United States Trade Representative (USTR) Ron Kirk has notified Congress that the Obama Administration is to enter into negotiations for a new trade agreement on international trade in services.
The negotiations will begin in Geneva, Switzerland, with a group of 20 trading partners - the US, Canada, the European Union, Norway, Switzerland, Australia, New Zealand, Hong Kong, South Korea, Japan, Singapore, Taiwan, Mexico, Chile, Colombia, Peru, Costa Rica, Israel, Pakistan and Turkey - who represent nearly two-thirds of global trade in services, with the objective of promoting international trade in services.
In July 2012, a group of World Trade Organization (WTO) members, the so-called "Really Good Friends of Services" (RGF), had agreed to intensify discussions on a "high ambition" international agreement on a wide range of services, to reinforce and strengthen the multilateral trading system.
Participants have stated that a new International Services Agreement (ISA) should be comprehensive in sectoral scope; contain new and enhanced rules that countries have developed since the WTO General Agreement on Trade in Services (GATS) entered into force in 1995; increase market access commitments to be as close as possible to countries' current practices; and produce new market access improvements.
It is also considered that an ISA could generate substantial benefits for all the participating economies. The services sector accounts for the largest share of most economies, and the US, for example, exports more services than any other country. In 2011, the US had a USD178.5bn surplus in services trade worldwide - the world's largest.
The services sector also employs over 80% of Americans. One sector – business services, such as industrial design, accounting, and legal services – accounts for approximately a quarter of US private-sector jobs.
Services exports, however, encounter substantial non-tariff barriers (NTBs) around the world, which keep the services trade from reaching its full potential. Traditional barriers to services exports include sectoral prohibitions on foreign participation, foreign equity limitations, discriminatory regulatory requirements, lack of transparency, and nationality requirements for service providers. In addition, there are a new generation of 21st-century NTBs, including restrictions on data flows, forced localization, and unfair competition from state-owned enterprises.
Kirk noted, in his letter to Congress, that a recent study by the Peterson Institute for International Economics has estimated that even though the US is the world's largest services trader, tradable services are still five times less likely to be exported than manufactured products.
"Every USD1bn in US services exports supports an estimated 4,200 US jobs in America," Kirk wrote. "Service industries employ… approximately three out of every four American workers nationwide. If business services achieved the same export potential as manufactured goods globally, US exports could increase by as much as USD800bn."
"To begin to realize this potential," he added, "we need to surmount a range of barriers that lock out, constrain, or disrupt the international supply of services. An ambitious, high-standard international services agreement presents a tremendous opportunity to remove these impediments."
The House of Representatives Ways and Means Committee Ranking Member Sander Levin (D - Michigan) stated that he was "encouraged" that the US will be negotiating an ISA with other interested WTO Members. "The purpose of the negotiation must be to make progress that eluded the Doha Round discussions in ensuring reciprocal market access abroad for US service suppliers. It can help to establish new rules to address critical emerging issues, such as the trade-distorting actions of state-owned enterprises."
In like manner, Ways and Means Committee Chairman Dave Camp (R - Michigan) added that "the ISA is a critical trade priority because it holds great promise for job creation in all sectors of the US economy... and can help rebuild momentum for a global agenda of trade liberalization."
Finally, the US Chamber of Commerce also welcomed the USTR’s move. "The ISA will be an economic boost for the US and the world economy," said Myron Brilliant, the Chamber's senior vice president for international affairs. "US services companies have seen trade and regulatory barriers multiply in ways that could not be foreseen two decades ago when the GATS was negotiated. This is a chance to tackle emerging trade barriers in areas such as the digital economy, while strengthening the global rules-based trading system.".
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