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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 Trade Possible -loss of fiscal revenue negative effects -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 locationspecific sunk costs Possible positive effects 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 A larger regional/bilateral market should result in lower prices/economy of scale effects/more choice = consumer gains
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 MFNbased 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
Services Sector in SADC Economies (% of GDP, 2007) Source: WDI, World Bank; Eurostat 7
WTO GATS Commitments of SADC Member States 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-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
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 (M 3) – Draft Protocol on Movement of Persons (M 4) – 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 Beginning of Negotiations First phase: requests and offers April 2012 Sector focus in the first phase: 1) Communication Services 2) Financial Services 3) Transport Services 4) Tourism Services Requests in at least 2 sectors end August 2012 Offers in at least 2 sectors end November Requests in at least 2 sectors Offers in at least 2 sectors end March 2013 end June 2013
Timelines for first round of negotiations (ctd) -> Thereafter: Energy-related and Construction Services Requests: end August 2013 Offers: 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 ü Where are you trading already now? Ø what sectors? what markets? What modes? ü Potential to expand services trade ? Ø what sectors? what markets? What modes?
Making requests to trading partners 2. Examine current market situation Ø Are the sectors of interest listed in commitments of trading partners? Ø 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? Ø Are certain regulatory measures of concern? Ø Are there MFN exemptions that affect your interests?
Making requests to trading partners 3. Strategic Considerations q Evaluate the requests in accordance with their economic, and strategic importance q Requests also to non-key markets? q Horizontal requests? ->covering all sectors, MS, equally q Compare the value of your requests with the value of your offers – are they roughly commensurate? q …take into account current level of openness, LDC status etc.
Formulating offers 1 Assess the REQUESTS received 2 Evaluate trade & development interests Ø Promotion of FDI? Ø Improvements in business and/or social infrastructures? Ø Promotion of knowledge transfer? Ø Reduction/elimination of domestic supply gaps? Ø Other social/economic/regional policy objectives?
3 Draft proposed offer Consult with relevant ministries & stakeholders ØUse existing schedule/or list of MFN exemptions as a basis, then clearly mark changes (use agreed editorial conventions) ØConsider technical corrections and clarifications ØConsult SADC Secretariat for advice if
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 X X X* X# Distribution Education Energy-related Environmental Financial Health and Social Tourism and Travel Recreational, Cultural, Sporting Transport # =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