SUNS | 18 April 2016
TISA plurilateral accord by year end?
by D. Ravi Kanth
After turning their backs on re-starting the Doha services negotiations at the World Trade Organization, trade envoys of the United States, the European Union, and Australia among others on Thursday (14 April) decided to accelerate negotiations towards a plurilateral deal called the Trade in Services Agreement (TISA) by the end of this year, several trade envoys told the SUNS.
However, the 23 countries which are pursuing the plurilateral TISA outside the WTO are largely focusing on several capital-intensive services sectors such as finance, telecommunications, e-commerce, and in particular data flows and ending forced data localization for all sectors.
Areas of interest for developing countries such as movement of natural persons under Mode 4, ambitious commitments in domestic regulation to ensure that market access in Mode 4 is not impeded by barriers, liberalization of maritime, air and road transport services among others, are being given short shrift due to opposition from the United States, a TISA envoy told the SUNS.
The European Union too remains opposed to ambitious market access commitments in Mode 4 and liberalization of health services among other sectors, the envoy suggested.
Significantly, the US, which is the principal driver for concluding the TISA by end-2016, seemed pretty determined in hollowing out the WTO by torpedoing the Doha services negotiations which can be easily concluded on the basis of work done till now, according to a non-TISA envoy.
The differing emphasis among the major TISA drivers - the US, the EU, and Australia - on the one side, and the developing countries such as Mexico, Turkey, and Pakistan among others who want ambitious outcomes in transport (road) and Mode 4 on the other, was evident at the 17th Round of TISA negotiations at the Australian mission.
TISA’s 23 members include Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the European Union, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, South Korea, Switzerland, Turkey and the United States.
Australia, which hosted the week-long meetings that began on 10 April, spoke about satisfactory progress that was made in stabilizing texts of the core agreement, including telecommunications, e-commerce, and finance.
Australia also informed about the urgency of submitting revised offers for market access by 6 May.
A review of those offers will take place at the TISA ministers’ meeting on June 1 in Paris on the margins of the annual Organization for Economic Cooperation and Development (OECD) meeting.
Given the opaque manner in which the TISA negotiations are being conducted, it is difficult to know how far the text is stabilized.
Although the core text of TISA is claimed to be based on the provisions of the General Agreement on Trade in Services (GATS), there are serious doubts and questions whether it would fully comply with Article V of the GATS dealing with "economic integration," said a developing country trade envoy.
For TISA to be "multilateralised" as per the demands of the European Union and a few other members and thus valid by coming under the rubric of economic integration in terms of Article V of the GATS, it has to fulfill two major conditions, among others.
The two major conditions are that TISA has: (a) substantial sectoral coverage (the condition is understood in terms of number of sectors, volume of trade affected and modes of supply - in order to meet this condition, agreements should not provide for a priori exclusion of any mode of supply); and (b) absence or elimination of substantially all discrimination, in the sense of Article XVII (national treatment), between or among the parties to such an agreement.
Given the stark asymmetries in the level of ambition in sectors such as finance, telecommunications, e-commerce, delivery services, and distribution services, which are dominated by the US and the EU, on the one side, and transport (maritime, air and road) sectors, and Mode 4, it seems highly unlikely that TISA can remain consistent with Article V, according to a trade envoy familiar with trade in services.
At the meeting at the Australian mission, TISA envoys reviewed the progress made in regard to domestic regulation and transparency in licensing procedures in telecommunications, in e-commerce, particularly on data flows and forced data localization for all sectors, and financial services.
Despite strong demands from TISA developing countries for ambitious outcomes in domestic regulation which will determine the final market access flows in Mode 4, the TISA domestic regulation provisions are being sufficiently weakened and compare poorly with the draft domestic regulation text drawn by the former Singapore official in 2009, according to a TISA envoy.
At the same time, the level of ambition as well as transparency provisions in telecommunications and e-commerce, which are priority areas for the US, are pretty high and closely reflect the TPP agreement, the envoy suggested.
Basically, the US is seeking TISA commitments in cloud computing, complete freedom for cross-border information flows and localization requirements.
The US wants that "governments should not prevent services suppliers of other countries or customers of those suppliers, from electronically transferring information internally or across borders, accessing publicly available information, or accessing their own information stored in other countries".
Further, governments must not give priority or preferential treatment to national suppliers of ICT services in the use of local infrastructure, national spectrum or orbital resources.
It has underscored the need to reconsider the utilization of "localization requirements" such as protecting personal data or restricting cross-border data flows, including measures that require consumer’s personal data to be processed and stored within their borders.
These measures, according to the US, "have the potential to impede economic activity and do not necessarily provide data security that they ostensibly seek to achieve".
Canadian firm Research in Motion ran into trouble over its BlackBerry devices and service in India over this issue.
During the concluding meeting at the Australian mission, the US and the EU separately urged "some (TISA) members to come on board in addressing ’non-political sensitive issues’ (technical standards) in areas such as telecommunications," according to a TISA participant.
Mexico called for discussion on the institutional issues, including the dispute settlement mechanism, during the next meeting.
"It is time that TISA members started talking about the institutional issues in which dispute resolution mechanism is a central pillar as it is in other regional trade agreements and free trade agreements," Mexico’s trade envoy Fernando de Mateo told his colleagues, according to the participant.
But concerns about uneven progress in different services sectors, particularly the high level of ambition on the one side and modest market access on the other, continued to surface during the current 17th round of negotiations.
While telecommunications, e-commerce, and financial services have moved ahead rapidly, progress in movement of short-term services providers in Mode 4 , air transport, maritime transport and road transport lag far behind, TISA negotiators acknowledged.
"There are some issues moving more rapidly than others," a TISA envoy told the SUNS after the meeting.
"But some areas are complicated while other areas are relatively easier which would happen in any negotiations involving some 23 members," the envoy added.
It is an open secret in the TISA negotiations that the US and the EU have continued to resist even modest market access openings in both Mode 4 and transport services sectors during the ongoing negotiations.
In short, the litmus test for the so-called high-level and comprehensive TISA will become clear when members table their revised offers on May 6.
It will conclusively demonstrate who are the major beneficiaries and the losers.
All indications until now suggest that the US, the EU, and other developed countries will walk away with another plurilateral deal that will turn a blind eye to the demands of developing countries in Mode 4, transport, and other sectors, according to trade envoys familiar with the TISA negotiations.