Sunday, February 17, 2013

Is it time for GATS 2.0?

While the GATT and other WTO Agreements deal with the trade in goods, the General Agreement on Trade in Services (GATS) deals with the trade in services. It is the multilateral agreement dealing with the trade in services with individual member countries underrating varying commitments in different service sectors.

Now there is news that several countries are undertaking an exercise to enter into a new international services agreement to go beyond the GATS to further liberalize the services sector. The failure of the Doha round to achieve further liberalization of the services sector is put forth as one of the reasons for this move. It is another example of the "plurilateral" route that many countries are taking to international agreements with the failure of multilateralism. The USTR website explains the rationale for seeking fresh negotiations in this area with 20 other trading partners quoting USTR Ambassador's letter seeking fresh negotiations. Coverage of new services not covered under GATS, ensuring greater transparency and predictability in regulations covering services of trading partners and addressing new issues that arise int he global market place and the way services trade is conducted are offered as the reasons for entering into a new agreement apart from increasing access to markets for national services sectors. Stewart and Stewart summarizes the move well in this analysis. Peterson Institute for international Economics in this paper has suggested a new framework for an international agreement on services.

Will this be a movement towards GATS 2.0? While the US intends to enter into negotiations with 20 trading partners initially (Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, European Union, Hong Kong, China, Iceland, Israel, Japan, Korea, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, Switzerland, Turkey), the notably absentees in this initial round are Brazil, Russia, India and South Africa. Will we see more countries joining the bandwagon or will it remain a plurilateral agreement without many emerging economies? What implications would this have on developing economies that have strong service sectors? It is clear that the US is leading this endeavour of a new agreement - a classic case where liberalization of the services regulation is linked to increase one sports of their services worldwide. This letter of the USTR Ambassador is clear about the intention of entering into new negotiations - more access to markets and more jobs at home.

While change in the way trade is conducted often does not get reflected in existing agreements making agreements not only obsolete but requiring change, what is the best route to go about it? Is this new international agreement in services another example of the failure of the WTO to address the realities of trade? Is it a triumph of plurilateralism over multilateralism? How should the WTO respond? A good analysis of whether the agreement should be within or outside the WTO and its implications is found here. How should developing countries outside the initial negotiations respond? Would there be a coalition of developing economies against this negotiation or will they eventually join viewing it as beneficial? Countries strong in the services sector would have to analyze their relative strengths and weaknesses and potential for their national service sector with increasing market access.

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