2007Jul CapacityBuildingWork shop 05 Services

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Information about 2007Jul CapacityBuildingWork shop 05 Services
Travel-Nature

Published on March 14, 2008

Author: Altoro

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Services in EPA negotiations: implications for ECOWAS:  Services in EPA negotiations: implications for ECOWAS July 2007, Dakar, Senegal ------------------------ Joy Kategekwa, South Centre Presentation structure:  Presentation structure RTAs: The concept The GATS: definitions, concepts and liberalising objectives Treatment of ECOWAS countries in the GATS The GATS and RTAs Advantages of RTAs in services Background to the EPAs: Lome to Cotonou Mapping the ECOWAS region: Facts, figures, and situational issues Key features of Cotonou on services EU/ECOWAS negotiations Liberalisation principles (MFN, NT) Scope and coverage: sectors and modes Regulatory issues The role of South South Trade Recommendations for ECOWAS countries Conclusion RTAs:The concept:  RTAs:The concept Regional Trade Agreements: Intergovernmental Agreements aimed at managing and promoting trade activities in specific regions of the world THE GATS:Definitions:  THE GATS:Definitions Sole International agreement responsible for governing multilateral liberalisation of trade in services Defines services against delivery modes:  From the territory of one Member into the territory of any other Member (Mode 1);  In the territory of one Member to the service consumer of any other Member (Mode 2);  By a service supplier of one Member, through commercial presence in the territory of any other Member (Mode 3);  By a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member (Mode 4). (See GATS Article 1:2) THE GATS:Concepts:  THE GATS:Concepts Expansion of trade as a means for development Achievement of progressively higher levels of liberalization through successive Rounds Due respect to national policy objectives Respect for the right to regulate to meet national policy objectives Facilitation of the increasing participation of DC in international trade in services (See Preambe to the GATS) GATS and key principles:Most Favored Nation (Article II):  GATS and key principles:Most Favored Nation (Article II) Each Member to accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country MFN exemptions are permitted provided they: Are listed, (GATS Art. II:2) Do not, in principle, last more than 10 years, (Para 6, Annex on MFN exemptions) Are subject to future Rounds of trade liberalization Any new MFN exemptions have to follow the waiver process in Article IX:3 of the Marakesh Agreement establishing the WTO GATS and key principles:National Treatment:(Article XVII):  GATS and key principles:National Treatment:(Article XVII) In the sectors inscribed in its Schedule, and subject to any conditions and qualifications set out therein, each Member shall accord to services and service suppliers of any other Member, treatment no less favorable than that it accords to its own like services and service suppliers National treatment can consist of either formally identical treatment or formally different treatment Treatment of ECOWAS countries in the GATS:  Treatment of ECOWAS countries in the GATS Progresssive liberalisation Art. XIX:2 Objective of increasing their participation in international trade in services Art.IV Special priority for LDCs Art.IV:3 Non-expectation for LDCs to make commitments:HKMD Scoping ECOWAS commitments in the GATS:  Scoping ECOWAS commitments in the GATS Nigeria: financial services including insurance, communications, and transport Burkina Faso: tourism and travel related services including on hotels, and catering Benin: professional services; financial services; banking; catering; hotels; maritime transport services; tourism; transport services Cote d’Ivoire: financial services; insurance services; banking The Gambia: business services; professional services; air transport services; audiovisual services; banking; communication services; computer services; construction services; cultural services; distribution services; educational services; engineering services; environmental services; financial services; health services; insurance services; maritime transport services; real estate services; recreational services; rental/leasing services; research and development; road transport services; sporting services; telecommunications; tourism; transport services; water transport services Scoping ECOWAS commitments in the GATS, cont’d:  Scoping ECOWAS commitments in the GATS, cont’d Sierra Leone: business services; professional services; air transport services; banking; communication services; computer services; construction services; cultural services; educational services; engineering services; environmental services; financial services; health services; insurance services; maritime transport services; rail transport services; recreational services; sporting services; tourism; transport services; water transport service Ghana: financial services; insurance services; banking Guinea Bissau: tourism; hotels; catering; cultural services; recreational services; sporting services Guinea: business services; environmental services; catering; health services; hotels; road transport services; tourism; transport services Mauritania: tourism; hotels; catering Niger: tourism; hotels; catering; road transport services; transport services Senegal:financial services; insurance services; banking Mali: tourism; hotels; catering; educational services RTAs and the GATS:  RTAs and the GATS Art. V allows liberalising services between or among parties to an Agreement. Conditions in GATS for RTAs “substantial sectoral coverage “ in terms of number of sectors, volume of trade affected and modes of service delivery, with no apriori exclusion of any mode of supply,  Provision for national treatment for services providers of Members eliminating “substantially” all discrimination. through; a) Elimination of existing discriminatory measures, and/or: b) Prohibition of new or more discriminatory measures RTAs and the GATS:  RTAs and the GATS Treatment of developing countries in RTAs  Art. V: 3 (a) where developing countries are party to an RTA, flexibility shall be accorded in fulfilment of conditions especially with regard to absence of national treatment limitations, elimination of existing discriminatory measures, and prohibition of new or more discriminatory measures RTAs and the GATS:  RTAs and the GATS In RTAs involving only developing countries, more favourable treatment may be given to juridical persons owned or controlled by natural persons of the parties to such an Agreement Provision for third countries:GATS Article V:(6) A service supplier of any other member that is a juridical person constituted under the laws of a party to an agreement refered to in para 1 shall be entited to treatment granted under such agt, provided that it engages in substantive business operations in the terrotory of parties to the agt. (substantive business not defined)i.e they are not excluded from a regional market because of a preferential agt. Key determinants of high services trade potential:  Key determinants of high services trade potential large domestic markets :production and diversification of trade in services for the local market – which triggers import substitution in services; physical infrastructure : reliable transport networks and other infrastructure such as telecomunication and energy to link production to consumption; Location: geographical location and the demographics of neighbouring countries : poorer economies can produce services for their richer high income middle income economies : e.g India’s exports to China and Singapore; Level of development: high disposable incomes have knock effect for the increased demand for diverse services and provide a need that can be met through local production: more new billionaires in Asia demanding more services,or the rich middle class in SA demanding more services; Technology Endowment: increased spending on science and technology and investment in research and technological development; Information endowment : effective access to information; Human capital endowment : highly skilled and educated population is critical for services trade both export and local consumption; Regulatory Framework : stable and reliable legal environment, institutional and admin ability; Efficiency and equity allocations: strong rules on competition QTN: What is the level of development of these issues in ECOWAS? Advantages of RTAs in Services:  Advantages of RTAs in Services Taming highly restrictive measures in sectors e.g. construction/engineering, which are typically highly restricted as they are subject to national standards; RTAs would allow for harmonizatoin in developing a common set of criteria for recognition of equivalence of standards, diplomas, educatioal and professional training for the granting of licenses to practice in various sectors; RTAs bring regulatory harmony, tapping on wider market, which is essential in socio-type services like educ, health where similarity is critical to enhance preferential agreements; QTN:Are these arguments convincing enough to warrant an ECOWAS EPA in services? Background to the EPAs: From Lome to Cotonou:  Background to the EPAs: From Lome to Cotonou EPAs a policy shift by EU (Lome to Cotonou) Services: Lome focus on development of domestic capacity Cotonou:Trade in services focus Common goals: promotion of sustainable economic growth and development Differences in approach? EC objective:New markets, ACP objective, enhanced diversification, and development Mapping the ECOWAS region in services:  Mapping the ECOWAS region in services ECOWAS countries: Nigeria Burkina Faso, Benin, Cote d’Ivoire, The Gambia, Sierra Leone, Ghana, Guinea Bissau,Guinea, Mauritania, Niger, Senegal, Mali Contributions for select contries: Nigeria:33.3% GDP in 2006, an increase from 24.2% in 2003 TPR;key sectors: finance and insurance, energy sector (oil), telecomm, transport, ports operations, tourism Source (Country profile, 2007, Nigeria, The economist intelligence unit, www.london.eiu.com) In Senegal:two-thirds of GDP, mainly services-based economy with telecomm, transport and tourim as main sectors: Source (Country profile, 2007, Senegal, The economist intelligence unit, www.london.eiu.com, also see Senegal TPR-Secretariate report: June 2003) ECOWAS contries remain net importers of services Mapping ECOWAS region, cont’d:  Mapping ECOWAS region, cont’d Europe is Africa’s main trading partner for commercial services:more than half went to Europe in 2003, WTO SDB, Eurostat Africa a minor trading partner for the EU with 6.6% of imports sourced from Africa in 2003. Imported sectors are: transport, travel, tourism (about ¾ of all imports) Mapping ECOWAS region: situational issues:  Mapping ECOWAS region: situational issues Most ECOWAS countries not services-based economies: Ghana:Diamonds, manganese, potential in bauxite and alminium: Source Country profile, 2006, Ghana, The economist intelligence unit, www.london.eiu.com) Cote d’Ivoire: Oil and gas production, gold and diamonds, nickle and iron, fishing: Source Country profile, 2007, Cote d’Ivoire, The economist intelligence unit, www.london.eiu.com) Mali:Gold and diamonds, cotton Benin:Cotton Infant levels of intra-ECOWAS trade in services, meaning alot of room for potential Issues with configuration:ECOWAS, WAEMU, e.g Senegal in WAEMU: implications? Incomplete work on assessment of trade in services:implications of further liberalisation? Mapping ECOWAS region: a brief summary :  Mapping ECOWAS region: a brief summary Weak potentials to export services Weak domestic services infrastructure Weak regulatory capacities Weak institutional and human resource capacities Weak capacities to identify sectors of interest (role of assessments) Limited number of services experts to engage in negotiations Key features of Cotonou on services ch.4:  Key features of Cotonou on services ch.4 Separate chapter from new trading agts.(Ch.2):Implications? Reaffirms GATS commitments(Art.41.2) Community underakes to give sympathetic consideration to ACP prorities for improvement of EC GATS schedule Both agree on objective of extending EPAs, after aquired experience in applying MFN under GATS, to services.(Ar.41 4) Implications? No clear obligation to negotiate services in EPAs Negotiation of services in EPAs seems conditioned on experience of MFN in GATS EU obligated to stregthen ACP capacity in supply of services esp, labour, business, distrbution, finance, tourism, culture and construction and related engineerng services to enhance competitiveness Clear and separate provisions for liberalisation of market access to international maritime transport market on a non-discriminatory and unrestricted basis, including NT (Art. 42) Other provisions for support for ACP ICT development Implication of EU position in EPAs:  Implication of EU position in EPAs Key principle:WTO compatibility Progressive liberalisation (Article XIX)  Flexibilities for developing countries (Article XIX:2)  No MA commitments by LDCs in GATS MFN Treatment for EU-Implications for intra-regional development goals ECOWAS capacity to benefit from EU granted MFN? Liberalisation prinicples:NT:  Liberalisation prinicples:NT NT for EU services suppliers:implications for ECOWAS countries  Equating EU like services suppliers to national ones  Contravention of GATS Article V: 3 (a)?  Stifling regulatory prerogatives? Issues with third country beneficiaries? Scope and coverage of proposed commitments :  Scope and coverage of proposed commitments Progressive, reciprocal and assymetric lebarlisation of establishment, and trade in services and ccopration on ecommerce Coverage is for all economic activities excluding  Mining, arms manufacturing, audio-visual services, production of or trade in firearms, national maritime cabotage:Are these sensitive for ECOWAS such that exclusion is comforting? Is there V 1 (a) on substantial sectoral coverage? What are ECOWAS offensive interests at sectoral level? EC proposed non-permissible limitations:  Quotas, ENTs, limits on foreign capital, value of transactions, requirements for J/Vs Key question: Is ECOWAS ready for this? Implications for attaining national development objectives? Scope and coverage, cont’d:  Scope and coverage, cont’d Mode 1 Full commitments NT, MA Key questions:  Can ECOWAS countries compete with EU in Mode 1?  Do ECOWAS countries have regulatory capacity to open mode 1? Scope and coverage, cont’d :  Scope and coverage, cont’d Mode 3 Full NT and MA Key questions:  Do ECOWAS countries have export capacity in Mode 3 for EU markets?finance capital, SMEs…  The EU defines juridical person as registered office, central administration, principal place of business. Can SMEs benefit from this? Scope and coverage, cont’d :  Scope and coverage, cont’d Mode 4:Key personnel, CSS, and IP Problem with EU position  Not going beyond GATS  Not adressing ECOWAS interest in commitments for semi-skilled services suppliers Regulatory issues:  Regulatory issues EU proposes detailed regulation in financial, telecom, postal, computer, maritime, e-commerce Problem with EU position  Weak regulatory capacity:laws, rules, human and institutional capital  Regional processes on harmonization of regulation are still ongoing  Contradictions with the right to regulate in the GATS and positions in the WPDR Role of South South Trade: Niche markets in developing ountries :  Role of South South Trade: Niche markets in developing ountries A number of sectors such as banking, insurance, or health services developing countries were able to exploit market niche effects. Financial services exports : strong market in developing countries for micro-finance operations. In other cases, the financial services industry has been able to create a niche market in offshore activities. Financial services exports : development of offshore activities for e.g. in Mauritius , UNCTAD(1999) estimated the total direct and indirect benefits of the offshore sector at 2.5% of GDP. Financial services : internet banking, ecommerce and the development of secure payment and other supporting systems for electronic commerce. The emerging “wellness” industry : Several developing countries diversified into areas such as medical and paramedical education, health tourism, and alternative medicine and treatment. QTN:Are there options for ECOWAS in these areas? South-south trade in services: modes and sectoral examples:  South-south trade in services: modes and sectoral examples Cross border trade ( Mode) 1 : transport (air transport and freight transportation): intra-developing countries’ exchanges of international passengers and freight tonnes flows are at extremely low levels - under 1% of reported passenger flows or total freight tones flows. Consumption abroad ( Mode 2) : travel services: South-South travel exports represent around 16% of world travel exports. Commercial Presence ( Mode 3 based Estimates based on FDI statistics): one-third of FDI in developing countries originated in other developing countries, with India, China, Brazil and South Africa among the main sources According to UNCTAD mergers and acquisition (M&A) and non-equity arrangements( Mode 3) : M&A sales/purchases in services among developing countries represented around 40% Movement of natural persons for services provisions ( Mode 4 using a proxy of migration statistics) : intra-regional migration is highest in Asia (14.9%); South America intra-regional migration is higher than with Rest of the World (ROW) at 1.3% ; intra regional migration in Africa is almost at par with its migration to the ROW with highest migration levels to Europe( 2.9%) followed by Asia (2.5%) and intra-regionally (2.3%) Recommendations:  Recommendations Priority for development of national services policies Priority for development of national regulatory capacity Priority for development of domestic supply capacity Priority for intra-regional integration prior to EPAs to give ECOWAS countries a headstart e.g Senegal and its software exports. Alternative solutions:  Alternative solutions In the event of a clear choice to assume services commitments in the EPAs: Technical assistance as condition precedent for regulatory design, institution building Achievement of certain targets in the regulation domain such as meeting requirements for JVs. Long transition periods to allow growth of regulation, skills and institutions Alternative solutions, cont’d:  Alternative solutions, cont’d In the event that there is decision not to assume reciprocal commitments: Resort to Cotonou provisions on TACB Elevate that to a trade and development cooperation agt. specific to services. Conclusions:  Conclusions ECOWAS countries not ready for reciprocal-based services liberalisation with EU EU should avail financial and technical assistance for meeting capacity constraints in ECOWAS countries ECOWAS countries should prioritise their on intra-regional integration processes ECOWAS can consider a trade and development cooperation agt.in services with EU. References:  References N Dihel et al ( October 2006): “South-South trade in services : OCED Trade Policy Working paper No 39” P Kowalski & B Shephard( October 2006): “South-South trade in goods : OCED Trade Policy Working paper No 40” Marchetti, J. A. (2004), “Developing Countries in the WTO Services Negotiations”, WTO, Geneva, September. OECD (2003), “Services Trade Liberalisation: Identifying Opportunities & Gains”, OECD Working paper No. 1, TD/TC/WP (2003)23/FINAL, Organisation for Economic Co-operation and Development, Paris. Martin , R et al (September 2006) WTO Staff Working Paper ERSD-2006-07 :Services Liberalisation in the New Generation of Preferential Trade Agreements (PTAs): How Much Further than the GATS? The end:  The end Thank you!!

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