Building capacity to help Africa trade better

Is GATS the appropriate model for developing countries?


Is GATS the appropriate model for developing countries?

Paul Kruger, tralac Researcher, discusses whether the GATS is the appropriate model for developing countries

Many developing countries are going through the process of liberalising trade in services or plotting a course to liberalise services in the near future. In southern and eastern Africa, the three configurations of COMESA, EAC and SADC have plans to liberalise services along similar lines to the multilateral GATS framework. Despite best intentions from the member states, efforts to liberalise the services industries in COMESA, EAC and SADC have either been slow or burdened by technical difficulties. EAC member states initially made good progress and negotiated their priority sectors in a very short time frame. The negotiation process was however suspended during 2011 to address certain concerns around the delinking of the movement of workers from the specific commitments. It is clear from the emerging debate that there are design issues that affect the implementation of the agreed commitments. The initial outcomes of the services liberalisation process in the EAC have led to questions around the feasibility of the GATS model for services negotiations. The question has been raised: is GATS an appropriate liberalisation model for African countries?

In the African context, there has been a shift in the perception and attitude of countries towards the liberalisation of services. There was a time when services liberalisation was regarded as a contentious issue, but over the last few years there has been a growing recognition of the importance of trade in services and the role services can play in the overall growth and development of the region. Another reason why services are receiving increased attention is the ambition of countries for further integration. All three configurations are set to become common markets and the free movement of services is an important feature of this level of integration. It appears as if most African countries are in agreement on the need to negotiate services, but there is some uncertainty on the best way to realise an optimal outcome.

The GATS positive list approach has been accepted by all three configurations as the method to liberalise trade in services, but questions have been raised about the efficiency and value of transferring the multilateral approach to the regional context. Part of the challenge is that countries have already invested serious effort and time in order to understand the GATS framework. Services training, workshops and seminars, with the GATS as background, have been part of the capacity building efforts in the regions and it can be argued that this knowledge contributed to the perception countries have on the process of services liberalisation. As seen from the EAC liberalisation process, the emphasis of services negotiations was primarily on concluding the schedules of commitments with the purpose to set up a regulatory framework for regional services trade. The aim was to complete the schedules within a short time frame, and in this context, the GATS rules put a certain degree of pressure on WTO member states to liberalise services sectors in a specific manner. Member states have to negotiate ‘substantial’ liberalisation commitments, without being exactly certain how to achieve this threshold. For countries negotiating services for the first time, addressing all the sectors is an intensive task. This is not something that can be done quickly, especially if countries want to make a comprehensive and in-depth assessment of all the services sectors. A more constructive approach is being followed in the COMESA negotiations where countries are choosing instead to deal with one sector at a time. This creates the necessary space to understand the regulatory framework and unique issues relevant to the specific sector before submitting liberalisation commitments. A similar approach has been followed in the MERCOSUR and ASEAN regions where several negotiating rounds were held, after which the results were consolidated in preparation for WTO notification and domestic implementation.

One challenge for countries negotiating services is to reflect their domestic conditions for establishment and trade in a transparent manner. This is being done through the scheduling of specific commitments which will eventually form an integral part of the services agreement. A request and offer approach as used at the multilateral level is not necessary or particularly useful at the regional level. It can be argued than an important first step is to reflect the status quo as it currently stands at the domestic level. Once a transparent status quo has been established, countries can begin to request the relaxation of specific restrictions in the successive rounds of negotiation. If countries are following a positive list approach, the only way to craft a comprehensive and truly transparent schedule is to address the sub-sectors line by line. This did not happen in the EAC services negotiations and several sub-sectors have been omitted from the schedules. In comparison, MERCOSUR member states followed the same positive list approach as the EAC, but have scheduled all 160 sub-sectors. Although the MERCOSUR schedules are far more restrictive than the schedules of the EAC, they represent a complete and transparent framework.

Another shortcoming of the current approach is the level of information contained in the schedules. Little information apart from ‘none’ (open sectors and modes) and ‘unbound’ (closed sectors and modes) are listed in the schedules. Without description of the current restrictions in the schedules, investors will still have to review domestic legislation to determine the exact conditions for entry and establishment. EAC member states have scheduled almost no specific restrictions during their services negotiations. One objective of the regional services liberalisation is the promotion of transparent and predictable legal frameworks, but at the moment it can be argued that the EAC schedules of liberalisation fall short of this aim. This situation can be compared to the negative list approach where every restriction is fully described including where in domestic legislation it can be found.

It is unlikely that African countries will forgo the GATS positive list approach. What is more foreseeable is that countries will adapt certain parts of the approach to suit their specific needs. The debate around the linking and delinking of the EAC schedules is an indication that countries are rethinking the current liberalisation process. The outcome of this debate is important, as it will likely feed into the movement of business persons under the Tripartite FTA negotiations. The flexible nature of the GATS provides the opportunity for African countries to build on the typical GATS approach in order to create a home-grown solution to govern the liberalisation of services.



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