WTO Symposium on WTO Symposium on Cross-Border Supply of ServicesCross-Border Supply of Services

Constraints with the existing GATS Constraints with the existing GATS framework and Schedules of Specific framework and Schedules of Specific

CommitmentsCommitments

Geneva: 29 April 2005Geneva: 29 April 2005

Aaditya Mattoo (World Bank)Aaditya Mattoo (World Bank)

Sacha Wunsch-Vincent (OECD)*Sacha Wunsch-Vincent (OECD)*

*the views expressed do not necessarily represent the views of the OECD*the views expressed do not necessarily represent the views of the OECD

Outline of PresentationOutline of Presentation

1.1. Virtues of the GATSVirtues of the GATS

2.2. Market Reality: Globalised service Market Reality: Globalised service productionproduction

3.3. The inadequacies of the scheduling The inadequacies of the scheduling framework and commitments framework and commitments

4.4. Other issuesOther issues

1) Virtues of the GATS1) Virtues of the GATS

Virtues of the GATSVirtues of the GATS Includes cross-border trade as mode of supply. Includes cross-border trade as mode of supply. Provides a framework to make specific commitments Provides a framework to make specific commitments granting open trading conditionsgranting open trading conditions

--market access market access

-national treatment -national treatment -underpinned by technological neutrality-underpinned by technological neutrality

Other GATS obligations apply to committed servicesOther GATS obligations apply to committed servicesAnd some concernsAnd some concerns

-The ‘likeness’ of electronic and non-electronic -The ‘likeness’ of electronic and non-electronic servicesservices

- Are digitally-traded services covered by GATS - Are digitally-traded services covered by GATS Mode 1 or 2 commitments? Mode 1 or 2 commitments?

- GATS obligations: too much or too little?- GATS obligations: too much or too little?

1)1) Globalised Globalised service service productionproduction- - Trade in intermediate servicesTrade in intermediate services- Trade in new services- Trade in new services

Example of Information Technology and Business Process Outsourcing Services

1. Information Technology Services 1. Information Technology Services Software Development Services, Data processing and Database Services, IT Support Services, Web-hosting and Application Service Providers (ASPs)Software Development Services, Data processing and Database Services, IT Support Services, Web-hosting and Application Service Providers (ASPs)

2. Business Process Outsourcing2. Business Process OutsourcingCustomer Interaction Services, Reservations for Airlines, Subscription services, Payroll Services, Insurance Claims AdjudicationCustomer Interaction Services, Reservations for Airlines, Subscription services, Payroll Services, Insurance Claims Adjudication

3. More Independent Professional or Business Services3. More Independent Professional or Business ServicesHuman Resource Services, Finance & Accounting Services, Marketing Services, Product Design and DevelopmentHuman Resource Services, Finance & Accounting Services, Marketing Services, Product Design and Development

InsuranceInsurance

Insurance service fragmentsInsurance service fragments Customer Services HelplineCustomer Services Helpline.. Insurance claims Insurance claims

processingprocessing Payroll managementPayroll management Business Intelligence & Business Intelligence &

Data WarehousingData Warehousing

a)a) Inadequacy of the existing classification Inadequacy of the existing classification schemescheme

b)b) Inadequacies of Existing GATS Inadequacies of Existing GATS Commitments and Offers on Mode 1Commitments and Offers on Mode 1

3) The inadequacies of scheduling 3) The inadequacies of scheduling framework and commitmentsframework and commitments

a) Inadequacy of the classification schemea) Inadequacy of the classification scheme

Implications of Positive list approach Implications of Positive list approach

WTO Members are free to include only certain WTO Members are free to include only certain (sub)-sectors of the GATS Services Sectoral (sub)-sectors of the GATS Services Sectoral Classification List (W120) in their schedules. Classification List (W120) in their schedules.

Services are only covered unambiguously when Services are only covered unambiguously when they can be clearly identified under an existing they can be clearly identified under an existing sectoral classification for which commitments sectoral classification for which commitments have been entered. have been entered.

Fragmentation of goodsFragmentation of goods

Fragmentation of ServicesFragmentation of Services

Hospital service fragmentsHospital service fragments Call Centre for customer Call Centre for customer

service, etc.service, etc. Medical transcription Medical transcription

servicesservices Payroll managementPayroll management Web hosting services / Web hosting services /

application service application service providers (ASPs)providers (ASPs)

Hospital call centre services

Other business services

Health services

Other “Other business services”

Other Health or Auxiliary Services

Hospital services

Supply of office personnel

Route 1: Services Directly Specified Route 1: Services Directly Specified in the W/120in the W/120

Route 1: Services Directly Specified in Route 1: Services Directly Specified in the W/120the W/120

8.8. A. A. Hospital servicesHospital services 93119311

Services delivered under the direction of medical doctors Services delivered under the direction of medical doctors chiefly to in‑patients, aimed at health status of a patient. chiefly to in‑patients, aimed at health status of a patient.

8. D.8. D. Other (not defined further)Other (not defined further)

Example: hospital call centre or medical transcription

Step one: Are these serviced explicitly listed under health services?

Route 1: Services Directly Specified in Route 1: Services Directly Specified in the W/120the W/120

Example: hospital call centre or medical transcription

Step two: Are these services explicitly listed under business services?

1.1. F.F. Other Business ServicesOther Business ServicesF.k.F.k. 8720387203 Supply services of office support personnel Supply services of office support personnel

Services consisting in supplying on a fee or contract basis to the clients, Services consisting in supplying on a fee or contract basis to the clients, whether on a temporary or long‑term basis, office support personnel hired whether on a temporary or long‑term basis, office support personnel hired by the supplier, who pays their emoluments. Included are the provision of by the supplier, who pays their emoluments. Included are the provision of personnel such as secretaries, clerks, etc. personnel such as secretaries, clerks, etc.

F.t.F.t. Other “Other business services” Other “Other business services” 8790 8790 8790387903 Telephone answering servicesTelephone answering services Services consisting in the Services consisting in the

provision of telephone answering services (eg, provision of telephone answering services (eg, wake‑up services).wake‑up services). 8790987909 Other business services n.e.cOther business services n.e.c. .

Some new services are specified in the Some new services are specified in the revised CPC Version 1.1 revised CPC Version 1.1

New category: New category: Business and production servicesBusiness and production services

Division: 85 - Support servicesDivision: 85 - Support services8512 - Supply of personnel services8512 - Supply of personnel services859 - Other support services859 - Other support services8593 - Telephone based support services 8593 - Telephone based support services

85931 - Telephone call center services85931 - Telephone call center services8596 - Data processing services 8596 - Data processing services 8599 - Other support services n.e.c.8599 - Other support services n.e.c.

But some new services are not even But some new services are not even captured in the latest CPC 1.1captured in the latest CPC 1.1

Example: Web hosting services / application service providers Example: Web hosting services / application service providers (ASPs)(ASPs)

OECD proposal to the revision of the CPC 2007OECD proposal to the revision of the CPC 20078316 Hosting and IT infrastructure provisioning services8316 Hosting and IT infrastructure provisioning services

Source: OECD (2004): Classifying ICT Services, DSTI/ICCP/IIS(2004)2 (7 April)

Services Sectoral Classification list: Services Sectoral Classification list: A continual catching up? A continual catching up?

Classification systems become obsolete fast. Classification systems become obsolete fast. The CPC was updated twice to cover the evolution of The CPC was updated twice to cover the evolution of services since the end of the Uruguayservices since the end of the Uruguay

1989: Provisional CPC1989: Provisional CPC1991: GATT secretariat produces the W1201991: GATT secretariat produces the W1201997: CPC 1.01997: CPC 1.02002: Manual on trade in services2002: Manual on trade in services2002: CPC 1.1 2002: CPC 1.1 2007: CPC 2.02007: CPC 2.0

Route 2: Indirect Coverage as Route 2: Indirect Coverage as “Inputs to Services Specified in W/120”“Inputs to Services Specified in W/120”

Argument forArgument for The "supply of a service" Art. XXVIII(b) includes The "supply of a service" Art. XXVIII(b) includes

production, distribution, marketing, sale and deliveryproduction, distribution, marketing, sale and delivery. .

Argument againstArgument against

But: Fn 9 states that But: Fn 9 states that GATS Art. XVI (2) does not cover GATS Art. XVI (2) does not cover measures which limit inputs for the supply of services”measures which limit inputs for the supply of services”

Guidelines for the Negotiations on Services:Guidelines for the Negotiations on Services:

““[...] market access and national treatment commitments [...] market access and national treatment commitments [...] do not imply a right for the supplier of a committed [...] do not imply a right for the supplier of a committed

service to supply uncommitted services which are inputs service to supply uncommitted services which are inputs to the committed service.”to the committed service.”

b) Inadequacies of Existing GATS b) Inadequacies of Existing GATS Commitments / Offers on Mode 1Commitments / Offers on Mode 1

Existing commitments on GATS Mode 1 are Existing commitments on GATS Mode 1 are limited and diverge widely for the different limited and diverge widely for the different service sectors.service sectors.

Even most liberal GATS schedules offer Even most liberal GATS schedules offer surprisingly little in categories important for surprisingly little in categories important for intermediate services intermediate services

Example from Initial GATS Offers (2005 )Example from Initial GATS Offers (2005 )

Supply services of office support personnelSupply services of office support personnelUnbound:Unbound: Australia, Brazil, China, India, EC (majority Australia, Brazil, China, India, EC (majority

of MS), Japanof MS), JapanOther business services n.e.c.Other business services n.e.c.Unbound:Unbound: Australia, Brazil, China, India, EC (all MS), Australia, Brazil, China, India, EC (all MS),

Japan, USA, etc. Japan, USA, etc.

Only few sectors where some Members made commitments Only few sectors where some Members made commitments on other categories or on other categories or at the higher two-digit levelat the higher two-digit level Few updates to incorporate elements of CPC 1.1 classification Few updates to incorporate elements of CPC 1.1 classification

updates or deliberations in the Committee on Specific updates or deliberations in the Committee on Specific Commitments Commitments

4) Other issues4) Other issues

Transparency Transparency

Domestic regulation Domestic regulation

-applicable jurisdiction,-applicable jurisdiction,

-data privacy issues-data privacy issues

Mutual recognition Mutual recognition

Government procurement Government procurement

Taxation.Taxation.

BibliographyBibliographyMattoo, A and Wunsch-Vincent, S (2004) ‘Pre-Empting Protectionism in Mattoo, A and Wunsch-Vincent, S (2004) ‘Pre-Empting Protectionism in Services: The WTO and Outsourcing’, Services: The WTO and Outsourcing’, Journal of International Economic Journal of International Economic LawLaw, vol 7, no 4, Dec 2004, pp 765-801, vol 7, no 4, Dec 2004, pp 765-801

OECD (2005), Growth in Services: Fostering Employment, Productivity OECD (2005), Growth in Services: Fostering Employment, Productivity and Innovation, and Innovation, OECD Services Economy Project, Directorate for OECD Services Economy Project, Directorate for Science, Technology and IndustryScience, Technology and Industry

Wunsch-Vincent, Sacha (2005): The WTO, the Internet and Digital Wunsch-Vincent, Sacha (2005): The WTO, the Internet and Digital Products, Oxford: Hart Publishing (Products, Oxford: Hart Publishing (www.hart.oxi.net/bookdetails.asp?www.hart.oxi.net/bookdetails.asp?id=810&bnd=0id=810&bnd=0))