WTO seeks resumption of talks on services

JAKARTA (JP): The inaugural ministerial conference of the World Trade Organization (WTO) in Singapore in December is expected to pave the way for earlier resumption of negotiations on financial services, basic telecommunications and maritime transports.

Adrianus Mooy, executive secretary of the Economic and Social Commission for Asia and Pacific (ESCAP) -- a United Nations body -- noted that the post-Uruguay Round negotiations on trade in services had failed to provide positive results in terms of increased market access.

"However, ESCAP members have expressed the hope that significant progress will be made according to the new deadlines," Mooy said at the closing of the three-day ESCAP senior officials meeting here over the weekend.

The meeting was held to prepare the way for the upcoming WTO ministerial meeting in Singapore.

WTO deputy director general Anwarul Hoda revealed at the meeting that the failure of negotiations on some sectors, notably financial services and basic telecommunications, had been triggered by the United States, which was dissatisfied with the liberalization commitments made by its trading partners.

The negotiations on financial services resulted in only an interim agreement formulated at the initiative of the European Union, which averted a collapse of the negotiations. The United States, however, did not join the agreement, which will last until November 1997.

"There wqs much disappointment at the U.S. decision not to make a full commitment. The reason for this decision was its dissatisfaction with the offers made by others, some of whom had not even offered to bind the existing level of liberalization," Hoda said.

He explained that the interim agreement on financial services preserves substantial liberalization commitments by 29 members, both developing and developed countries. Among the 29 members, 20 have made improved commitments in insurance, 24 in banking, 17 in securities and 25 in other financial services.

It seems so far that improvement in the commitments in financial services will be mainly sought from the members of the Association of Southeast Asian Nations -- Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The United Nations Commission on Trade and Development (UNCTAD) said in its report that developing countries, in deciding to liberalize their financial services sector, need to examine the benefits and problems of liberalization.

Financial liberalization will expand the range of financial services available to domestic firms, but at the same time it may pose risks to monetary and financial stability, especially if it is accompanied by abrupt and massive capital movements.

Liberalization could also bring about greater prudential risks, concentration of ownership and moral hazard, deprive the government of a major source of fiscal revenue and thereby adversely affect the fiscal balance.

"To reduce this risk, liberalization should be sequenced and accompanied with overall macroeconomic policies and a rigorous system of banking supervision," the report said.

Like in financial services, the negotiations on basic telecommunications could not be concluded on the planned date, 30 April 1996. The United States believed that the "critical mass" of offers had not been achieved -- the market opening offers were considered insufficient.

The final outcome of the basic telecommunications negotiations was similar to that in financial services, in that the United States refused a deal at the last minute. Apparently, the United States, under the pressure from the industry led by Motorola, wished to protect its market from competition from potential rivals.

During the negotiations, 34 offers of market access were made, 32 of which contained market access commitments in voice telephony. Offers had been made on opening markets by 28 participants for local telephone services, by 27 for domestic long distance and by 25 for international services.

"It has been decided to continue the negotiating process and afford an opportunity to the members to reexamine their positions and supplement or modify their offers over a 30-day period beginning Jan. 15, 1997," Hoda said.

The negotiations on maritime transport also failed to secure any agreements. The negotiations did not succeed because, again, the United States did not put forward any offer at all.

Negotiations on maritime transports aim at commitments in international shipping, auxiliary services and access to and use of port facilities, leading to the elimination of restrictions within a fixed timeframe.

At the time of suspension, on June 28, 1996, 24 conditional offers had been submitted. Meanwhile, there is an understanding that countries will respect a "peace clause", that is, they will not take any measure to improve their negotiating positions except in response to measures taken by others.

"This will help prevent the introduction of new restrictions on trade in this sector," Hoda said, adding that negotiations will resume in the next major round of comprehensive negotiations on the services.

According to Article XIX of the General Agreement on Trade in Services (GATS), a general round of multilateral negotiations on trade in services must be held before 2000.

The solutions reached in financial services, basic telecommunications and maritime transport sector negotiations which provide for the possibility of withdrawal of offers create an element of instability affecting the credibility of the WTO as a whole.

"The best solution might be to simply advance the date for the next multilateral round of negotiations on trade and services as provided in Article XIX of the GATS from 2000 to 1998," UNCTAD suggested in its report. (rid)