WTO Services Negotiations Concludes Preparations and Enters Second Phase

March 30, 2001

This week in Geneva, the WTO Council for Trade in Services took three important steps that, together, mark the start of a new phase in the WTO services negotiations.

First, the Council agreed on a set of guidelines and procedures for the negotiations. These guidelines are required under the WTO's built-in agenda -- that is, by the provision in the WTO General Agreement on Trade in Services (GATS) calling for a new round of services negotiations not later than January 2000 -- and reflect agreement among WTO Members on how to conduct and organize the negotiations. The guidelines reaffirm the negotiating mandate to remove restrictions on trade in services and provide effective market access. In addition, the guidelines acknowledge the right of governments to regulate, as well the role of services liberalization in promoting international and domestic economic growth. An important objective of the negotiations is further integration of developing countries in the world economy. The guidelines confirm that the GATS contains flexibility to address concerns of individual WTO Members, including those of developing countries.

Second, as part of a "stocktaking" of the first phase of the negotiation, which began in early 2000, the Council agreed on a work program for the second phase of the negotiations. To date, WTO Members have submitted some 45 negotiation proposals -- statements of objectives on liberalization by service industry sector (e.g., financial services) and by "mode of supply" (e.g., temporary entry of natural persons). The United States has submitted 12 such proposals to date.

The meetings of the Council will now be organized to allow for more focussed discussion of the negotiating proposals, as a vehicle to promote clearer understanding of the specific obstacles to be addressed in the negotiations and, where appropriate, new rules to promote more open and transparent regulation of service industries. At the next Council meeting, in May, WTO Members will review and comment on all negotiating proposals, with the discussions organized by sector and by mode. Then, half of the proposals will be discussed at the July meeting, and half at the October meeting. Further meetings are planned for December and March, with the agenda to be determined. Members agreed on the importance of arranging the meetings to encourage participation by capital-based sectoral experts.

In March 2002, the Council will review progress to date. In addition, the work program just agreed is without prejudice to decisions that may be taken relevant to the services negotiations at the WTO's Fourth Ministerial Conference, to be held in Doha, Qatar.

Third, the Council approved a revision of guidelines, first prepared during the Uruguay Round, on how countries should record their GATS commitments in their national schedules. The aim of the guidelines is to promote clarity, comparability, and consistency of country commitments -- an aid to making the commitments more understandable not only to other governments but also to business and other interested parties. Completion of this revision clears the way for countries to begin looking at how they will improve their country schedules in this round.

With the start of this new phase in the services negotiations, WTO Members are making good on their undertaking in the Uruguay Round to continue to use the GATS as the vehicle for broader and deeper commitments across all service sectors.

Background

The GATS is the first multilateral, legally enforceable agreement covering trade and investment in services. The GATS contains obligations for trade in services in much the same way that the General Agreement on Tariffs and Trade (GATT) does for trade in goods.

Most- favored-nation treatment, market access, and national treatment are three of the important principles included in the general framework of the GATS. Countries take on GATS commitments by listing sectors in a national schedule, thereby agreeing to allow foreign services and service suppliers to enter its market without applying certain quantitative limitations, certain restrictions on foreign equity amounts, or certain requirements on the form of the legal entity through which the service is supplied (market access). The country further agrees to treat foreign services and suppliers under no less favorable terms and conditions than the ones it applies to its domestic services and suppliers (national treatment). A country can, however, list limitations on market access and national treatment in this "schedule of commitments."

Service industries account for nearly 80 percent of U.S. employment and GDP. U.S. exports of commercial services (i.e., excluding military and government) were $255 billion in 1999, supporting over 4 million services and manufacturing jobs in the United States.

Cross-border trade in services accounts for more than 25 percent of world trade, or about $1.4 trillion annually. U.S. services exports have more than doubled over the last 10 years, increasing from $118 billion in 1989 to $255 billion last year. U.S. services compete successfully worldwide. Major markets for U.S. services include the European Union ($85 billion in private sector 1999 exports), Japan ($30 billion), and Canada ($21 billion).