Published on: Financial Express, December 06, 2001,
By Pradeep S Mehta
IN a large international organisation like the World Trade Organisation (WTO), in spite of the “one country, one vote” principle, most of the countries do not get what they deserve. But, for sure they get what they negotiate. India did experience the same when it secured major gains in several areas of the hard-fought agenda of the recently concluded Fourth Ministerial Conference of the WTO.
A dispassionate analysis of the Ministerial Declaration from the perspective of India’s basic trade interests reveals that India bargained hard on agriculture, implementation, trade-related intellectual practices (TRIPs) and trade & transfer of technology among other areas and met with a fair amount of success.
However, trade in services is an area, which isn’t probably among the ones highlighted at the Doha meeting, and where perhaps India needs to do a lot of homework to be able to influence future negotiations.
The service sector today has vastly expanded in scope, beyond the traditional activities, to a whole host of professional services including software and information service, engineering and legal services and e-commerce and other internet-based service offerings. The growing importance of the sector is reflected in the fact that it accounts for more than 70 percent of production and employment in industrial societies. India is not behind either. The share of services in India’s GDP, had gone up to 46 per cent by 1999, and the upward trend is continuing.
The Doha Declaration talks about negotiations on services and puts emphasis on growth and development of all trading partners. It recognises the work already initiated under Article XIX of the General Agreement on Trade and Services (GATS) and reaffirms the guidelines and procedures for the negotiations adopted by the Council for Trade in Services as the basis for continuing the negotiation.
Under Article XIX, the GATS Agreement is under review since early 2000 and many countries have placed proposals on a wide range of sectors and several horizontal issues, as well as on movement of natural persons. Participants in the negotiations are supposed to submit initial requests for specific commitments by 30 June 2002 and initial offers by 30 March 2003. This gives a clear signal to India to start working on the issue seriously and chalk out a game plan.
In recent years, this sector has created the maximum number of jobs and is expected to do so in future as well. Our policy-makers have already started taking initiatives, albeit less ebullient; to make service-industries competitive, as compared to those in developed economies and the GATS accord appears to be an important vehicle for this drive.
Among the different modes of service supply, India is most interested in ‘movement of natural persons’ and has also submitted a proposal at the WTO Council for Trade in Services.
However, other modes (viz. commercial presence, cross-border supply and consumption abroad) are also important for making Indian service sector a global player in the emerging international scenario. For example, Indian service providers are increasingly looking for niche markets in other countries through ‘commercial presence’ mode of supply. Many global companies are outsourcing their service products, while setting up operational units. The country is an emerging hub for ‘cross-border supply’ of services. None the less, in terms of action, apart from liberalising the service sectors, the government has to create a regulatory environment for the benefit of consumers and also take them into confidence. GATS has not had a significant impact on consumers so far, but only because of the fact that the treaty is new and the international market for services is still relatively small. But that will change as global trade in services is growing rapidly, as demonstrated by the incursion of French water companies into Britain, German insurance into China, Spanish telecommunication into Latin America, and so on.
India, at another level, has to create an enabling environment for regulation as many foreign companies are investing in India, while establishing their presence as service providers and due to the fact that the GATS also provides avenues for foreign direct investment in a country. Studies by consumer organisations have revealed that in some cases this trend has improved services and lowered costs, but in others, the cost of some basic services, like water, have soared beyond the means of many poor people.
Despite different measures for the liberalisation and promotion of this sector, there are not many efforts by the government to adopt measures for the benefit of Indian service providers in creating a commercial presence in other countries. For instance, there are hardly any efforts to create an information hub for domestic service providers to receive knowledge on market access opportunities in other countries. Such home country measures for promoting trade in services are absolutely essential for India to become a major player in this relatively new area of the multilateral trading system.
On issues of ‘movement of natural persons’ though India has made its proposal, our trade negotiators are not as proactive as they can and should have. The Indian proposal talks about more opening for professional service providers in other countries’ market, with little emphasis on skilled and unskilled workers. Our negotiators should explore possibilities of putting forward a comprehensive proposal to the WTO Council for Trade in Services for the opening up of labour markets in developed countries and seek allies in other (developing and developed) countries to support it.
As I have written before, an agreement on MNP can also act as a counter to the demand for an agreement on investment. The latter is on the cards for negotiations to be launched after the Fifth Ministerial, to be held just 18 months from now. There is not much time left for the more serious preparatory work, involving research and coalition building, so that a strong salvo can be fired.