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close this bookThe Courier N 156 - March - April 1996 - Dossier: Trade in Services - Country Report : Madagascar (EC Courier, 1996, 96 p.)
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close this folderTrade in services
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View the documentA trailblazing project for services in Africa
View the documentServices potential in the Caribbean
View the documentWhat do ACP nations have to win or lose from global liberalisation of services?
View the documentImplications for developing countries of liberalised financial services
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What do ACP nations have to win or lose from global liberalisation of services?

Renato Ruggiero, Secretary General of the World Trade Organisation (WTO), which is driving greater international liberalisation in the sector, relied in writing to our questions.

· What is encompassed by trade in services?

- In principle, all services which can be suplied outside the domestic market of the provider. This covers an enormous range of activities: architecture and design, telecommunications and data processing, accounting and management consultancy, banking and insurance, transport and the variety of services provided by the travel and tourism industry.

· Are services a global growth area

- Services exports, currently amounting to over one trillion US dollars or 21% of world trade, are growing fast and could equal or even overtake merchandise within ten years. According to International Monetary Fund (IMF) statistics, for example, the average growth in services trade between 1980 and 1992 was 8% compared with 596 for trade in goods.

· How far does the Uruguay Round's General Agreement on Trade in Services (GATS) go towards liberalising global trade in services?

- The GATS, which came into force on January 1 1995, not only provides for the first time a set of multilateral rules for the conduct of the services trade, but also simultaneously creates a framework for continuing liberalisation. At the end of the Uruguay Round, over 100 countries accepted schedules of legally binding commitments to ensure that services markets in the whole range of sectors will be open to foreign suppliers to compete on a fair and equitable basis. Where discrimination and market access restrictions still exist, they have been identified and catalogued, and will be subject to liberalisation in future negotiations with the aim of achieving progressively higher levels of liberalisation. The first such negotiations will begin before the year 2000.

· Were you disappointed by its apparent/y limited outcome?

- Not at all. GATS covers all trade in services. And because the market access negotiations involved well over 100 governments around the word, commitments to liberalise realistically had to take into account the individual economic and other priorities of countries of varying levels of economic development. Where there are limitations, these are clearly identified and multilaterally recognised. Moreover, there is a firm commitment by all governments to progressively eliminate these limitations through on-going negotiations. We made a good start, but only a start. As with trade in goods under GATT, we will need to work towards ever higher levels of competition and openness.

· It is commonly argued that trade in services benefits industrialised countries over developing ones. Is this true?

- The principal beneficiaries of the liberalisation commitments are efficient suppliers of services in both developed and developing countries who will gain from more open and secure markets that the commitments will produce. The specific gains to be derived by developing countries in terms of increased exports of services will, of course, depend on the level of development of their service industries. And the more sophisticated the service industries become, the more it will help to attract foreign direct investment for developmental needs. Tourism, for instance, is one sector which holds great potential for developing countries. The largest category of commercial services consists of international tourism receipts, accounting for more than one-third of total services trade.

· Will developing countries lose out for example in the liberalisation of trade in financial services?

- Developing countries should be among the biggest beneficiaries of the liberalisation of trade in financial services. It is this realisation which has induced certain ACP countries to participate actively in the Uruguay Round negotiations in this area and make significant commitments. Although it may take time for financial services suppliers in these countries to be able to take advantage of the more open and secure markets provided by the commitments of other countries, the opportunities are there. Meanwhile, users of the services will benefit from foreign suppliers entering the domestic markets, enhancing general economic efficiency. Foreign direct investment and other capital inflows will be induced through the greater stability and security that the Agreement provides. Technology from abroad should help in the development of efficient and sophisticated financial markets which will help in fulfilling the development needs of these countries.

· What potential is there for ACP countries to develop their trade in services under the GATS accord?

- There is significant diversity within the ACP group, so it is not easy to make generalisations. However, the creation of multilateral disciplines on measures affecting trade in services has created significant potential for all countries. First of all, the GATS has more or less eliminated the scope for discrimination between trading partners, so ACPs are now assured of 'Most Favoured Nation treatment in all export markets. Secondly, the trading environment has been made more secure thanks to the binding nature of many measures which affect market access and competitive conditions for services suppliers. Finally, the steps taken towards trade liberalisation are likely to encourage the development of services trade according to the pattern of comparative advantage.

· What are the minuses in that agreement for ACP nations?

- The only 'minus' that I can think of is that we have not made faster progress towards trade liberalisation under the agreement, which, I must emphasise, is already a step in the right direction Even though many restrictions on trade have been removed, a large number still remain in place. Furthermore, negotiations in important areas like basic communications and maritime services are still continuing. It is, however, important to remember that a country benefits not only from liberalisation with its trading partners, but perhaps more so from its own liberalisation. ACP countries are no exception.

· Will cultural monopolies surface in opening trade in the audiovisual sector such as the American audio-visual monopoly?

- No government is obliged to open its market for any particular service, so GATS members wishing to take measures to safeguard their audiovisual industries are perfectly free to do so. Countries can maintain and develop national measures to preserve pluralism in the media. At present there are 13 countries, including some of the largest, which have offered market access and national treatment in this sector.

· What is WTO's agenda to open up further trade in services, in particular to the benefit of ACP nations?

- Article XIX of the GATS calls for successive rounds of negotiation with a view to achieving a higher level of liberalisation. As I have said, the next such round is to begin no later than January 1 2000. Article IV of the GATS stipulates that increased participation of developing countries in world trade shall be facilitated through specific commitments. These relate to the strengthening of their domestic services capacity, improved access to distribution channels and information networks, and liberalisation of market access in sectors and modes of supply of export interest to them. Special priority is to be given to least-developed countries.

· Do you foresee ACP countries being able to compete in the field of services with industrialised nations as services are gradually liberalised. Which services have the most potential to increase export earnings of ACP states?

- Again, I hesitate to make broad generalisations for such a diverse group of countries. There is no doubt that in time ACP countries will be able to compete in the provision of a wide range of services. Meanwhile, there are certain services, such as tourism, from which many ACP countries are already obtaining significant export earnings. Interview compiled by D.P.