TCS Daily

Are You Being Served?

By Charles Finny - August 17, 2005 12:00 AM

Old habits die hard: as a former WTO trade negotiator, I still find time to read WTO reports. The other day I picked up Director-General Supachai's report to the WTO General Council on the state of play in the Doha Round. Much has been made of the lack of progress on agriculture and non-agricultural product market access, but what alarmed me most was the section on services.

In this section Supachai notes that so far in the negotiations 68 members have submitted initial offers and 24 revised offers. While Supachai was positive about the number of offers received he went on to note that the overall quality of these offers "remains unsatisfactory" -- and then the killer sentence -- "Few, if any, provide new business opportunities to service suppliers."

If this last sentence is correct then I am deeply concerned. These negotiations are all about achieving liberalization and if they are not producing that result, why are we all wasting so much time, money and effort on them?

Those involved may remember that the original General Agreement on Trade in Services (GATS), negotiated as part of the Uruguay Round, did not achieve much liberalization either. It was, however, hailed as a triumph because of the increased certainty created for those sectors in which commitments were made, and because it contained a requirement for regular reviews aimed at achieving "progressive liberalization".

I was frankly shocked by the WTO Director-General's admission that no new business opportunities have yet to be offered in the WTO services negotiations. I was shocked because of the implications of this admission for the credibility of the WTO process and because the services sector is for many countries the most important sector in the economy.

For New Zealand, the sector contributes 68% of our GDP. This is identical to the situation in Canada, the EU average, Spain, Singapore and Taiwan. For Australia, the US, UK and Japan the importance of the sector is even greater with over 70% of GDP being generated by services activity.

Trade in services is also of growing importance in the international trade of most economies. For New Zealand, 28% of overall exports are now generated by trade in services, and one component of the sector -- tourism -- has become our biggest single export earner (yes, even more than dairy product exports). Only Hong Kong (72%), Luxembourg (70%), the UK, Austria, Denmark, and the US (all on 29%) have a higher percentage of total exports made up of services.

I represent a Chamber of Commerce which draws 90% of its members from the services sector. What are 90% of my members going to think about this crucially important global trade negotiation -- which we and many other organizations spend so much time supporting -- when they discover that it has so far failed to deliver any new business opportunities for their sector? And nationwide, what is 68% of the economy going to say when the news slips out?

Clearly the leaders of these companies and their employees will be as unhappy as I am. We need to ensure that sufficient resources are being devoted to the services aspect of the negotiations. And we should be ensuring that other OECD countries are devoting a similar resource to these negotiations. Now I don't expect that New Zealand will be devoting 68% of its negotiating resources to services, but I do expect the proportion to be in line with the proportion of overall exports generated by the sector: 28%. Is 28% of the New Zealand WTO Ambassador's time really devoted to services? Is 28% of the team in New Zealand's WTO Mission really devoted to services? And what of the WTO section in New Zealand's Ministry of Foreign Affairs and Trade? And what of the proportion of travel expenditure to Geneva to assist the WTO mission?

Now if the WTO negotiations are not creating new business opportunities for the services sector what is happening with all the free trade agreements being negotiated around the world? Is this "new business opportunity" standard being enforced in these negotiations? Well, with regard to New Zealand's FTA with Thailand the answer is no, as the services sector has effectively been left out of the agreement.

But, with regard to the recently negotiated Trans-Pacific Strategic Economic Partnership (Brunei, Chile, New Zealand and Singapore) it would appear that the answer is yes. New Zealand has new market opportunities created for services suppliers in Chile (New Zealand already had an FTA with Singapore and services negotiations with Brunei are in progress). Interestingly, though, these gains are hardly mentioned in the National Interest Analysis just published on this negotiation. Rather that highlighting the trade gains, the emphasis in this document is on New Zealand's services reservations.

New Zealand (and Australia -- in some cases separately and in some cases jointly) is currently in FTA negotiations with China, ASEAN and Malaysia. I hope that both governments take note of the dire state of the WTO services negotiations and ensure that the bilateral and regional FTA route is used to create as many new business opportunities as possible for our services exporters. Another Thailand type outcome just won't be good enough for the New Zealand business community.

And if the WTO doesn't deliver any new business opportunities from the ongoing services negotiations that won't be good enough either. Let us hope that the 80 WTO members (over half of the total membership) who have yet to submit their services offers make a better job of it than the 68 who have. If they don't, we will have a real crisis on our hands.

Charles Finny is Chief Executive of the Wellington Regional Chamber of Commerce and a former WTO and FTA trade negotiator.



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