Doha Services Strategy

Original Publication Date: 
14 February, 2007

Geneva - The success of the Doha Development Agenda services negotiations will result from the number and quality of "revised offers" which eventually come forward, said services negotiations chair Fernando De Mateo in an interview with WTD (WTD, 2/13/07).

The chair today will commence "Enchilada" discussions with over two dozen trade envoys on moving the negotiations forward. A"nice" outcome in services, he said, would be one in which members "bind" autonomous liberalization which they have carried out since the conclusion of the Uruguay Round of trade negotiations a decade ago.

In an exclusive interview with WTD, Ambassador De Mateo of Mexico said an "internal balance" between market access and rules - including domestic regulation - is essential for a good outcome. He also said the developmental outcome in services should not be viewed "in North versus South categories." Developing countries must get more access in all modes of supply.

WTD - What is the state of play in the Doha services negotiations at this point?

Mr. De Mateo - In market access, members were supposed to table new offers a week after the process broke down in July last year. So, it's really a "black box." And we don't know the intentions of the members who were to table the offers. We had to restart the process all over again. That's the first point.

The other point is what I have always said, namely, in agriculture and NAMA you can feed the computer with the agreed formulae and parameters - and some hours later know what you are getting and what you are giving. I know I'm making a big simplification, but once you know there is convergence on the core issues in ag and NAMA, then it is easy to prepare the schedules. In services, it is far more complex because of the dynamics that is dictated by the bilateral and plurilateral give-and-take process involving the request-and-offer approach.

And the only way for any member to know what it is getting in services is to have an offer on the table that would reveal the market opening.

In Hong Kong, the ministers paved the way for plurilateral negotiations which started last year in the March-April "cluster" and then again in May. So what is in store for us is to facilitate the process for revised offers that will be tabled soon.

The good news is that in those clusters and then again early this month, services experts from capitals nudged the process by addressing all the vital components of the services negotiations in order to bring them on par with agriculture and NAMA. So we have two processes - one which is going on within capitals and the other in Geneva - both aiming to produce revised offers. There seems to be a real determination right now among the major players in the services negotiations to have an ambitious outcome.

Deadline

WTD - Is there an agreement now over what ought to be a realistic deadline for the submission of revised offers given the complexities involved in the negotiations?

Mr. De Mateo - Services negotiations are not conducted in a vacuum. They are part of the single undertaking, so the so-called breakthrough in ag and NAMA will influence the precise timing for the tabling of revised offers in services. Now the point is: if you put a timeline for revised offers before whatever breakthrough you are targeting in ag and NAMA, two things can happen. Either, not many offers would be tabled or whatever is tabled might not be significant enough. There is also the other problem - namely, if you put a deadline before ag and NAMA there is a danger that you could lose momentum.

So you require an honest discussion among all members on what they are prepared to do on services. They already know what they have been asked by their counterparts and it is worthwhile to continue with that honest discussion.

WTD - But as services negotiations chair what do you think should be a realistic timeline for revised offers?

Mr. De Mateo - What I'm trying to do now is to catalyze a real exchange on what they are requesting and what they are prepared to give. They have already done their homework at the technical level. Therefore, I'm trying to get ambassadors into the game.

WTD - During the last services meeting, the US and the EU had suggested that members be ready with offers to table once there is a breakthrough in ag and NAMA. Don't you think there is a danger in such an approach because any further delay in ag and NAMA would lead to further delay of offers? Isn't it important to decouple the submission of revised offers from the negotiating process in ag and NAMA?

Mr. De Mateo - Well, the problem is that you have a triangle. Or let's put it this way - you have three equations with three unknowns. So you have to solve a system of simultaneous equations, and if you solve one before the other two, there is a danger that you might fail.

WTD - But you are already far behind in services and your last deadline was the end of last April.

Mr. De Mateo - There has been considerable discussion on whether services is lagging or is ahead of ag and NAMA. I think that at this juncture it is not a worthwhile discussion. What is relevant is that services may easiliy lag behind ag and NAMA due to the differing negotiating techniques I referred to earlier. It is important that this time around that you have real revised offers. Because most of the offers that were tabled last time were considered poor in quality and market-opening - and depended on particular interests lie. Therefore, it is important not to fix any timeline at this juncture.

This discussion is useless because we are in a "black box" and we don't know what is inside. The point is that you have to prepare the process so that just after the breakthrough there is something worthwhile on the table.

Timing

WTD - Is there a shared understanding that the revised offers will be circulated after the deal in ag and NAMA?

Mr. De Mateo - The point is how you would describe a deal in the final analysis. There is so much discussion around full modalities-minus or full modalities-plus. This is something that we still don't know and so it is important to have a start first in making members to engage in high-level negotiations at the ambassadorial level and try to get an understanding what will be there in those revised offers.

WTD - So you want them to start talking about the "nitty-gritty" of their revised offers?

Mr. De Mateo - Yes, I want them to get into the nitty-gritty of what they are prepared to do in response to the requests made to them by their counterparts. That's the only way to get an outcome in the services negotiations, and this can go in tandem with what is happening in ag and NAMA. If something moves in ag and NAMA - which may come later - members then can decide to have a deadline.

One last-resort option Ambassadors Crawford and Stephenson may have in ag and NAMA after all this process, respectively, is to present a text. But do you think I can present the revised offer of each industrialized and developing country through a text? I don't have that option. So, I'm going to hold what I would call the "Enchilada" talks with ambassadors to get into the nitty-gritty.

WTD - But services are essentially bilateral give-and-take talks. What role does the chair take in such talks?

Mr. De Mateo - Ultimately, they have to do it between themselves. My role is precisely to say "okay, what is your interest in various sectors and modes and let's all hear what you are prepared to provide. Let's see which countries you are interested in and what are you prepared to address their concerns."

Ambition

WTD - Can you throw light on the level of ambition in the services negotiations and what, in your view, is a do-able deal given the importance attached by the United States, the European Union, and several other industrialized countries as well as India to the talks? Also, do you have in mind - like in the agriculture - that the center of gravity in services market access revolves around what the EU and the US can agree?

Mr. De Mateo - No, I guess the interests of different countries in services are completely different from what happens in ag. I mean the US and the EU agreeing on something in services does not mean much because they already have in place a strong working relationship in different areas of services through their trans-Atlantic cooperation, though they still have conflicting interests in some issues like audio-visual and maritime services. The problem in services is the differing interests of various other members in relation to their trading counterparts.

Having said this, in my view, an ambitious outcome in the Doha services negotiations would constitute something close to a standstill agreement that would bind the existing autonomous liberalizations in different sectors of services and something else in sectors and modes of delivery. Let me go a bit back on this. In services, both developed and developing countries have been liberalizing over the last 10 years and there is a big liberalization that has taken place which is not bound at the WTO for different reasons. One of the reasons is that those who liberalized autonomously might say: What would I get by binding my existing autonomous opening in sectors that are of interest to my services providers. Some others might reckon that it is prudent not to bind the autonomous opening on the ground that they might introduce some regulatory changes in the future depending on how the liberalization plays out.

Therefore, I would argue that a good outcome in the Doha services negotiations must come close to a "standstill" of what is already done autonomously in different services sectors and some additional opening in different services sectors and modes. That would be a very nice outcome.

WTD - So you would argue that a good deal in services must lead members to bind their autonomous liberalization commitments at the WTO?

Mr. De Mateo - Yes, I would add something more in the form of new access. I think this is what is being attempted in the Doha NAMA negotiations. In NAMA, for example, you have a bound level of around 35 percent in some countries while their applied tariffs are below 15 percent. So there is room to remove at least some of the "water."

Imbalances

WTD - But in some revised offers presented last year there are huge imbalances in sectors and modes of supply. So how do you address this problem?

Mr. De Mateo - This is something that I won't be able to address. My guidance to members would be that they should agree on the internal balance within services and then address the external balance - or the so-called exchange rate - with other negotiating areas. You know, services are going to balance a lot for many countries for what they give up in ag. And it will be the same in NAMA for some others. But inside services, of course, you have to reach an internal balance.

WTD - Are you suggesting that there has to be an internal balance between different services sectors and the modes of supply?

Mr. De Mateo - What I'm saying is that when you put your offers on the table in the sectors or modes of delivery that you are interested in, they can tell the chair that they are seeking balance in terms of what they are ready to give and what they are willing to offer.

WTD - As you know, there is a huge imbalance among what the "quad" countries - the United States, the European Union, Japan and Canada - are seeking enhanced market access in Mode 3 in different capital-intensive services sectors and what several developing countries are asking for in Mode 4 that relates to short-term movement of services providers and locking of commitments in Mode 1.

Mr. De Mateo - Let's say the imbalance is in the requests and not in the offers.

WTD - So, there is no imbalance in the offers, say, among Mode 3 and Mode 4 and Mode 1?

Mr. De Mateo - Let's put it this way. For instance, in tourism, we are already ready and eager to liberalize the commitments in Mode 3. Most countries want to liberalize the tourism sector in their own interest. The imbalance that you are talking about is what some countries asked for in Mode 4 and what they are prepared to give in Mode 3. In general, the offers that are put on the table are poor because they don't address the requests of the other side. And you see, countries are asking in Mode 3 and are not provided in Mode 3. Some others are asking in Mode 1 and they are not provided in Mode 1; it is the same thing in Mode 4. So, all participants have to do much more than what they have done until now.

Modes

WTD - There is a strong perception that the level of engagement in Mode 1 and Mode 4 is far too less as compared to Mode 3?

Mr. De Mateo - Well look, it depends on the country you are talking to and you can't generalize. What you can say is that the engagement so far is poor.

WTD - This being a Development round, can you indicate the benchmarks that have to be accomplished to fulfill the goals set out in the round?

Mr. De Mateo - I don't want to talk about benchmarks because that might lead to lot of difficulties. Well, let me say that trade in services have become the most important input for industrial goods and even farm items. A country that cannot provide its industrial and agricultural sectors with international quality services will find itself in trouble. So the development round is to provide services, and if developing countries can export more services, then that is a developmental outcome.

WTD - Are you suggesting that the final outcome in services must enable developing countries to export more services than what they did until now?

Mr. De Mateo - What I'm saying is that in a development round, market access to developing countries is the most important element. That's what I'm saying. And it applies to agriculture, NAMA and services.

WTD - If that is so, developing countries say that the best outcome in services for them will be determined by what they get in Mode 4. Do you agree?

Mr. De Mateo - That is not exactly what I'm saying. For developing countries - besides Mode 4 - there are many areas such as information services, construction services, professional services and telecom services that are not linked to Mode 4. For instance, there are Korean construction companies, Indian construction companies and so on that are making big inroads in construction services. What I mean to say is that we should not look at the development round in "North" versus "South" categories.

You can look at health, architectural or information services and many other services where developing countries can supply more services.

Rules

WTD - Let's come to rules negotiations. What would constitute a credible package in rules-related aspects of the services negotiations?

Mr. De Mateo - Rules is a very important element in the services negotiations. The rules-related issues in trade in services are somewhat akin to nontariff barriers in trade in goods. What you can give in national treatment and market access you can erode by having rules that would not allow the access. So there has to be improvements in rules to ensure that market access is not undermined.

WTD - Some industrialized countries place massive importance on market access, but they are either indifferent or not willing to address domestic regulation?

Mr. De Mateo - Well, it is like any other area in the Doha negotiations that involves the writing of texts - and that is how we are addressing it. You have to look at different proposals. And the chair for the domestic regulation has done a great job. He has already put a consolidated text and this part of the whole negotiations.

And certain countries say that market access is not the only issue, maintaining that they require strong rules. Mexico is also one of the main proponents asking for strong rules in the domestic regulation in terms of technical standards and is also demanding strong disciplines in subsidies.

WTD - Are you now suggesting there has to be balance between rules and market access?

Mr. De Mateo - What I'm saying is that the participants will have to determine what balance they want in the final analysis between one and the other, i.e. market access and balance. As chair, I can't judge that.

WTD - But at the end of the negotiations, can some members say that the outcome in services has weakened rules and strengthened market access?

Mr. De Mateo - There is no way of weakening the rules, and the rules are already there, especially Article VI. Something has to be strengthened but you can't weaken it. Proponents of domestic regulation want to ensure that there are adequate rules so that market access commitments are not weakened. The other side argues that transparency is the most important element and many countries are not aware about the requirements.

Developmental Package

WTD - The issue raised by some developing countries is that they want a developmental package in rules. Is it possible?

Mr. De Mateo - Well, there is no one view about what constitutes a developmental package on rules. Some countries believe that the developmental package is policy space. Some others believe it is market access. So here you have to get in the end a package that satisfies all the members or leaves some people dissatisfied. That is what all negotiations are about.

WTD - Some Southeast Asian countries - such as Malaysia and Thailand - are asking about an outcome on the long-pending issue of an emergency safeguard mechanism. Is there some progress there?

Mr. De Mateo - This is a tough one. When you look at services, you may find it is difficult to apply emergency safeguards. Even in goods - where it is easier - many times you end up in dispute settlement panels at the WTO on this issue. The members calling for ESMs had a big problem in 1997. It is already ten years old and the others say it is difficult to determine an injury or threat thereof in trade in services. This has been an ongoing issue since 1995 - and there is no end to this issue.

WTD - On the issue of subsidies in services, Hong Kong, Australia and Mexico are calling for a text on subsidies.

Mr. De Mateo - This is something that has been under negotiations since the GATS was implemented in 1995. It is not an easy task, but the chair of the working party has been doing a great job on this issue. As a chair, I hope there is some text in the rules negotiations. However, some members say there is no mandate to negotiate on issues such as government procurement. What we are doing now is having informal and formal meetings on rules and domestic regulation during the week of March 5.

WTD - In short, you are going to have an outcome only in domestic regulation?

Mr. De Mateo - I'm not sure about that. Look, at the end of the day, many things can happen. So, you can shape a package including rules and domestic regulation or a strong domestic regulation package or something that just provides some bare improvements in the domestic regulation disciplines. Of course, you can have nothing as this is something different from market access. In rules, the chairs are trying really hard to have a text.

Credible Package

WTD - Ultimately what is a credible package that addresses both market access and domestic regulation?

Mr. De Mateo - What I am saying is that there is going to be something in the three areas - market access, rules and domestic regulation. What I am not sure of is the outcome. As a chair, I would like to see improved offers with real market access on the table and I will like to see a good text on domestic regulation and something on rules.

WTD - Some members are saying they will judge the Doha round on what happens in services. Do you see the danger that services might become as difficult as agriculture to negotiate?

Mr. De Mateo - Many countries are saying they can be net losers in agriculture and they are going to push hard in services. Others are saying that they have to have something in services as they have no offensive interests in ag or NAMA. I mean there would be some hard bargaining in services - and the Hong Kong ministerial meeting was proof of that.

WTD - Lastly, a word about plurilaterals. So far, you had two rounds and many say they have failed to take off. Do you agree?

Mr De Mateo - No, I wouldn't agree with this view. I think they helped a lot to clarify requests and to dispel misgivings. The proof of the pudding in the Doha services negotiations is in the revised offers. And my final assessment is that there has to be a breakthrough in ag and NAMA - whatever that means, and immediately after that revised offers will have to be on the table. Subsequently, there will be balancing of different results.

That's how I see it in the next three or four or five months. I'm sure I will push for more engagement in services on the grounds that it is a difficult area. Also, I would like to see greater engagement by all participants.

WTD - Thank you.