Daily Editorial – Global Services Pact

GLOBAL SERVICES PACT

Click here to Download Daily Editorial PDF (10 Feb. 2017)

Context: 

World Trade Organisation (WTO) Director General Roberto Azevêdo is on a two-day trip to India and we will make a presentation on a proposal for a global pact to boost services trade with an aim to make it to be part of the next WTO ministerial at Buenos Aires.

What is a Global services pact?

Trade Facilitation in Services (TFS) Agreement at the WTO-level aims to ease norms including those relating to movement of foreign skilled workers/professionals across borders for short-term work. It is for ‘facilitation’ – that is “making market access ‘effective’ and commercially meaningful and not about ‘new’ (or greater) market access.”

It is similar to the Trade Facilitation Agreement (TFA) in Goods adopted by the WTO Members in 2014 to ease customs norms for boosting global goods trade.

Objectives of the pact

•  Simplification of procedures and clarity in work permits and visas for smooth movement of professionals.
• To ensure portability of social security contributions, as well as making sure fees or charges for immigration or visas are reasonable, transparent, and non-restrictive or impairing the supply of services in nature.
• It also aims to pave the way for a single window mechanism for foreign investment approvals.
• to ensure cross-border insurance coverage to boost medical tourism, publication of measures impacting services trade and timely availability of relevant information in all the WTO official languages as well as free flow of data/information for cross-border supply of services.

Benefits

•  It shall result in reduction of transaction costs associated with unnecessary regulatory and administrative burden on trade in services. A well-structured TFS will significantly enhance the potential for trade in services for all Members.TFS Agreement will address the key issues that are pertinent to facilitating trade in services, such as transparency, streamlining procedures, and eliminating bottlenecks.
• India being service export surplus country with Services sector contributing about 60 per cent to India’s economy and 28 per cent in the total employment along with highly skilled labour-disciplines on measures relating to taxation, fees/charges, discriminatory salary requirements, social security contributions in relation to temporary entry in order to ensure that these do not unfairly disadvantage us.

Cross-cutting issues

Some of the cross-cutting issues for deliberation mentioned in the proposed TFS agreement include:

1. Disciplines on taxes, fees, charges and other levies on supply of services.
2. Special and differential treatment for developing countries and LDCs (least developed countries).
3. Opportunities for discussion before entry into force of measures affecting trade in services.
4. Publication and availability of information, including automation and international electronic exchange of trade data.
5. Ensuring administration of measures affecting trade in services in a reasonable, objective and impartial manner.
6. Transparency in application of all measures of general application affecting trade in services.
7. Procedures and timelines for consideration of applications from service suppliers, as well as for appeal and review.
8. Institutional arrangements.
9. Consultations and cooperation among relevant authorities.

Background on services trading

•  The creation of GATS that entered into force in January 1995 was one of the landmark achievements of the Uruguay Round and had the same line of objectives as the General Agreement on Tariffs and Trade (GATT) – to have a credible and reliable system of international trade rules; ensuring fair and equitable treatment of all participants; guaranteed policy bindings; and progressive liberalisation.
• GATS covers all services except services provided by national governments to the public and services in the air transport sector, traffic rights and all services directly related to the exercise of traffic rights.
• The Doha ministerial conference gave further direction to services negotiations in 2001. The progressive-liberalisation objective of GATS has been inscribed under the Doha Development Agenda (DDA) as part of the ‘single undertaking’ rule – implying that all items of the DDA were to be concluded at the same time.
• Agreements in service, thus, could not be completed until more controversial issues under non-agricultural market access (NAMA) reached consensus among negotiators.
• The Hong Kong ministerial conference held in 2005 took stock of the Doha Round of Trade Talks and opened the way for negotiations on plurilateral agreements on services.
• Subsequently, some countries started their own plurilateral negotiations in service since DDA appeared to be in a logjam.
• The 23-member TiSA group was formed between developed countries. Apart from the 28-nation EU bloc, other countries include Australia, Canada, Chile, Taipei, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, Panama, Pakistan, Peru, South Korea, Switzerland, Turkey and the US.
• None of the emerging economies or the African nations are participating in the talks.
• The BRICS, which includes India, has been critical of pursuing trade liberalisation outside the purview of the WTO, basically negating the ‘single undertaking’ principle because the ultimate aim is to multilateralise the rules at a later stage.

Why is India pushing for TFS with urgency?                           

India’s services sector has increased substantially in the post-reforms period.

• We are ranked sixth as the biggest global exporter accounting for 3.2 percent of the global trade
• Ninth largest importer of services accounting for 2.8 percent of the global trade in 2014.
• Predictably, the IT/ITeS industry remains India’s biggest contributor to services export – 90 percent of these exports are directed to the US and the EU.
• With its large English-speaking young population and robust services capabilities, India has tremendous ground to be covered.

In the times of measures by the US that have increased the fees for L-1 (L1A and L1B) and H-1B categories of non-immigrant temporary visas into the US and, measures related to numerical commitments for H-1B visas. Both H-1B and L-1 visas are temporary work visas that allow employers to hire foreign workers and increase of minimum salaries paid to the H-1B workers affects the supply services than can hamper India’s economy tremendously.

Conclusion

The immigration-phobic climate in the US and in the EU, especially after BrExit and the current refugee movement will make Global pact in services a challenging task for India. The western countries are already shutting their borders on short-term services providers from emerging economies.

This uphill task cut out for India in pulling forward its proposal on trade in services, it is likely to be one of the important negotiating agendas in Buenos Aires next year. India will have to expend a lot of diplomatic efforts to achieve this.