WTO seeks resumption of talks on services

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)