Setting the Scene for the SADC Trade in Services Negotiations
National Seminar on Trade in Services Negotiations under SADC
31 July – 1 August 2012 Lilongwe, Malawi
Overview of the presentation
1. Why are countries negotiating trade in services?
2. Approaches and strategies of Trade in Services Negotiations
3. Linkages between Negotiations in SADC and COMESA
1. Why are countries negotiating on trade in services?
• Political motivations:– Recognition of importance of services as an
increasingly important aspect of the economy and trade (?)
– Expression of commitment to regional integration agenda (?)
– …everyone is negotiating services regionally…(?)
Welfare effects of trade preferences in goods/services
Goods Trade Services TradePossible negative effects
-loss of fiscal revenue-loss of quota rents- consumer losses if efficient third country suppliers are supplanted as a result of the preference
- Higher risk of “first mover advantages” due to location-specific sunk costs
Possible positive effects
A larger regional/bilateral market should result in lower prices/economy of scale effects/more choice = consumer gains
No loss of fiscal revenue (no tariffs)Dynamic gains from liberalization are likely to be significant --input nature of key service industries -FDI (commercial presence) is the main mode of supplying services; -returns to scale, -QR nature of impediments, -trade facilitation properties of regulatory convergence
Why then negotiate regionally?• Because politics often trumps economics ….• For reasons of greater bargaining efficiency
– Negotiations may be less complex with fewer players around the table
– PTAs constrain the scope for free riding that is inherent to MFN-based market opening
• Because geography often shapes key trade patterns • Because many forms of regulatory cooperation are more feasible
and desirable within a smaller group of countries (e.g. regulatory cooperation, mutual recognition, harmonization).
• Because of learning-by-doing externalities (gradualism/infant industry rationale to focus first on neighborhood arrangements before exposing local suppliers to the full force of MFN-induced competition; PTAs also offer prospects for upgrading negotiating skills)
5
The SADC Trade in Services Agenda – Overview and State of Play
7
Services Sector in SADC Economies (% of GDP, 2007)
Source: WDI, World Bank; Eurostat
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other
Services
Sub-sectors No. of Members(LDCs in
brackets)
List of WTO Members
20 or less 44(21) Angola, Bahrain, Barbados, Benin, Botswana, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Democratic Republic of Congo, Costa Rica, Cyprus, Fiji, Gabon, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Madagascar, Maldives, Mali, Malta, Mauritania, Mauritius, Mozambique, Myanmar, Namibia, Niger, Paraguay, Rwanda, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Solomon Islands, Sri Lanka, Suriname, Swaziland, Tanzania, Togo, Uganda, Zambia
21-40 23(6) Bangladesh, Bolivia, Brunei Darussalam, Burundi, Cote D’Ivoire, Djibouti, Dominica, El Salvador, Ghana, Grenada, Guatemala, Kenya, Malawi, Macao, Mongolia, Nigeria, Papua New Guinea, Peru, Qatar, Senegal, Sierra Leone, Tunisia, Uruguay, Zimbabwe
41-60 10 Antigua and Barbuda, Belize, Cuba, India, Morocco, Netherlands Antilles, Nicaragua, Pakistan, Trinidad and Tobago, UAE
61-80 14 Brazil, Bulgaria, Ecuador, Egypt, Hong Kong (China), Israel, Jamaica, Kuwait, Liechtenstein, Panama, Poland, Romania, Singapore, Venezuela
81-100 14(1) Argentina, Chile, China, Czech Republic, Dominican Republic, Indonesia, Lesotho, New Zealand, Oman, Panama, Slovak Republic, Slovenia, South Africa, Turkey
101-120 12(1) Albania, Australia, Bulgaria, Canada, Estonia, Gambia, Jordan, Latvia, Lithuania, Philippines, Switzerland, Thailand
121 and more
29 Colombia, Croatia, EC (15), Georgia, Hungary, Iceland, Japan, Korea, Kyrgyz Republic, Latvia, Malaysia, Mexico, Moldova, Norway, USA
WTO GATS Commitments of SADC Member States
SADC Member States
Malawi’s commitments by sector*
*Denotes incidence of commitments, by sub-sector, without assessment of depth/quality
Liberalization of Trade in Services in SADC
• Work on Trade in Services started in 2000 with the development of a framework agreement (initially foreseen as an Annex to the Trade Protocol)
• The “Protocol on Trade in Services” was adopted by Ministers of Trade in July 2009
• Protocol to be approved by the Summit on the recommendation of the Council-> August 2012
• Note: Several other SADC Protocols address issues related to trade in Services – Finance and Investment (M3)– Draft Protocol on Movement of Persons (M4)– Sector-specific Protocols (e.g. covering transport, communications,
finance etc.)
SADC - First Round of negotiations
1. Objective for first round of negotiations: – Each Member State will provide better treatment
to SADC MS in each priority sector than is provided in their GATS schedule
– No new restrictions to be introduced during the negotiations (“standstill”)
• Plus: GATS Article V • Substantial sectoral coverage (~ 6 sectors)• And elimination of substantially all discrimination (~better
than GATS commitments sufficient(?))
Timelines for first round of Negotiations
end August 2012
First phase: requests and offers
April 2012
Requests in at least 2 sectors
Requests in at least 2 sectors
end November
2012
Offers in at least 2 sectors
end March 2013
Requests in at least 2 sectors
Requests in at least 2 sectors
end June 2013
Offers in at least 2 sectors
Begi
nnin
g of
Neg
otiati
ons
Sector focus in the first phase:1)Communication Services
2)Financial Services3)Transport Services4)Tourism Services
Sector focus in the first phase:1)Communication Services
2)Financial Services3)Transport Services4)Tourism Services
Timelines for first round of negotiations (ctd)
-> Thereafter: Energy-related and Construction Services
Requests: end August 2013Offers: End November 2013
Additional Elements:-Sector Studies (market analysis in all MS)-Sector Fora (bringing regional stakeholders together)
- Transport ~ 11-13 September 2012- Communication ~ November 2012
Negotiations under SADC –main principles
• Conducted through request - offer method • Requests exchanged before offers• Requests to one or more trading partner• To be circulated through the SADC Secretariat• Full transparency: requests to any trading
partner shared with all trading partners
Making requests to trading partners
1. Evaluate trading opportunities in the relevant sectors
Where are you trading already now? what sectors? what markets? What modes?
Potential to expand services trade ? what sectors? what markets? What modes?
Making requests to trading partners
2. Examine current market situation Are the sectors of interest listed in commitments of
trading partners? What is the level of commitments?
• Have relevant Modes been bound?• Are they subject to quotas or equity restrictions? Etc.• Are your suppliers facing discrimination?
Are certain regulatory measures of concern? Are there MFN exemptions that affect your interests?
Making requests to trading partners
3. Strategic Considerations Evaluate the requests in accordance with their
economic, and strategic importance Requests also to non-key markets? Horizontal requests? ->covering all sectors, MS, equally Compare the value of your requests with the value of
your offers – are they roughly commensurate? …take into account current level of openness, LDC
status etc.
Formulating offers1 Assess the REQUESTS received2 Evaluate trade & development interests
Promotion of FDI? Improvements in business and/or social
infrastructures? Promotion of knowledge transfer? Reduction/elimination of domestic supply gaps? Other social/economic/regional policy objectives?
3 Draft proposed offer
Consult with relevant ministries & stakeholders
Use existing schedule/or list of MFN exemptions as a basis, then clearly mark changes (use agreed editorial conventions)
Consider technical corrections and clarifications
Consult SADC Secretariat for advice if needed
3. Linkages between negotiations in SADC and COMESA
• Strong substantive similarities between the COMESA Regulations and the SADC Services Protocol– Same core provisions: MFN, Market Access,
National Treatment– Positive list approach to negotiations
Priority Sectors in the COMESA/SADC negotiations
Sector COMESA SADC
Business Services X
Communication X X
Construction X (incl. engineering) X
Distribution
Education
Energy-related X X
Environmental
Financial X X
Health and Social
Tourism and Travel X X
Recreational, Cultural, Sporting
Transport X* X#
# =excludes air traffic rights# =excludes air traffic rights
Main Differences Between COMESA and SADC frameworks
• Fundamental principles:– Comesa excludes “basic services” from scope of application– SADC (like GATS) excludes “air traffic rights” from scope of application
• Definition of Mode 4: – SADC covers also movement of employees from non-SADC Member
States (as long as service supplier is from SADC)• Additional commitments
– SADC: only repeat WTO commitments
• Transparency:– SADC: “shall” publish information about international agreements
(COMESA :”should”)
Main Differences between COMESA and SADC frameworks (ii)
• Enquiry Points:– Comesa requires enquiry points to inform service supplier of other MS (“gateway
function”)– SADC (like GATS) deals only with minimal requirements to respond upon request to other
SADC MS.
• Rules of Origin: – COMESA: “Juridical person” means a legal person set up in accordance with the laws of a
Member State of the COMESA respectively, and having its registered office, central administration, or principal place of business in the territory of the Member State -> if operations possess a real and continuous link with the economy of the member State
– SADC: Defines “juridical person” (to which benefits of the Agreement are conferred) as a legal entity set up in accordance with the laws of a State Party, and engaged in “substantial business operations” in the territory of that Member or any other State Party.
Main Differences Between COMESA and SADC frameworks (iii)• Domestic Regulation:
– Both are aiming at domestic regulation disciplines– SADC criteria slightly different (to ensure that meet
national policy objectives)• Simplification of procedures and electronic procedures:
– COMESA to work on simplification, MS to endeavor electronic procedures
• Movement of Natural Persons:– COMESA Annex contains definitions for main categories– Target for reduction of quantitative restrictions and ENTs for
IP’s (2015), CSS (elimination 2012), ICTs.
Main Differences Between COMESA and SADC frameworks (iv)
• Negotiating Guidelines:– COMESA aims at removal of all restrictions– SADC aims at better than GATS commitments.
– COMESA : MS that do not make commitments in the priority sectors shall not received the preferential treatment under the Regulations
– SADC: no such clause…but possibility for some MS to advance faster
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