| India's
stand at the WTO Ministerial Meeting at Hong Kong was
not just a betrayal of other developing countries –
it suggests that the government has not understood the
real interests of the Indian people either.
The Indian Commerce Minister, Shri
Kamal Nath, was one of the first to celebrate the deal
that was arrived at on the final day of the WTO's Hong
Kong Ministerial Meeting. He claimed that the hastily
patched up agreement addressed all of India's concerns,
and suggested that many of the areas where India has
''aggressive interests'' had been resolved in a manner
that was satisfactory from an Indian perspective.
Clearly, such enthusiasm could not have come from the
result of negotiations on agriculture, where the final
declaration was almost identical to the July 2004 package
that had been so heavily criticised until the previous
week by the same Commerce Minister. The paltry offer
of removing export subsidies by 2013 and the apparent
concession with respect to subsidies on cotton, amount
to almost nothing, and the way they are phrased are
likely to involve almost no benefits for most developing
countries. Indeed, the result in the agriculture negotiations
is clearly failure from almost every developing country
standpoint.
So the positive reaction of Indian negotiators must
have come from the other important elements of the declaration,
those relating to services and non-agricultural market
access (hereafter NAMA). In fact, it is precisely with
respect to services that India has been a ''demandeur''
in the WTO, with explicitly declared ''aggressive interests''
in terms of forcing countries to liberalise in certain
areas of services.
The General Agreement on Trade in Services (GATS) categorises
services according to their mode of delivery, which
is cross-cutting between different sectors and even
activities. It allows for individual member countries
to specify both the extent and the pace of liberalisation
in all of the modes, and operates on a ''request-offer''
basis, whereby members make requests for opening up
to other members and make offers on liberalising their
own regulations. These offers can be vertical (that
is, confined to particular sectors) or horizontal (that
is across sectors within a particular mode).
Thus far, developed countries have been especially keen
on pushing for liberalisation under Mode 3, which relates
to allowing foreign commercial presence for the supply
of services. They are especially keen on allowing their
multinational companies to open subsidiaries or branches
elsewhere so as to benefit from their competitive advantage
in activities such as banking, insurance and other financial
services, in retail trade, as well as in utilities such
as water supply and electricity distribution. Most of
their requests and offers thus far have essentially
been in this mode. Some other interests of developed
countries relate to Mode 2 (consumption abroad, which
occurs when the consumer travels to partake of the service
delivery, as occurs in tourism or foreign travel for
purposes of education or health services).
The Government of India has recently been particularly
keen on emphasising opening up and more market access
for its services exports according to Mode 1 (which
relates to cross-border supply, that is activities which
do not involve the cross-border movement of either the
supplier or the consumer, but can be delivered through
other means, such as a number of IT-enabled services)
and Mode 4 (which covers the movement of ''natural persons'',
that is short-term migration of people for the delivery
of a specific service). The recent boom in software
services and the expansion of IT-enabled services including
offshore Business Process Outsourcing which have increased
substantially both in terms of foreign exchange revenues
and incomes generated from these activities, in India
have been the source of great optimism in this area.
This is why in the WTO negotiations, India became a
great votary of ''Annex C'' of the draft declaration,
which was roundly condemned by most developing countries.
It was in fact this ''offensive interest'' of India
that led to it joining the developed countries in pushing
for Annex C to be adopted. This created some degree
of distrust and dissension in the ranks of developing
countries, and was one of the reasons why their various
much-publicised groupings were ultimately so ineffective
in affecting the outcome of the negotiations.
It is certainly true that Annex C makes some concessions
to the demands of India and other countries for whom
services exports is seen to be an area of potential
export expansion in future. Thus, it emphasises that
commitments under Mode 1 should include removal of existing
requirements of commercial presence, which had hitherto
militated against developing country suppliers who find
it difficult and expensive to establish companies abroad
in the country where the service is being supplied.
It also says that there should be new or improved commitments
in Mode 4 on the categories of Contractual Services
Suppliers, Independent Professionals and Others, again
delinked from commercial presence, to reflect inter
alia removal or substantial reduction of economic needs
tests. Both of these had been demands of several developing
countries, including India, and to that extent it could
be argued that these inclusions represent some success
for this particular position.
However, Annex C has a significant negative implication
– and was strongly opposed by so many developing countries
- because it implicitly changes the very structure of
GATS, which had hitherto been based on voluntary unilateral
commitments or bilateral requests and offers in the
various modes. The Hong Kong Declaration says that ''the
request-offer negotiations should also be pursued on
a plurilateral basis… Any Member or group of Members
may present requests or collective requests to other
Members in any specific sector or mode of supply, identifying
their objectives for the negotiations in that sector
or mode of supply… Members to whom such requests have
been made shall consider such requests
This is the real prize that the major developed countries
had hoped for in Hong Kong: a change in the negotiating
modalities in services. This will now allow them new
instruments to pressurise developing countries to open
up their key services sub-sectors under Mode 3 of commercial
presence.
The newly proposed ''plurilateral'' approach, which
will incorporate the sectoral and modal approaches,
is being presented as only one alternative open to member
countries. But it is quite clear that is now set not
just to add another option but actually to replace the
bilateral request-offer approach as the main negotiating
method. In fact the Hong Kong Declaration says the plurilateral
requests should be submitted to other members by 28
February 2006.
It is not surprising that several multinational service-providing
companies, who have been actively lobbying for just
such an outcome, and whose representatives were present
even in Hong Kong, have already expressed delight at
the outcome of the deal. It is evident that they are
already preparing themselves and their governments to
launch a first round of plurilateral negotiations involving
many key sub-sectors, especially in finance, retail
trade and areas like water provision. So developing
countries will have to brace themselves for an almost
immediate consequence in terms of greater pressure to
open up various domestic services sectors to the commercial
presence of large foreign firms.
Yet the Indian government obviously felt that even this
very significant and potentially dangerous concession
was worth making, simply to ensure greater liberalisation
by other (developed) countries in Modes 1 and 4. This
is based on the notion that India's competitive position
in terms of supplying professional and skilled labour
through Modes 1 and 4 is now so strong that it justifies
the aggressively liberalising stand that India has taken
in the service negotiations. The problem is that this
initial premise itself may be a mistaken one. |
