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US Pushes New International Services Agreement

by Mike Godfrey, Tax-News.com, Washington

26 September 2012


The House of Representatives Subcommittee on Trade of the Committee on Ways and Means has held a hearing on the benefits of expanding United States trade in services through an international services agreement (ISA).

It was noted that on July 5, 2012, a group of World Trade Organization (WTO) members, the so-called ‘Really Good Friends of Services’ (RGF), agreed to intensify discussions on a “high ambition” international agreement on a wide range of services, to reinforce and strengthen the multilateral trading system.

Thus far, 20 countries – both developed and developing – are participating, representing a strong majority of global services trade: 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.

Participants have stated that the 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 – some 14% of all global services exports. According to a July 2012 report by the US International Trade Commission, US cross-border services exports totalled USD518bn in 2010, generating a USD160bn trade surplus – 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, however, 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.

In announcing this hearing, the Subcommittee’s Chairman Kevin Brady (R – Texas) said: “By ensuring that benefits are available only to those countries that commit themselves to the high standards of the agreement, we can encourage participation by a wide range of developed and developing countries. I am also optimistic that a successful agreement will help reinforce the important role of the WTO.”

In his testimony to the hearing, Deputy US Trade Representative Michael Punke added that the RGF group has been instrumental in providing leadership on Doha Development Agenda (DDA) Services, as well as WTO services generally, as it reflects a cross-section of the interests of the WTO as a whole.

“Above all,” he continued, “the RGF discussion has been motivated by the conviction that opening up services markets is a critical factor in supporting economic development, not just for each Member, but globally. Many services are key infrastructure industries: information and communications, financial services, distribution and logistics, energy and environmental services – networks that are essential for all economic activity. With the continued stalemate of the WTO negotiations, the RGF was a natural place to turn to develop new pathways to global services trade.”

He pointed out that the most logical place to start was to look at the more than 100 services agreements that have been notified to the WTO in the 18 years since the GATS entered into effect. That exercise has been conducted over the past eight months.

The ISA should encompass all service sectors and modes of supply and impose a high standard for liberalization. The agreement also would provide a new platform where the parties could work to build a stronger international consensus on new and improved rules to address new issues.

He confirmed that “progress to date has been encouraging”. Agreement has been reached on a core set of objectives, and the next step is for the group to develop more specific negotiating parameters so that each participant can conduct the domestic consultations necessary in order to decide how to proceed.

“While we are pleased by early signs of progress,” he concluded that “it is important to keep in mind that with a group of 20 participants with varied interests, there are likely to be differences of opinion. As for timing, we do not have a hard deadline, but would like to see things move forward as quickly as possible. We are planning to have monthly meetings from September to December.”

In his speech to the Service Industries 2012 Global Services Summit in Washington, the US Trade Representative Ron Kirk commented that “the ISA presents significant new opportunities to examine the achievements of services agreements so far; consolidate the most important and effective elements into a single framework; and extend that framework to a broader group of countries. The ISA also offers a means of building international consensus on new trade rules that someday could be introduced into the WTO.”

TAGS: Pakistan | environment | business | Chile | legal services | law | financial services | trade treaty | Australia | Colombia | Israel | Mexico | Norway | Singapore | Taiwan | agreements | Canada | Costa Rica | Hong Kong | Korea, South | New Zealand | Peru | Switzerland | United States | standards | trade | European Union (EU) | Japan | Turkey | services | Europe

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