Stakes for RP High as WTO Services Talks Nears Deadline

Original Publication Date: 
29 May, 2005

IBON Features-- The end of May could breathe new life or kill the services talks in the World Trade Organization. It is the deadline for the submission of new and revised offers of services sectors up for liberalization.

Crucial to the present negotiations is the request-offer process, in which individual WTO members make requests of others for new market access and national treatment commitments, and respond with offers of new commitments.

As of the February 2005 negotiating cluster, the last formal cluster before the May 31 deadline, 45 member countries are still expected to make offers (excluding the Least Developed Countries).

Of crisis and benchmarks

The Chair of the Services Negotiating Committee and the WTO Secretariat declared the negotiations in crisis and a proposal to establish quantitative benchmarks-- a minimum level of commitments that any WTO member would have to make in this round of negotiations -- was floated.

The United States said the request-offer approach has failed to sufficiently advance the current round of talks and suggested supplementing the approach with a new initiative designed to bring other countries up to US standards. American negotiators have been discussing the initiative with other developed countries, including the European Union, Canada and Japan.

According to the US, a number of WTO members with potentially significant services markets, such as the Philippines, South Africa, Pakistan, and Morocco, have failed to submit initial market-opening offers in the talks, and many offers currently on the negotiating table contain no commitments in sectors such as distribution, maritime transportation and construction. Other sectors where offers are weak include healthcare, education, environmental services, and postal/courier services.

The depiction of a crisis in GATS talks is a ploy to force many Third World countries to submit offers in services. The proposed benchmarks are also meant to compel countries to commit their services to be liberalized even if they do not intend to.

Mode 4

Given the continuing offensives of developed countries in opening up their services sector, governments of Third World countries are pushing for Mode 4 (Temporary Movement of Natural Persons) as a key issue.

Many poor countries have registered their disappointment in the services talks because of the lack of improvement on Mode 4 offers of developed countries while they are being pressured to submit offers for liberalization on other modes. For these governments, Mode 4 represents one of the few areas that provide gains for them in the liberalization process.

In general, Mode 4 of the GATS covers: 1) persons providing services where a foreign service supplier obtains a contract to supply services to the host country company and sends its employees to provide the services; 2) independent service providers abroad: an individual selling services to a host country company or to an individual; 3) persons employed abroad by foreign companies established in the host country (but excluding nationals of the host country).

Underdeveloped countries have criticized the United States and other rich countries for failing to offer any substantive offers on Mode 4. Among the issues being raised in the negotiations regarding Mode 4 commitments are:

1) De-linking or separation of Mode 4 from Mode 3- the application of Mode 4 at present is restricted and often associated with commercial presence. Third World countries, led by India, have been urging the separation of Mode 4 from Mode 3. The main argument is that only transnational corporations (TNCs) from developed countries can afford commercial presence.

2) Horizontal commitments are limited- despite the fact that Mode 4 commitments are mostly horizontal and cover almost all services, these are subject to various limitations regarding immigration rules and economic needs test. Due to these limitations, the application and benefits from Mode 4 as a mode of supply is relatively narrow and biased towards highly skilled and professionals employed by the TNCs.

Brazil, India, and China are pushing for more ambitious Mode 4 commitments. However, developed countries are not receptive due to rising unemployment rates as well as political reasons in their homefront. For instance, the US Congress recently declared that it would continue to oppose any agreement negotiated at the WTO that would allow foreign business and professional personnel to enter the US to work on a temporary basis. These comments came as the US was preparing to submit its revised offer on services trade at the WTO by end-May.

Philippines stakes

The Philippines has been identified as one of the WTO members with potentially significant services markets that have not yet submitted offers of sectors to be liberalized.

Services accounts for roughly 44% of the Philippines gross domestic product (GDP). GDP growth in 2004 was mostly driven by the growth of services particularly telecommunications and finance, with activities in call centers and business process outsourcing, private services, trade and real estate boosting consumer spending and investments. It is thus unsurprising that the Philippine government is being pressured to further open up the services sector to foreign service providers under the GATS.

In the current services negotiations, developed countries have made it clear that they want to open up sectors that are also publicly provided such as healthcare, education and environmental services (e.g., water). At present, the Philippine governments policy thrust of privatizing and commercializing social services is making life more miserable for the average Filipino.

For example, the privatization of water and power has made these vital utilities more inaccessible to the poor as rates continue to escalate. In healthcare, public hospitals are instituting a pay-for-service policy that limits access to health service for poor families. Also, the privatization of state colleges and universities and the deregulation of private education resulted in higher tuition, making education so costly.

The liberalization of these services under the GATS will further limit government involvement, facilitate the entry of foreign providers that will only take advantage of the profit opportunities and leave many Filipinos without access to basic social services.

Furthermore, foreign investments flocking in would not only bleed the economy dry through dollar repatriations; they would also compete with and eventually squeeze out domestic businesses.

Meanwhile, the Philippines has a stake in getting Mode 4 commitments from developed countries. About eight million overseas Filipino workers (OFWs) are in over 140 countries. In the 1970s, the country initially started exporting low-skilled labor to the Middle East. But recent trends show that Filipino migrant labor has broaden into a variety of skills-- from professionals (medical, IT, health), to middle skilled (caregivers, entertainers, seafarers), and low skilled (domestic helpers and unskilled labor).

If Mode 4 commitments become more liberal, Filipino workers are expected to find it easier to offer temporary services abroad. Thus, given the fact that the Philippines has not much to gain except on Mode 4 and a great deal to suffer from liberalizing its services sector, the governments trade negotiators should not respond to liberalization requests and must not submit any offer this coming May 31 without substantially improved Mode 4 offers especially from the US and other developed country-destinations of OFWs.

The GATS negotiations should also be made a venue to discuss the negative effects of services liberalization. A comprehensive assessment of the impact of GATS should be demanded and that until such evaluation has been done, there is actually no basis for proceeding with liberalization.

In the local scene, there is a need to truly assess the direct and indirect effects of liberalizing services. The legislative branch must initiate a review of policies implemented in line with the GATS as well as other WTO agreements, and the impact of these policies on the economy and especially on the Filipino people. IBON Features

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