Wednesday, December 7, 2011

If India commits for Retail service in GATS

Just a random thought occurred to me while writing my previous post. An incisive commentary on the state of affairs of FDI retail in India was alluded to in this piece  on Bloomberg. 

If India commits to retail trade under GATS, what are the implications of Article XVI and XVII on the FDI retail trade local sourcing debate. 

As per Article XVI of the GATS agreement.
"  Market Access
1. With respect to market access through the modes of supply identified in Article I, each Member shall accord services and service suppliers of any other Member treatment no less favourable than that provided for under the terms, limitations and conditions agreed and specified in its Schedule."
The treatment to be given here to the foreign service and service suppliers should be "no less favourable" than that provided under the terms, limitations and conditions agreed and specified in its Schedule. If the terms specified in the conditions agreed and specified by India in its schedule of commitments requires local sourcing from small and micro enterprises, this would satisfy the market access issue."
Regarding Article XVII of the GATS, it states

" Article X V IINational Treatment
1. 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, in respect of all measures affecting the supply of services, treatment no less favourable than that it accords to its own like services and service suppliers."

This mandates that the treatment accorded to a foreign service supplier must be identical to that of the local service supplier. What if the local sourcing requirement is mandated for both these categories of organised retail trade - the Walmarts as well as the Reliance stores. Would this be in consonance with WTO obligations?
Hence, is offering a commitment in the retail trade be more beneficial to India so as  to include the safeguards of local sourcing to ensure that the local products are protected and favoured.

I might be completely off the mark here. Would love to hear some comments on this one!

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