Sunday Business in association with the Private Sector Organisation of Jamaica (PSOJ) will, as of this week, present a series of articles drawing attention to issues of particular pertinence to the business community. This week the World Trade Organisation's agreement on trade in services comes under examination.
IN RECENT times the private sector has been more involved in the various theatres of trade negotiation through the efforts of the consolidated Trade Policy Committee of PSOJ. The committee incorporates representatives from the major business associations and the public sector and has been focusing on the services sector and the trade agreements which impact this sector.
There are two main trade regimes, the World Trade Organisation (WTO) and the Free Trade Area of the Americas (FTAA). In addition within the region, the CARICOM Single Market and Economy (CSME) is intended to facilitate the liberalisation of trade in goods and services through economic integration of CARICOM member states. All three trade regimes contemplate the liberalisation of trade in services.
The General Agreement on Trade in Services (GATS) is an agreement within the WTO which extends the WTO negotiations to services. (Originally the negotiations were confined to trade in goods). The GATS covers an extensive array of service sectors and sub-sectors, which includes tourism services, financial services (e.g. insurance, banking, securities), professional service (e.g. accounting, legal, medicine), educational services, transportation services, real estate services and communication services to name a few.
The negotiations are of the utmost importance to Jamaica, as they will establish worldwide rules for trade in services. In developed countries, services account for 50-60 per cent of Gross Domestic Product (GDP). In Jamaica, services accounted for 84 per cent of GDP in 2000, with growth in that sector substantially outpacing the rest of the economy.
The GATS negotiating process entails a series of requests and offers. Member countries will opt to participate in negotiations relating to service sectors of their choosing. Countries then make commitments in relation to those service sectors. In response, other countries make requests for liberalisation of certain aspects of laws and regulations relating to a specific service sector. These are then followed by offers in response to these requests, revised requests and requests for improved offers.
Importantly, there is no process by which countries are forced to make commitments that they do not wish to make.
Requests and offers are made for market access and national treatment in each service sector in one or more of four "modes of supply":
MODE 1
relates to "cross-border supply" (where services are supplied across borders without the consumer or service provider leaving his/her country, e.g. services provided in Jamaica to persons in other countries via the Internet).
MODE 2
deals with "consumption abroad" (where the consumer leaves his country to go to the country of the service provider to access the service, as with tourism).
MODE 3
"commercial presence" (where a foreign service provider establishes a branch or office in another member country, as where a United States bank might establish a Jamaican branch).
MODE 4
"presence of natural persons" (where a foreign individual comes to work in Jamaica).
Some of the main principles of the negotiations are:
MOST FAVOURED
NATION TREATMENT
A member state must grant to all other member states any concession which it grants to any one member state. A member state can seek an exemption to this principle, but exemptions have a maximum duration of only 10 years.
NO RECIPROCITY
Member states are not required to give reciprocal treatment to each other and can benefit from concessions to them, without being obliged to make those same concessions in return.
TRANSPARENCY
OF REGULATIONS
Laws and regulations affecting the service sector must clearly set out criteria, requirements and application.
NO BACKTRACKING
Once a commitment has been made, a member state is precluded from taking any action which is inconsistent with the commitment.
In the WTO, the negotiating positions of the CARICOM countries are co-ordinated by the Caribbean Regional Negotiating Machinery (CRNM). Where negotiations are conducted by individual CARICOM countries, the positions put forward and any agreements reached must be approved by CARICOM or widened to include other member states.
The WTO negotiations have now reached a critical point with initial requests already made, and initial offers now due March 31, 2003. Rough and tumble negotiations will start thereafter. Implementation of the GATS is scheduled for January 1, 2005.
In the FTAA, the deadline for the presentation of offers in February 15, 2003 and requests for improvements of offers made before February 16, 2003 and June 15, 2003. Implementation is set for no later than December 31, 2005.
Jamaican negotiators will need information from the sectors affected in order to develop negotiating positions and to be able to advocate and defend those positions effectively. Individual service sectors must therefore seriously consider the requests made of Jamaica, against the background of the existing regulatory regimes under which they operate. They must decide not only what aspects of their regulatory regimes are critical to them, but also what requests should be made on their behalf of other countries where they may wish to do business.
In this regard, the PSOJ is collaborating with the Ministry of Foreign Trade to assist the private sector. However, service sectors will need to commit time and resources to the process, as it needs to be primarily driven by them, since the outcome will be crucial to their business prospects.
