Annexure C of the Hong Kong Ministerial Declaration is perceived to put pressure on developing countries to negotiate on a plurilateral basis. What, in your opinion, is the implication of this change in approach for developing countries?
This plurilateral approach will definitely help to bring together the critical mass of developing and developed countries that matters for the services negotiations. It will thus speed up the process compared to the current bilateral approach of requests and offers, which is quite tedious. There will be economies of scale in terms of negotiating effort. But, this will also mean that certain developing countries will come under more pressure to bind in higher levels of liberalisation in key services like finance, telecom, distribution, etc, or to offer more services for negotiation in return for any market access gains in modes of services of interest to them. So, the trade-off between Mode 4 and Mode 3 is likely to be more pronounced and could pose some difficulties for developing countries.
One could also question whether there would be much gain in Mode 4 commitments from developed countries in terms of actual enhanced market access, or whether the improvements there would be more in terms of removal of certain limitations, enhanced transparency and the addition of some categories of interest to developing countries.
The point I am making is that gains in areas of interest to developing countries may be incremental in return for greater pressure on them to open up services, especially in Mode 3. So, the plurilateral approach may be logistically a superior approach to the bilateral method, but may not yield much more in return for the concessions granted by developing countries.
In the services text, liberalisation in Mode 3 is linked to liberalisation in all other modes. What do you think is the nature of give-and-take between developing and developed countries in services negotiations (inter-modal) or in other key areas (agriculture and NAMA) in the Hong Kong Declaration?
The linking of Mode 3 commitments by developing countries in return for commitments in Modes 1 and 4 by developed countries has already been noted in the question above. This is the main give-and-take. As I have already mentioned, the ‘give’ by developing countries could end up being more than the ‘take’ under the plurilateral approach, due to the sensitivities involved in Mode 4. As for the give-and-take involved in the broader scheme of the negotiations, this is primarily between industry and services. For India, it appears that there might be a willingness to agree to steeper tariff reductions in industrial goods if there are generous offers in Modes 4 and 1. I am not so sure whether this kind of trade-off exists between agriculture and services, as the issues in agriculture are far more complicated, and it is unlikely that demands for subsidy cuts in agriculture by countries like Brazil would be muted by better offers in areas of interest to developing countries in services. I think the trade-off is more apparent between industry and services and certainly within services across Modes 1 and 4 and in Mode 3.
Given that countries have initialised sending of requests, what sort of an analysis framework and preparedness should be in place to ensure that developing countries are able to engage in plurilateral negotiations effectively, particularly in domestic regulation?
What is most important is to take stock of the domestic situation -- how competitive the sector is, what regulations are in place, whether there is a level playing field with foreign providers, which are the markets of interest, what the domestic and external constraints are, etc. This stocktaking needs the participation of all stakeholders -- perhaps collection of information via surveys, impact assessment studies -- and accordingly the strategy for requests and offers needs to be worked out.
It is imperative to understand the nature of domestic regulation and institutions in the concerned sectors. Take, for instance, the higher education sector. One needs to understand the regulations that are in place to enforce quality and standards, conditions for the entry of foreign providers, whether regulations hinder domestic institutions from competing with foreign providers, how institutions and regulations need to be modified or strengthened in light of a commitment, what domestic objectives such as equity, infrastructure development, etc, need to be addressed before making a commitment, how regulations can address these issues and, specifically, what conditions should be inscribed in the schedules. This is a difficult task, requiring the involvement of a large number of concerned parties. Where consensus is hard to reach, it may be best to leave out such services from the offer list at this time and to learn the lessons from autonomous liberalisation before binding them in later.
In your opinion, should India have an aggressive position on services? Isn’t such a position hampering the development interests of India and other developing countries? During the negotiations, the ACP group submitted a new, substantially, diluted text on services. Does this reveal that India is not encompassing the interests of other developing countries and that such a position is detrimental to the coalition of developing countries?
India is in an awkward position due to its aggressive position on services. This has led to its endorsing the plurilateral approach alongside other developed countries, and has pitted it against many developing countries. If being a coalition leader and keeping a unified voice is important in all aspects of the negotiations, then we should perhaps not push as hard as we are pushing on services, because for the majority of countries this is not a priority sector. If we put our national interests and advantages over geo-political considerations, then we should have an aggressive position.
The point is what we stand to lose on some fronts, and what we stand to gain, from an aggressive stand on the strategic front. I think we should be aggressive, because we have been aggressive and postured a lot in agriculture, expending considerable negotiating effort on something that is not going to yield major gains for us, in the interests of the larger group of developing countries. We should also now look at our own interests as long as we keep our position in agriculture and don’t neglect those other interests. So, we should not strike a different note in other parts of the negotiations, such as flexibility concerns in NAMA or subsidy issues in agriculture, but should maintain this along with pursuing our own interests in services.
Is India binding autonomous liberalisation in commercial presence as a trade-off for predictable market access in outsourcing and movement of professionals? Since progressivism is mandated in services negotiations, do you expect limits on commercial presence to be lowered beyond the current levels of autonomous liberalisation?
Yes, it is a trade-off between our commitments in Mode 3 for offers in Modes 1 and 4. In any case, it made sense to bind in the autonomous liberalisation levels, as we do not benefit from holding back, especially in services like telecom and finance where the liberalisation is irreversible. So, we will gain little credibility by binding less than the status quo if we revert to a more protectionist stance in future. This would not be believed by our trading partners, so why not bind in existing levels? I do not think at this stage that we will bind in below-existing liberalisation levels like raising the ceiling on foreign equity further, though a phase pre-commitment in some services cannot be ruled out. But this will also depend on what is forthcoming in Modes 4 and 1; if there isn’t substantial improvement I don’t think we will go further than autonomous levels. There is also scope for offering new services for scheduling, and offering more sub-sectors within earlier services scheduled and hence expanding the scope of commitments rather than just raising levels of commitments.
The next two months will be crucial for negotiations in services, given the stringent deadlines set in Annexure C. In your opinion, which are the key sectors in which India should submit requests?
This depends on an assessment of our strengths. I would say that we should submit requests in most of the professional and business services, like in computer and related services, accountancy, architecture, and in others like education, health, tourism, even finance and telecom. But the markets to which we submit requests would need to vary for different groups of services. We may consider the developing economies, countries in the region and Southeast Asia for tourism, health, telecom, and these and developed countries for professional services, and so on. So, the requests need to be tailored to each sector rather than submitting a standard request across a large range of countries, without heed to particular restrictions and sub-sectors that we would like to focus on in individual markets.
February 2006 |
