lending of all types, including consumer credit, mortgage credit, factoring and financing of commercial transaction; financial leasing; all payment and money transmission services, including credit, charge and debit cards, travellers cheques and bankers drafts; trading for own account or for account of customers, whether on an exchange, in an over-the-counter market in money market instruments, foreign exchange, derivative products, exchange rate and interest rate instruments, transferable securities, and other negotiable instruments like bullion; money broking; asset management; settlement and clearing services; provision and transfer of financial information or financial data; and other financial services.
Significantly, the US annex stipulated what TiSA members have to do in market access, national treatment, and standstill commitments in financial services.
More importantly, the annex had suggested what TiSA participants will have to provide "cross-border trade" in insurance of risks and "maritime shipping and commercial aviation and space launching and freight (including satellites), with such insurance to cover any or all of the following: the goods being transported, the vehicle transporting the goods and any liability arising therefrom".
The cross-border trade also includes goods insurance of goods in transit, reinsurance and retro-cession and provision and transfer of financial information, investment advice, and portfolio management services.
Following the trade dispute with China over electronic payment services, the US has now included in its annexe "electronic payment services for payment card transactions into its territory from the territory of another party by a person of that party."
Washington maintained that the inclusion of electronic payment services in the Annex is not only "new, but based on US TPP proposal." The annex spelled out the detailed activities that TiSA members shall allow for carrying out electronic payment services.
On commercial presence under Mode 3, the US said each party shall grant financial suppliers of any other party the right to establish or expand within its territory, including through the acquisition of existing enterprises, subject to conditions, limitations, and qualifications set out in the respective schedule of commitments.
The US proposal also targeted countries where certain "monopoly privileges" are accorded to financial services operators. Washington insisted that "monopoly rights" shall be eliminated or reduced.
Another controversial area being targeted in the US annex is "financial services purchased by Public Entities [state trading enterprises]". Washington called on each TiSA member to "ensure that a financial service supplier of another party established in its territory is accorded most-favoured-nation treatment and national treatment as regards the purchase or acquisition of a financial service by public entities of the Party in its territory."
The US also called for binding commitments on "payment and clearing systems", "new financial services" , "expedited availability of insurance,", "dispute settlement," and "supply of insurance by postal insurance entities."
On domestic regulation, the US wants only strong "transparency" provisions but is not prepared to accept the need for any kind of necessity test or "no burdensome than necessary" provisions.
"The United States opposes the adoption of a free-standing requirement that regulations be no more burdensome than necessary," the US had maintained in its proposal.
In sharp contrast, the friends of domestic regulation (DR) - Hong Kong-China, Mexico, New Zealand, and Switzerland - within the TiSA group have pressed for a modest outcome to ensure that market access commitments in trade in services are not undermined by burdensome and opaque regulations. "Each Party shall ensure that all measures of general application affecting trade in services are administered in a reasonable, objective, and impartial manner," the friends of DR argued in their proposal submitted to the TiSA participants.
More importantly, the demandeurs of DR in TiSA negotiations want measures pertaining to license requirements and procedures, qualification requirements and procedures, and technical standards which require authorization for the supply of a service are based on "objective and transparent criteria."
Effectively, the US lowered the bar on domestic regulation well below what is set out in the WTO's GATS provisions, thereby, ensuring that market access commitments could possibly face impediments, a TISA participant said.
Turkey, which is a strong proponent for movement of natural persons under Mode 4 in the TiSA group, wants specific commitments to measures affecting the entry, temporary stay and work of natural persons. Turkey has listed the categories of natural persons as business visitors, business service sellers, intra-corporate transferees, contractual service suppliers, and independent professionals.
Turkey called on the TiSA parties "to avoid applying Economic Needs Tests, or other procedures of similar effect as a condition." In case, members choose to apply ENT, they should be applied on a non-discriminatory basis. Turkey said there should not be exorbitant visa fees for temporary stay or work of services providers.
On international maritime transport services, Norway has submitted two proposals which were supported by many TiSA members.
Norway's has called for ambitious "strong commitments for non-discriminatory market access for international maritime transport services" which is responsible for 90% of world's trade by vessels.
Norway said that its proposal is based on the GATS Maritime Model Schedule (MMS) with additional elements connected to maritime services that the maritime industry supplies on the international maritime transport market (empty containers, feeder, offshore and multi-modal/door-to-door transports).
Given the rapid changes in the international maritime services, particularly with regard to international cargo, it is imperative that TiSA members must update the definition of international maritime transport services to include "the modern means of organizing transportation of international cargo and the specialized maritime transportation services related to energy exploration offshore," Norway has argued.
In the arena of transportation of international cargo, the increased use of ocean-crossing transport between regional hubs warrants the use of "feeder services" while "the modernization" of the shipping industry has led to more operations which are often categorized as "cabotage," according to Norway's proposal.
Given the differing levels of ambition, it is highly unlikely that the final outcome in TiSA negotiations would be equitable, said a TiSA participant. +