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CHAPTER
XII
This chapter addresses (a) how negotiations aimed at the liberalization of barriers to trade might be organized, (b) the time sequence in which the general agreement, the sectoral annotations, and the substantive commitments might be negotiated, and (c) the relationship that- might exist between them. It also addresses how general trade negotiations carried out on an unconditional most-favored-nation (MFN) basis could relate to negotiations of higher level commitments on regulations that would be carried out on a conditional most-favored-nation basis.
Signatories of a General Agreement on Trade in Services would be obligated to notify other countries of substantial changes in their regulations that would affect foreign suppliers of services. They would have to give foreign suppliers an opportunity to consult with regulatory officials on the impact such regulations would have on their business. Signatory governments would be obligated to consult with another signatory government when regulation adversely affects the commercial interests of a foreign supplier of services. If such consultations failed to resolve the problem involved, the countries involved would agree to participate in a conciliation or dispute settlement procedure. Signatories of the general agreement would also be committed to participate in substantive negotiations aimed at binding the level of protection and eliminating barriers to trade. The substantive commitments that would result from negotiations carried out under the general agreement would be bound in national schedules attached to it. The countries involved would agree not to take any actions that would erode the value of such commitments in terms of the commercial opportunities it would provide to commercial enterprises from signatory countries. While the provisions of the general agreement would not directly commit governments to change specific policy measures affecting trade in services, it would commit governments to pursue the liberalization and expansion of international trade and investment in services and to facilitate the international movement of information, people, and money in support of that objective. By establishing these basic principles as long-term objectives, the general agreement would establish a firm philosophical foundation for the negotiations that would be carried out under the agreement. In order to give the agreement some immediate applicability at the time of signature, the participating governments could agree to negotiate an initial exchange of substantive commitments prior to the actual signature of the agreement. A number of options are explored below. One would be to establish a standstill commitment that would freeze levels of protection at current levels and commit governments to accord other signatories national treatment with respect to all new regulatory measures that are enacted. A second option would be to establish a soft, best efforts commitment that would commit governments to do what they can within the limits of current laws to facilitate trade and investment in services and the movement of information, people, and money connected with trade in services. A third option would be to organize an initial exchange of negotiated commitments. In order to prepare for negotiations aimed at the progressive liberalization of barriers to trade in services, governments would agree to participate in a review of national regulations that create barriers to trade in services. Each country would identify regulations in effect in other countries that pose obstacles to trade in services. Such notifications would be compiled into a list available to all member countries, and the affected government would be given an opportunity to defend the measures involved in terms of the regulatory objectives served by such measures. In the course of the examination of the notified measures, other countries would have an opportunity to explore whether the regulatory objectives might be achieved through alternative approaches that would create fewer trade distortions.
As discussed in Chapter 8, barriers to trade in services can take the form of 1) regulations that restrict the sale or consumption of services produced by foreign enterprises, 2) regulations that restrict the ability of foreign producers of services to establish or to invest in local facilities and to operate such facilities, 3) regulations that impede the movement of information generated by foreign producers of services, 4) regulations that limit the movement of people employed by foreign enterprises producing services, 5) regulatory barriers to the movement of money or other financial assets, and 6) measures that make it difficult to import or export goods associated with trade in services. In some cases the regulations explicitly discriminate against foreign producers. In other cases, the regulations are not discriminatory but are nevertheless so restrictive that foreign suppliers are unable to obtain meaningful market access. This tends to be the case, in particular, in services subject to tight licensing provisions. Some barriers may apply only to narrowly defined categories of services (e.g.., foreign insurance companies may be prohibited from selling compulsory auto insurance, insuring telephone poles, or insuring buildings in towns of less than 10,000 inhabitants). Other barriers may apply to all services within a broadly defined sector (e.g.., all foreign insurance companies may be required to maintain prohibitive deposits in non-interest-earning accounts). Still other barriers may apply to all foreign providers of services (e.g.., immigration rules may not allow businesses selling services to obtain commercial visas on the basis of the treaty-trader principle), or to all foreign business activities (e.g., foreign investment restrictions). There are large differences among countries with respect to the regulations that restrict trade. While in one country investment restrictions may create the most severe barriers to foreign trade, in another country regulations that restrict all forms of competition may pose the most difficult barrier. Negotiations aimed at any one type of policy instrument may therefore result in very different degrees of liberalization in different countries. These observations about the nature and scope of government regulations that potentially restrict trade in services lead to important conclusions about the organization of negotiations. Negotiations aimed at the progressive liberalization of barriers to trade in services will have to focus on policy instruments that restrict trade as much as on the specific areas of services that might be affected by such restrictive regulations. In order to achieve reciprocal, and therefore negotiable, liberalization of barriers, however, the negotiations will have to address simultaneously a broad range of policy instruments that serve to restrict trade in particular services in different countries. For the sake of analytical clarity and negotiating efficiency, one could break the process of negotiating the progressive liberalization of barriers to trade in services into three parts. One task facing negotiators will be to identify the policy instruments each country intends to use to achieve trade policy objectives as against domestic regulatory objectives and the policy instruments it is willing to subject ab initio to international disciplines designed to assure market access by foreign enterprises.1 A second task will be to "bind" the degree of protection provided with respect to specific service activities. A third task will be to negotiate a reduction or the elimination of specific discriminatory or restrictive measures. These three aspects of the negotiating process could be organized into sequential steps, or they could be carried out simultaneously and packaged together with the adoption of the framework agreement. The options involved are explored in greater detail later in this chapter.
A key strategic decision facing negotiators will be to decide whether they should adopt an "exceptions" approach or a "request and offer" approach to the negotiation of an initial list of policy instruments and service activities that would be subjected to international discipline. Under an exceptions approach, governments would agree to accept disciplines such as national treatment for all policy instruments and service activities except those enumerated in an exceptions list. Under a request and offer approach governments would agree to accept the disciplines only with respect to specified policy instruments and service activities. In other words, under an exception approach the negotiations would focus on the policy instruments and service activities that would not be covered by the agreed disciplines, while under a request and offer approach the negotiations would focus on the policy instruments and service activities that would be covered. To some extent, this is an argument over whether it is better to describe a bottle as half full or-as half empty. The negotiating dynamics under the two approaches could be quite different, however, and the choice between the two approaches could lead to quite different results. There is wide disagreement, however, about how governments would behave under the two approaches. Those who argue in favor of an exceptions approach believe that adoption of such an approach would lead to a more substantial result, that is, a much wider range of services and policy instruments would initially be subjected to international commitments. The argument in favor of an exceptions approach revolves around externalities in the negotiating process. 2 Under a request and offer approach, an exporting country must request the application of international disciplines to specific services and policy instruments, but it will do so only if it expects to derive enough benefit from such treatment to warrant "paying" for it through a reciprocal concession. If each of many countries would derive a little benefit, but no one country could expect to derive enough of a benefit to "pay" for it, no request will be made and therefore no offer will be forthcoming. Under an exceptions approach, services that are not very important to any exporting country would nevertheless automatically be covered by any general commitments to the agreed disciplines unless the importing country felt strongly that it needed to protect that industry. A country, it is argued, would not take an exception unless it was willing to "pay" for it by allowing its trading partners to take additional exceptions. The exceptions approach also leads to the establishment of disciplines in services that are not very important items of trade today but could become important items of trade in the future. In general, these arguments in favor of an exceptions approach to trade negotiations in services are the same ones that lead to the adoption of a formula/exceptions approach to past tariff negotiations in the GATT. Those who favor a request and offer approach to the negotiations argue that governments will be afraid to make open-ended commitments since the number of regulations that could be affected by such commitments is very large and it will be difficult for a government to analyze the potential impact of national treatment and market access commitments for all such regulations in the course of the initial negotiating round. In the face of such uncertainty, it is argued, governments will overreact and establish exceptions in many areas where no protection currently exists. Establishment of exceptions where there are no barriers currently could have the perverse result of increasing the uncertainty for business in these areas. Governments that want to maximize the degree of market liberalization in services will have to weigh the potential advantages against the risks. On the other hand, those governments that are reluctant to go very far in liberalizing markets will certainly insist that negotiations follow a request and offer approach. On balance, this probably tilts the scales in favor of a request and offer approach. The choice between the two negotiating approaches, however, need not be an either/or proposition. Some elements of the negotiations could follow the exceptions approach, while other elements of the negotiations could be based on the request and offer approach. The negotiations of national treatment, for example, could be based on an exceptions approach, while negotiations on investment and immigration issues could be based on a request and offer approach.
An early objective of negotiations on trade in services will be to bind the maximum allowable protection. It will be difficult, however, to establish objective, quantifiable ceilings on the maximum allowable protection in services. Under the GATT regime for goods, binding commitments based on tariffs and quotas can be measured with considerable quantitative precision. In services, many restrictive measures take the form of highly complex regulations that are not easily reduced to a single number. These difficulties argue in favor of the adoption
of relatively simple and transparent means for protecting domestic
service industries, and this should be a key objective of negotiations
aimed at the establishment of maximum ceilings for the protection
that is provided. Whatever the difficulties, negotiations aimed at
the reduction of barriers will be meaningless unless governments develop
the means for establishing meaningful limits on allowable levels of
protection. Negotiating the Reduction of Barriers As discussed above, negotiations aimed at the reduction of barriers will have to focus both on specific service activities and on the policy instruments that adversely affect the ability of foreign enterprises to sell such services. Any negotiated commitments may apply to the application of a policy instrument to specified services, or they may encompass all services affected by that policy instrument. In other words, commitments to reduce the restrictiveness of investment, taxation, immigration, information transfer, or other regulatory policies could cover specific services, all services that fall into a particular industry, or all tradeable services. How the reduction of barriers is negotiated will depend, in part, on whether the initial set of commitments are negotiated on an "exceptions" basis or a "request and offer" basis. If the initial commitments are established on an exceptions basis, then subsequent negotiations will naturally be aimed at narrowing or eliminating the initial list of exceptions. If the initial commitments are negotiated on a request and offer basis, then subsequent negotiation will be aimed at expanding the range of services and policy instruments covered by national treatment and open market access commitments. One issue that will need to be resolved is whether negotiations aimed at the reduction of barriers to trade in services should be organized on a sector-by-sector basis or on a comprehensive basis covering many different sectors. The principal argument in favor of organizing negotiations along sectoral lines is that each service sector tends to have a unique regulatory and institutional structure and that policy issues also tend to be defined in sectoral terms. The principal argument against organizing negotiations along sectoral lines is that any negotiation limited to a particular sector will be dominated by the regulators in that sector, and in such a negotiation the economic benefits of liberalization would receive very little weight as compared with the concern of the regulators to preserve the current regulatory structure. A negotiation organized purely along sectoral lines would also limit the possibility for negotiating mutually acceptable reductions in barriers since it may be very difficult to persuade a country that lacks competitive strength in any given sector to liberalize its policies in that sector in exchange for the removal of barriers in that same sector by a country that has a highly competitive industry. In short, a sectoral negotiation limits the possibility of mutually advantageous trade-offs. In the first instance, any negotiations aimed at the reduction of barriers to trade in services should be organized on as broad a basis as possible, covering many different sectors. Negotiations organized on purely sectoral lines should generally be pursued only after the possibilities for liberalization on a comprehensive basis are exhausted. There is one major exception to this rule of thumb, and that involves negotiations carried out among governments that have committed themselves to deregulate a particular sector in services.
In certain services, real liberalization of international trade is possible only among countries that permit unlimited domestic competition. Countries that would be prepared to agree, for example, to ensure unlimited competition in a particular industry could decide to grant each other open access to their respective markets. Such agreements would be negotiated on a conditional most-favored-nation basis. As noted in the last chapter, however, governments that enter into such agreements would be required to extend such agreements to other countries, provided such countries are prepared to accept the substantive obligations of the agreement, including commitments of the nature and scope of domestic regulations in that sector. The possibilities for negotiating higher level agreements
involving binding commitments on regulatory policies are explored
below for a number of key sectors. Telecommunications and Data Processing The wide divergence in regulatory policies, and the differences in the pace at which different countries are adjusting their policies to changes in telecommunications technology, make it highly probable that countries that have moved further than others in deregulating the telecommunications sector will want to negotiate agreements among themselves, providing expanded opportunities for international competition in telecommunications services. The companion volume by Aronson and Cowhey (1988) on telecommunications services contains many interesting ideas on the scope and content of such agreements. Aviation In the companion volume on aviation, Dan Kasper (1988) describes economic forces that are likely to lead to a gradual breakdown of the current system of bilateral agreements in aviation. He describes in detail an agreement that might be negotiated among a number of like-minded countries for open, multilateral competition among airlines. An agreement along the lines proposed by Kasper could well be accommodated within the framework of a general agreement as proposed in Chapter 10 and sectoral annotations on aviation as proposed in Chapter 11. Maritime Transport The degree of liberalization that can be achieved
within the existing institutional and regulatory framework for international
shipping is probably quite limited. In order to achieve a breakthrough,
it will be necessary to negotiate a new regulatory framework that
will subject the operation of the conference system to strict international
disciplines. In addition, such an agreement would have to encompass
the right to invest in shore facilities and in local land transport
facilities. Without such a, Insurance A regulatory agreement on insurance among like-minded countries could establish common fiduciary standards for insurance companies admitted to the countries covered by the agreement, and mutual recognition of the fiduciary supervision exercised by each country's regulatory authorities. Such an agreement could open the way for the elimination of special deposit requirements on foreign insurers, and the open sale of insurance across national borders without local establishment. Professional Services It is highly likely that major breakthroughs in the liberalization of harriers to the international movement of professionals will come only in the context of agreements negotiated among smaller groups of like-minded countries. Such agreements will probably have to be negotiated by those most directly involved in the accreditation of professionals, and the respective professional associations. A model of what such agreements could look like is provided by the inter-recognition agreement negotiated by the National Association of Architectural Review Boards in the United States with their counterparts in the United Kingdom. Similar agreement are under negotiation with a number of other countries including Australia and Canada. Banking In his volume on international banking, Ingo Walter (1988) describes the contents of a sectoral agreement that might be negotiated on international trade in banking services. It would provide (a) freedom to establish branches, agencies, subsidiaries, or other facilities, (b) regulatory symmetry with respect to domestic and foreign competitors, which would include the right to manage local currency issues, (c) freedom to import critical resources, including travel and resettlement of professional staff, access to telecommunications, and the ability to process data locally or abroad, (d) symmetry with respect to the application of foreign exchange controls, and (e) equality of access to domestic client groups.
A number of negotiating scenarios either have been proposed by some countries or should be considered as logical alternatives. Five such scenarios are described below. Each of these negotiating strategies or scenarios has different strengths and weaknesses in terms of the criteria described above. Each would help advance the achievement of some of the objectives and retard others. Scenario 1: Evolutionary. The general agreement would establish a framework for bilateral, plurilateral, and multilateral negotiations among signatory countries on any sector in services they wish to address in such negotiations.3 Basically the agreement would encourage groups of countries that shared common objectives or a common regulatory philosophy to get together and negotiate agreements that would be open to other countries that have signed the general agreement to join. Signature of the general agreement would initiate an evolutionary process whereby agreements negotiated among small groups of likeminded countries are gradually expanded to cover all the countries that have signed the general agreement. 4 Scenario 2: Sectoral. The framework of principles
and procedures contained in the general agreement would provide a
common reference point for subsequent sectoral negotiations. Scenario 3: Sequential. The negotiation of the general agreement would be followed by the negotiation of annotations for the key sectors, which would be followed by a general exchange of legally binding commitments on a request and offer basis. Each step would require a consensus among all the countries that decide to join the general agreement. The negotiation of higher level agreements among like-minded countries would not take place until the possibilities for liberalization on an MFN basis had been exhausted. The general agreement would include a standstill commitment on the introduction of new restrictions and a conciliation procedure for the resolution of disputes. The sectoral annotations would be developed in conjunction with the identification and examination of regulations that are seen by businesses as barriers to trade in services. 6 Scenario 4: Grandfather. The general agreement would commit governments to substantive commitments on market access, national treatment, and foreign investments, but it would grandfather all existing laws and regulations. Such laws and regulations that create barriers to trade would be reduced through subsequent negotiations. These negotiations would encompass all countries that signed the general agreement, though any subset of those countries would be free to go ahead with an agreement on their own if a general consensus among all countries proved too difficult to achieve.7 Scenario 5: Exceptions. The general agreement would
commit governments to substantive commitments on market access, national
treatment, and foreign investment except to the extent that such countries
notified specific regulations as barriers to trade and investment.
This would be followed by negotiations aimed at the removal of barriers
that were notified at the time the
The decisions that are made on these organizational issues will influence the outcome of the negotiations. The decision to include many substantive commitments in the framework agreement, for example, might reduce the number of countries willing to sign the agreement. Since such commitments could not be very precisely defined, countries might insist on a long list of national exceptions, or they could interpret the commitment so broadly as to create many subsequent disagreements over the scope and interpretation of the commitment. The decision to obligate all signatory countries to participate in the negotiation of sectoral annotations or a subsequent general exchange of substantive commitments would be likely to slow down the pace of the negotiations and reduce the overall depth of liberalization, while it would ensure that a wider group of countries participate in the liberalization process and that the resulting agreements can be implemented on an unconditional most-favored-nation basis. A decision to carry out all substantive negotiations on a sectoral basis would inevitably leave some sectors behind, and it would also reduce the overall liberalization achieved since it would increase the influence of sectoral regulators who can be expected to resist commitments that require changes in their regulations. On the other hand, the absence of a sectoral focus would result in agreements that cannot be fully implemented because their implementation requires domestic regulatory reforms that can be achieved only with the participation of the regulatory authorities involved. The various negotiating scenarios thus need to be evaluated in terms of their effect on the achievement of various operational objectives one might establish for the negotiations. Six such objectives readily come to mind. As will become apparent, however, it is impossible to frame a negotiating approach that will facilitate the achievement of each of these six objectives simultaneously. As is often true in life, difficult trade-offs must be confronted. The six operational objectives that can be used as
criteria for evaluating alternative negotiating strategies or scenarios
are as follows: These six objectives inevitably conflict. For example,
in order to assure early results it may be necessary to sacrifice
precision in commitments, magnitude of liberalization, the number
of sectors covered by any liberalization, or the number of countries
included in the agreement. In order to obtain precision in commitments
it may be necessary to narrow the focus of the negotiation on a sectoral
basis, sacrificing the scope of any liberalization.
While there is no ideal strategy that is inherently superior, it is possible to establish some basic ground rules for developing a strategy that is balanced in terms of .its impact on the six operational negotiating objectives enumerated above. Ground Rule 1. Any negotiating approach should maintain a constant balance between the general principles contained in the framework agreement and sectoral realities. Much of the work in connection with the negotiations will have to be carried out on a sectoral basis by sectoral experts. But such sectoral results should always be a part of broader negotiations and subjected to the general principles of the framework agreement. Any purely sectoral discussion is likely to turn into an effort to justify and reinforce sectoral regulations that tend to be restrictive and interventionist. Any negotiation carried out on a purely sectoral basis is also likely to miss liberalizing opportunities by not making such sectoral results a part of a broader package. On the other hand, any discussion carried out by generalists operating under general trade principles is likely to be significantly removed from the real world and therefore unlikely to be taken seriously in the end and will not provide the necessary precision and clarity that are desirable for binding legal commitments incurred by governments. Ground Rule 2. Governments should not enter into binding
legal commitments unless they have been able to develop a clear understanding
of the issues involved and are able to spell out the binding legal
commitment with some clarity. If it becomes desirable to achieve some
early substantive results, best efforts commitments are likely to
be better than binding legal commitments based on imprecise information
about the impact of such commitments on existing policies and regulations
and unrealistic expectations by foreign suppliers about the nature
of the Ground Rule 3. Governments should bend over backward
to preserve the broad multilateral character of the agreement and
include as many countries as possible in the negotiations as long
as possible. Negotiations among smaller groups of countries that want
to make faster and more far-reaching progress should be treated as
the exception rather than the rule. Conversely, countries that are
not prepared to participate in agreements that result in substantial
liberalization of trade and a reduction in domestic regulations should
not be encouraged to sign the Ground Rule 4. Governments should organize the negotiations in such a way that they can achieve some substantive results reasonably early in the negotiating process in order to convince people that this is a worthwhile effort that will yield practical results. Since it will not be possible to establish precise understandings on many subjects in a short period of time, such early substantive results either will have to be limited in terms of the services covered or will have to take the form of a best efforts commitment rather than a legally binding obligation. Ground Rule 5. Governments should recognize the evolutionary character of an effort to build a comprehensive trade regime for services. There has to be considerable room for experimentation and for the negotiation of practical solutions to problems.
In order to make real substantive progress toward the liberalization of trade in services, governments will have to address a long list of sensitive issues in a new and untried context. Officials from a wide range of government departments who have not spent much time speaking to one another will have to cooperate, overcoming basic instincts of bureaucratic turf. The negotiations will have to deal with complex domestic regulations, without becoming enmeshed in a debate over regulatory philosophy or haggling over detailed regulations. Will it work? Ultimately all the principles, rules, and procedures are merely tools. The negotiations will succeed in making substantive progress toward a greater liberalization of services if everyone involved-trade officials, regulatory officials, business and labor leaders-sees the broader opportunity for mutual economic gain and comes to share the sense of excitement provided by a new challenge.
How do you sell a new concept such as trade negotiations on services to the world community? This hook has documented all the reasons it makes sense to negotiate multilateral trade agreements in services. However compelling the arguments for trade negotiations on services, the international consensus to include trade in services in the Uruguay Round of multilateral trade negotiations did not emerge spontaneously and was forged only with considerable difficulty. Undoubtedly the time was ripe for a new approach to services, and if the growing role of trade in services in the world economy were not so apparent all around us, no amount of planning and cajoling would have persuaded ministers from around the world to embark on global negotiations on an entirely new issue. At the same time if it had not been for the foresight and determined leadership of a small group of individuals, it would not have happened in 1986 and it might not have emerged in a trade framework. This appendix traces the history of the events that
led from an idea in the early 1970s to a decision in 1986 by ministers
from around the world to launch multilateral trade negotiations on
services as part of the Uruguay round of multilateral trade negotiations.1
This is a remarkably short time if one considers that before 1973
there had been no public discussion of trade in services, no one had
thought about the issue in a systematic manner, most people thought
that services were not tradeable, and it would have been difficult
to find a trade official who thought that services had anything to
do with trade policy. THE BIRTH OF A CONCEPT One of the first people to recognize the new importance of trade in services in a rapidly integrating world economy was Hugh Corbet, an Australian who had written on international economic issues for the Times in the mid-1960s. As a writer on international economic issues, Corbet had become increasingly aware that the "informed" public understood very little about trade policy. Moreover, neither the academic community nor government policymakers seemed equipped or inclined to fill this gap in public knowledge, which in practice meant a lack of public support for "good" trade policy. Corbet therefore decided in 1968 to establish the Trade Policy Research Center in London, which commissions articles and books on trade policy geared to the intelligent layman and sponsors conferences and seminars on trade policy. As Corbet thought about the trade policy issues the
center should address, it occurred to him that services were playing
an increasingly important role in the world economy. Indeed, it would
have been difficult for an economic observer in London during the
1960s not to be aware of the rapid growth of international services.
During these years, London was one of the principal centers in the
world for international services such as insurance, banking, publishing,
theater, and shipping. What is more, an earlier study of nontariff
barriers to trade in goods and how they might be tackled in GATT negotiations
gave Corbet the idea that a similar study of barriers to trade in
services might provide the basis for similar negotiations in services
(Corbet, 1977). He therefore commissioned Brian Griffiths, an economist
at the London School of Economics, to undertake a study of international
flows of services and restrictions on transactions in the services
sector. The resulting book, Invisible Barriers to Invisible Trade,
was published by the Trade Policy Research Center in 1975. It became
the starting point for much of the subsequent work in the field, and
the Trade Policy Research Center has played a key role in the development
of international thinking on trade and investment in services since
that time. First Official Recognition of Trade in Services In the meantime, in September 1972, a group of eminent individuals from key industrial countries, under the chairman ship of lean Rey, the former president of the Commission of the European Community, issued a report on the long-term trade issues facing the world economy. The Report by the High Level Group on Trade and Related Problems provided the intellectual underpinnings for the Tokyo Round of multilateral trade negotiations. It contained a short chapter on trade in services and was the first published document of any kind to discuss trade in services as "trade in services." The Rey group was the brainchild of Emile van Lennep, the secretary general of the Organization of Economic Cooperation of Development, an intergovernmental organization that seeks to improve economic cooperation among industrial countries through the analysis of common policy challenges. By learning from each other, policymakers from different countries are able to develop a better understanding of economic problems and, where appropriate, to establish a coordinated approach to required solutions. Every year, the ministers from the member countries meet in May to review economic trends and to evaluate the major challenges facing the world economy. In 1971 many trade policy officials in the key industrial countries had come to the conclusion that a new effort was needed to liberalize trade. Van Lennep therefore convened a group of eminent individuals to analyze trade and related problems in a longer term perspective, i.e.., to define the problems and assess their relative urgency, consider how they might be dealt with, and set out options for their solution. The decision to include a chapter on trade in services was largely due to several individuals associated with the preparation of the report. One was Bill Eberle, a prominent American businessman; another was Bertil Ohlin, a well-known Swedish economist. A third was Sir Richard Powell, who had been extensively briefed by a study group put together by the Trade Policy Research Center. Drawing on their own experiences and those of their associates, they shared the view that services were of growing importance to world trade and that barriers to services would need to be addressed more systematically by governments. Another person who played a key role in adding services to the report of the Rey group was Harald Malmgren, a brilliant American trade policy thinker and friend of Hugh Corbet who had been hired by Van Lennep to draft the papers used by the high level group in its work. The report issued by the high level group noted that
while The report also noted that the Group has not made a detailed examination of questions concerning international trade in services. It considers however that, from the point of view of international economic relations, this sector poses problems similar in nature to those met with in merchandise trade. Given that services are a sector that seems likely to expand rapidly in countries' economies, the main need is to avoid any tendencies to protectionism and to aim at achieving a more thorough liberalization (OECD, 1973). The report concluded, "The Group considers that action should be taken by the developed countries to ensure liberalization and non-discrimination in the services sector." Even though the report succinctly established the rationale for launching negotiations aimed at the liberalization of trade in services, the Rey group stopped short of recommending that the GATT address trade in services. Instead, the group recommended that the OECD work out further steps to be taken in areas such as tourism and transport. Curiously, the last sentence on services was addressed to the treatment of developing countries: "As in the case of goods, consideration might be given to allowing developing countries a limited time to adapt themselves before undertaking the full commitments" (OECD, 1973). This sentence seems to point to future negotiations on trade in services outside the OECD framework, without saying so explicitly.
Congressional consideration of legislation to authorize U.S. participation in multilateral trade negotiations inevitably becomes a broader debate over the conduct of U.S. trade policy. Every economic interest group is given the opportunity to make its case for special consideration not only in the coming multilateral trade negotiations but also in the conduct of day-to-day trade policy. One of the new issues to emerge from congressional consideration of the Trade Act of 1974 was trade in services. It is not entirely clear which company first came up with the idea of using the trade bill to advance the international commercial interests of the services industries, though the recollections seem to point to Pan American Airways. Pan American had run into some difficulties in persuading a number of countries that it was as qualified to carry the international mail as the national airline, and it seemed to Pan American that national regulations preventing them from carrying the mail were no different from barriers to trade in goods. Pan American had also run into restrictive regulations on aircraft repairs, which it believed could be dealt with in the context of trade negotiations. It was an executive at another company, however, who saw the full potential of expanding the definition of international trade to cover international trade in services. Ron Shelp had only recently been appointed vice president in charge of international relations at the American International Group (AIG), the American insurance company with the largest international business. Shelp had previously been with the International Department of the U.S. Chamber of Commerce, where he worked on international trade issues. He was therefore familiar with international trade concepts, and with the assistance provided by the U.S. government to merchandise exporters in the form of export promotion activities and negotiations aimed at the reduction of foreign trade barriers. Shelp reasoned that if services could be included under the definition of trade, the government would give U.S. exporters of services the same kind of assistance. With the full support of the president and CEO of his company, Hank Greenberg, Shelp organized a full-fledged campaign to extend many of the provisions of the trade act to services. Representatives from a number of service industries joined the campaign and offered public testimony in hearings organized by the Senate Finance Committee. Persuasive testimony was offered by representatives of the Air Transport Association, the American Institute of Marine Underwriters, the American Institute of Merchant Shipping, and the National Constructors Association. It is an ironic twist of history that all of these organizations, with the exception of the insurance industry, are now either opposed to or at best reluctant supporters of multi lateral trade negotiations in services. The Trade Act of 1974 included a number of key provisions on trade in services. The most important of these provisions is probably found in Section 102, which gave the president authority to negotiate on nontariff barriers to trade. Paragraph g(3) of Section 102 says simply that "the term 'international trade' includes trade in both goods and services." By simply expanding the definition of international trade, the Congress thus directed the president to concern himself not only with barriers to trade in goods, but also with barriers to trade in services. Section 121, which dealt with the reform of the GATT, directed the president to seek "the extension of GATT articles to conditions of trade not presently covered in order to move toward more fair trade practices." While services were not explicitly mentioned, the language of the text, read in conjunction with the other provisions, clearly implied such coverage. Section 135 of the bill directed the president to establish an Advisory Committee for Trade Negotiations to provide overall policy advice for the negotiations, and the language of paragraph b(1) makes it clear that the committee should include "representatives of ... service industries." Section 163 of the Trade Act dealt with the annual report which the president must submit to the Congress on the administration of trade policy. Section 163a directed the president to include information on "the results of action taken to obtain the removal of foreign trade restrictions (including discriminatory restrictions against U.S. exports) and the removal of foreign practices which discriminate against U.S. service industries (including transportation and tourism)." Section 301 directs the president to retaliate against
foreign practices that burden the commerce of the United States, and
at the end of paragraph a the Senate Finance Committee had added,
"For purposes of this subsection, the term 'commerce' includes
services associated with international trade." The Tokyo Round of multilateral trade negotiations was launched in September 1973, on the basis of an agenda approved by trade ministers at a ministerial meeting held in Tokyo. By the time the Congress passed the legislation authorizing U.S. participation (January 3, 1975), the negotiations had already been under way for more than a year. The agreed agenda for the negotiations was extremely ambitious even without the inclusion of trade in services, and services was a totally unfamiliar subject for most trade policy officials, including officials in the United States.
The task force concluded that trade in services posed
far too many complex issues to permit a comprehensive negotiation
with so little preparation. The U.S. administration, however, could
not ignore the legislative mandate without possibly jeopardizing congressional
approval of the final results of the negotiations. Moreover, Frederick
Dent, who had become the special trade representative in 1975, was
determined to negotiate an agreement that would receive the support
of all U.S. industries and economic groups, including the services
industries. Dent also took a special interest in services. The task
force report, issued in December 1976, therefore recommended that
issues related to trade in services should be raised in the multilateral
trade negotiations on a "carefully selected" basis. More
specifically, the report proposed that the special trade representative
should be requested to explore the feasibility of The second nontariff code that contains a provision dealing with services is the Standards Code, which establishes some basic rules and procedures for the adoption of government standards on internationally traded goods, in order to assure that such standards do not discriminate against foreign goods. The Standards Code includes provisions dealing with the recognition of test results provided by foreign testing laboratories. Such testing, of course, is a service and use of such test results in other countries constitutes trade in services. The third nontariff code that contains language on services is the Subsidies Code, which limits the use of government subsidies with respect to internationally traded goods. Under the Subsidies Code, services used to export goods are not allowed to be subsidized. In addition to these provisions, the United States obtained an informal commitment from the other industrial countries to undertake a comprehensive study of trade in services in the Trade Committee of the Organization for Economic Cooperation and Development. The objective of the study was to determine if it was possible to identify trade issues in services that would lend themselves to negotiation in future trade agreements. Ultimately, the Tokyo Round achieved some results because business leaders such as Shelp and Greenberg from AIG and Harry Freeman from American Express were not willing to let the administration forget about services. Bob Strauss appointed Greenberg to the Presidential Advisory Committee for Trade Negotiations, which provided high-level private sector advice to U.S. negotiators, and once on the committee, Greenberg kept reminding Strauss of the legislative mandate on services. At the same time Shelp persuaded the U.S. Chamber of Commerce to organize a services committee, which could monitor the government's response to the legislation and exert pressure on the administration to take the legislation seriously.
With the decision to launch a comprehensive study of trade in services in the OECD, the work on trade in services entered a new stage. It was now possible to approach the subject in terms of serious, long-term effort to lay the groundwork for future negotiations. Since I represented the United States in the OECD Trade Committee, it fell to me to organize the campaign, and soon thereafter I was given full responsibility for all facets of U.S. trade policy in services. At about the same time, a change in administration led to the appointment of William E. Brock as the new U.S. trade representative. Brock had developed a keen interest in services previously as a member of the Banking Committee of the U.S. Senate, and he brought dynamic political leadership to the effort to integrate services into the domestic and international trade policy framework. It had become quite apparent that building an international consensus in support of multilateral trade negotiations represented a major challenge. First, except for the excellent study carried out by Wolf and Company in 1975-76 and the 1975 study prepared by Brian Griffiths for the Trade Policy Research Center in London, information about trade in services and barriers to such trade was totally inadequate. Moreover, very few businessmen, including those in the services sector, looked at international services activities in trade terms. In fact, most people, including most economists, thought that one of the principal distinctions between services and goods was that services were not tradeable and that economic activity in the services sector was therefore insulated from global economic pressures. Trade officials had little knowledge about services and the policy responsibility was scattered among dozens of departments, ministries, and regulatory agencies in the national government, and in lower levels of government. The industries benefiting from existing systems of protection and the regulatory agencies that administer that protection are well entrenched and politically powerful, and the protective measures are not easy to identify because they are embedded in domestic regulations. How are you to know what is a trade barrier and what is a purely domestic regulatory measure? Giving trade officials a role in the administration of domestic regulatory policies in services was bound to be highly controversial, and it was easy to understand why the average trade official would want to shirk the resulting bureaucratic wars. In order to break through the widespread public ignorance and sectoral resistance it was necessary to develop a comprehensive strategy that would address both directly. A strategy was needed that would change public perceptions of the nature and role of services in the international economy and would institutionalize a role for trade policy officials in services. Accordingly I developed such a strategy in cooperation with a loose international coalition of about a dozen key business executives and government officials. The strategy included a comprehensive program of studies and conferences, a pubic information campaign, full integration of services into the trade policy machinery, active use of bilateral trade channels to resolve bilateral disputes in services, full utilization of all existing international institutions and mechanisms in the trade area, and a long--term program to improve government statistics on trade in services.2 The aim of the program of studies and conferences was not only to supplement the fairly limited resources available to trade officials to gather information, but to develop a core of government officials, business leaders, and academicians knowledgeable about trade in services, involved in the work on trade in services, and committed to the effort to build a consensus in support of multilateral negotiations. The public information program was designed to create
public awareness of trade in services to overcome the wide public
view that such trade did not exist, and to educate the trade policy
community about the issues in trade in services and how they might
he tackled in trade negotiations. In each country, a certain number
of business executives, academicians, and former trade policy officials
play an important role in developing a national consensus on trade
policy, and this collection of individuals had to become informed
on the substantive issues in trade in services in order to change
the policies of the countries involved. Building Up Information and Knowledge on Services Through the efforts of Shelp, Freeman, and others a long list of organizations and institutions became involved in carrying out studies of trade in services, in sponsoring seminars and conferences, and in passing resolutions in support of trade negotiations in services. The list of organizations includes the U.S. Council for International Business, the Council of Foreign Relations, the National Foreign Trade Council, the Committee for Economic Development, the Conference Board, the Center for Strategic and International Studies, and the American Enterprise Institute. With the help of the German Marshall Fund, I organized a research conference that brought together international economists and economists who specialized in specific areas of services. The government also had more specific needs for information in order to support the establishment of policy objectives and priorities for future negotiations on trade in services and to provide the necessary raw material for studies in the OECD and the GATT. The government could have chosen to collect this information through official surveys, but the bureaucratic requirements proved too cumbersome and time consuming. U.S. trade officials therefore turned to the U.S. Chamber of Commerce and its services committee to help organize a survey of barriers faced by U.S. service industries in selling services abroad. The data collected from that survey, organized by industry and type of barrier, provided the first comprehensive overview of the barriers faced by businesses engaged in international trade in services. This document, which has come to be referred to as the U.S. trade representative's inventory, remains one of the most detailed sources of information about barriers in this area. (See Office of the U.S. Trade Representative, 1979.) In addition to the information about barriers to trade, trade policy officials needed information about the market structure in each industry, both in the United States and abroad. In order to provide this information, analysts at the Commerce Department, under the able leadership of Brandt Free, provided sectoral profiles of the key industries. (See, for example, U.S. Department of Commerce, 1982 and 1984.) On the basis of these profiles and the information contained in the USTR Inventory of Barriers to Trade in Services, USTR policy analysts developed sectoral policy papers for each major services industry. These papers summarized the key international trade issues in each industry and presented some initial ideas on how future trade negotiations might address those issues. They became the basis for interagency policy discussions and served to establish initial negotiating objectives for each sector that could be discussed with the private sector. These sectoral papers were subsequently included in the U.S. National Study on Trade in Services submitted to the GATT in 1983 (Office of the U.S. Trade Representative, 1983). Internationally, Hugh Corbet and the Trade Policy Research Center continued to play a leading role in organizing conferences and sponsoring studies. In fact, conferences organized by the Trade Policy Research Center in places like Ditchley Park outside Oxford, Bellagio in northern Italy, and Wiston House near Steyning (south of London) provided focal points for the international coalition-building efforts. The meetings provided a unique opportunity to compare notes on the evolution of thinking in various countries, to coordinate plans for conferences and seminars, and to develop an informal consensus on the future direction of work in the OECD, in the GATT, and elsewhere. Studies sponsored by the Trade Policy Research Center also provided a growing body of literature on trade in services that could be used as background material by governments when preparing their position on issues discussed in the OECD and the GATT. The Trade Policy Research Center also publishes a quarterly journal, The World Economy, and that publication gave researchers an opportunity to publish articles on trade in services at a time when more mainstream journals did not believe trade in services was a suitable subject for their publication. In addition to the Trade Policy Research Center, the International Chamber of Commerce played a key role in developing an international consensus in the business community in support of multilateral trade negotiations aimed at the liberalization of trade in services. Hans Svedberg, a Swedish businessman, became head of a services working group in the International Chamber of Commerce, and this group produced a clear and forceful statement in support of the negotiations in 1981. Another key participant in the work of the international chamber was Bill Eberle, who headed the Trade Committee of the chamber. More recently, many different organizations have organized international conferences, seminars, and discussions, including the World Bank, the Center for the Study of International Negotiations in Geneva, the Center for Transnational Corporations in New York, the Atwater Institute in Montreal, Promethee in Paris, and the Services World Forum, a private support group headquartered in Geneva. Developing a Public Information Program It is difficult to launch negotiations on a difficult
and complex issue such as trade in services without some degree of
support from the educated public-the one-tenth of 1 percent of For a number of years, the services section of the Office of the U.S. Trade Representative also circulated a mimeographed newsletter to individuals around the world who were working on policy issues related to trade in services. Eventually, other organizations such as the Coalition of Service Industries in the United States, the Liberalization of Trade in Services Committee (LOTIS) in the United Kingdom, and Progres in Geneva took over the task of circulating-informative newsletters that kept everyone with an interest in trade in services posted on conferences, books, key events, and progress made in various negotiations. Ironically, countries such as Brazil and India that were opposed to launching multilateral negotiations on trade in services helped considerably in spreading information about trade in services. Their opposition to U.S. efforts in various meetings to advance international discussions and negotiations on trade in services created the drama needed to make news. While some success had been achieved earlier in persuading various newspapers and magazines to write background stories on trade in services and the preparation of negotiations, that coverage was nothing compared with the worldwide treatment of the confrontations over services in the GATT. Such news stories inevitably led to increased requests by the press for additional materials, which in turn led to more articles.
Services cover a large number of sectors, each with its own domestic regulatory structure, international agreements, and problems. In order to demonstrate that negotiations covering all of these sectors would be a feasible undertaking, it became necessary to develop a group of trade policy professionals who could become experts in the different service industries. Accordingly, both the Office of the U.S. Trade Representative (USTR) and the Office of the Department of Commerce established separate units for services, each staffed with professionals assigned to specific industries. Both the USTR and the Department of Commerce also took steps to bring the services industries fully into the private sector advisory process, thus giving the services industries the same status in that process as the goods-producing industries. The USTR established a Services Policy Advisory Committee, made up largely of chief executive officers of major firms in each of the major services industries. At the same time, the USTR and Commerce jointly established a working level Industry Sector Advisory Committee on Services, largely made up of industry representatives at the vice-president level. The establishment of separate units with responsibility for trade in services made it possible to take other steps to integrate services into U.S. trade policy programs. The Commerce Department, for example, has a variety of programs to support U.S. exports. The Export-Import Bank helps finance exports. The USTR conducts bilateral consultations and negotiations with trade officials from other countries on a regular basis. By extending each of these programs to services, the government was able to give the service industries some immediate commercial benefits. Using bilateral trade channels to solve trade problems in services had a number of benefits aside from the immediate commercial benefits. It helped to demonstrate to foreign governments that there were real trade problems in services and that the United States would use its commercial leverage to deal with those problems bilaterally even if it proved impossible to launch multilateral negotiations. Such bilateral problem-solving efforts also helped to educate foreign trade policy officials about services issues and made it necessary for foreign governments to establish internal mechanisms for resolving bureaucratic conflicts between trade ministries and ministries responsible for regulating individual service industries. In effect, it was possible to use the bilateral trade policy process to induce foreign governments to integrate services into their own trade policy machinery. Bilateral negotiations thus helped pave the way for the future multilateral negotiations. In more recent years, the negotiation of bilateral free trade area agreements with Israel and Canada provided an opportunity to develop agreements on trade in services that could provide models for the multilateral negotiations. It also enabled trade officials in the countries involved to give their business communities and regulatory agencies in services an operational reason for addressing the many issues that will have to be covered in the multilateral negotiations. In other words, these negotiations served as dress rehearsals for the multilateral negotiations, and enabled the officials involved to work out many of the problems associated with organizing and implementing agreement on trade in services.
The OECD study on trade in services went through several phases, and each phase was characterized by a debate over different, though related issues, and foreshadowed the debates that later took place in the preparation of negotiations on trade in services in the GATT. The debate in the first phase was over the desirability of conducting a comprehensive study of trade in services. There was obviously widespread skepticism whether there was such a thing as trade in services. The debate in the second phase was over what aspect of trade in services should be studied. The debate in the third phase revolved around the question whether the factual information collected in the course of the study should be analyzed on an industry-by-industry basis, or whether it would be possible and meaningful to analyze the information on an aggregate, cross-sectoral basis. The debate in the fourth phase concerned whether it was possible to relate the issues that had been identified to existing trade concepts. The debate in the last phase was over the possibility of developing meaningful rules and principles for trade in services. Each of these phases took about a year.
The debate over the desirability of conducting a study of trade in services in the Trade Committee of the OECD, as against the Invisibles Committee that had dealt with services in the past, took place in 1978-79. Everyone understood, of course, that the primary reason for agreeing on the study was the need of the United States to be able to demonstrate to the Congress that it had taken steps toward preparing comprehensive negotiations on trade in services. Nevertheless, it was obviously necessary to establish an objective rationale for the study, which would enable trade officials to justify their action to their colleagues in the other ministries. In preparing its case for such a study, the U.S. delegation to the Trade Committee was considerably helped by a background paper that had been prepared on the subject by Ron Shelp (1979), who was familiar with the OECD and who had thought the most about the subject. The Trade Committee agreed in the course of 1979 to undertake a study of trade in services, and this led to a debate over what information to collect. Some members of the Trade Committee argued that the study should be based on a collection of statistics on trade in services. Others argued that the study should focus on government regulations in each services industry in member countries. Still others argued that the study should examine existing international agreements and arrangements on services. The United States argued that the study should focus on barriers to trade in services. The positive reason for the U.S. proposal to focus on trade barriers in services was that a study of trade barriers in services would most directly and effectively demonstrate the need for negotiations on trade in services. The negative reason was that every other approach had major drawbacks. Government data on trade in services were very poor, and a focus on such data could have quickly convinced everyone that nothing could be done until governments had prepared better data, an effort that has only just begun and could take another five to ten years to yield results. A study of government regulations on services would have proved so overwhelming that the committee would quickly have gotten lost in a sea of information they did not understand. A study of existing agreements and arrangements would be useless unless you could evaluate such agreements and arrangements vis-à-vis an unfulfilled public policy objective related to trade in services. In responding to the U.S. proposal for a study of barriers to trade in services, other delegations asked how such information could be obtained, and for which industries relevant information could be made available. Some proposed that the committee embark on a case study involving a particular sector. The United States responded that the information could be obtained by asking the representatives of businesses involved in trade in services about the barriers they face and that such an exercise should cover the full range of services. Most members of the Trade Committee expressed great skepticism about the feasibility of such an approach. To overcome the skepticism expressed by other members of the Trade Committee regarding the feasibility of obtaining information on barriers to trade in services, the United States decided to demonstrate to the committee that it could be done. By drawing on information collected by the Wolf and Company study in 1975, the United States compiled an initial inventory of trade barriers to services and proposed to undertake a more comprehensive survey that would provide more up-to-date information. Since the United States agreed to do the work, the committee ultimately agreed to pursue the approach it had proposed.
U.S. trade officials turned to the U.S. Chamber of Commerce and its services committee to help organize a survey of. barriers faced by U.S. service industries in selling services abroad. The data collected from that survey, organized by industry and type of barrier, provided the first comprehensive overview of the barriers faced by businesses engaged in international trade in services. The USTR inventory remains one of the most detailed sources of information about barriers in this area (Office of the U.S. Trade Representative, 1979). The USTR inventory had its weaknesses. Some of the information about foreign laws and regulations provided by businesses was outdated. In other cases, the businessmen had misunderstood the scope and application of foreign laws and regulations. Later editions of the inventory were subjected to a more intense scrutiny by U.S. embassies in the countries involved, and most of the factual errors were eliminated. The purpose of the inventory, however, was not to accuse foreign governments of wrongdoing in individual areas but to get an insight into the range of barriers faced by business. The survey defined barriers as discriminatory measures or laws that served as an impediment to the sale of services by foreign suppliers. Eventually, other countries undertook to collect information about barriers to trade in services from their own businesses, and this information supplemented the information made available to the OECD Secretariat by the United States. With the question of the study's focus settled, the discussions in the Trade Committee turned to the method of analyzing the data. Many members of the committee argued that the information about barriers should be analyzed on a sectoral basis, since the institutional, regulatory, and market structure in each services industry is quite different. The United States argued that the barriers should be analyzed in terms of the type of barriers encountered by exporters of services, regardless of industry. The reason for this approach was that it would help demonstrate the applicability of trade negotiating techniques and trade concepts in services, and that it was possible to achieve broad-based liberalization of trade in services through comprehensive negotiations that simultaneously covered all sectors. The U.S. concern was that an analysis focused on sectors would quickly reduce the scope of the study to one or two sectors, that it would emphasize all the sectoral regulatory issues that will make negotiations difficult, and that it would ultimately reduce the scope for liberalization. After considerable debate, the committee agreed to follow a dual approach to the analysis of trade barriers. As information from the USTR-Chamber of Commerce survey of barriers to trade in services became available, the USTR used its in-house computer processing facilities to organize the information on barriers by type of barrier, by industry, and by country. This information provided much of the raw material for Secretariat papers analyzing major types of barriers. The next question was how papers on the individual sectors should be prepared. Since the OECD has a number of committees that have responsibility for specific services industries, it was felt that those committees should be asked to provide the Trade Committee with background papers on those sectors, while the Trade Directorate agreed to prepare papers on sectors not covered by sectoral committees in the OECD. The first such sectoral paper prepared by the Secretariat, with the help of trade officials from the member governments, covered the construction and engineering sector. Interestingly enough, many delegates discovered to their surprise that their national industry was a large exporter of construction services, and this helped generate greater enthusiasm for the whole trade in services effort.
The papers prepared by the Secretariat on various , types of barriers led to a discussion in the next phase of the OECD work of the applicability of trade concepts and techniques. After considerable debate the committee came to accept the transferability of many of the trade concepts and principles to services. This led to a decision to draft a document that would discuss the key concepts and principles that could serve as the foundation for a future trade regime for services. This document, "Elements of a Conceptual Framework for Trade in Services" (OECD, 1987), was published by the OECD in 1987. With the achievement of substantial consensus in the committee on the conceptual framework that might be used to negotiate on trade in services, it was agreed that the applicability of the conceptual framework to trade in individual service industries should be tested, in cooperation with the sectoral committees of the OECD. That process is still under way. The next step in the OECD work is likely to focus on the development of possible sectoral interpretations or annotations of the general trade concepts and principles contained in the conceptual framework.
At the same time that the United States persuaded the OECD Trade Committee to launch a study of trade in services, U.S. representatives continued to pursue the discussion of issues related to trade in services in the GATT. For example, the United States used the opportunity provided by a GATT exercise to update the inventory of nontariff barriers to include an illustrative notification of barriers to trade in services. The United States also tabled proposals for a work program on trade in services in the Consultative Group of 18, an informal advisory body of senior trade officials that meets periodically to advise the director general of the GATT on trade policy issues that should be addressed by the GATT. U.S. representatives to the GATT also circulated a number of background papers.
Discussion of trade in services in the GATT reached a more intense level in 1981 with the preparation of a meeting of GATT trade ministers. In 1981 OECD ministers had concluded that there were a number of trade issues, including barriers to trade in services, which should be examined as possible topics for another round of multilateral trade negotiations. This led to a discussion in the GATT of a possible meeting of trade ministers to decide on a work program in preparation for a future round of multilateral trade negotiations. GATT member countries agreed in November 1981 to hold such a meeting in November 1982 and to prepare a draft work program for the consideration of ministers. As a result of the work undertaken in the OECD Trade Committee most developed countries had come to the conclusion by 1981 that they had an economic interest in trade in services, and that the issue should be examined in the GATT as a possible topic for future multilateral negotiations. Developing countries, however, strongly resisted the discussion of trade in services in the GATT, and this set the stage for a confrontation at the ministerial meeting. After a fairly contentious meeting, the U.S. trade representative, Bill Brock, succeeded in hammering out a compromise agreement. It was agreed that interested countries could prepare national studies of trade in services and that the GATT could arrange for an exchange of views based on such studies. Even though this outcome fell short of the original U.S. objective of establishing a GATT committee or working party on trade in services, the legitimacy of work on trade in services in a GATT context had been established. In spring 1983, the United States and other developed countries decided it would be desirable to organize an informal discussion in the GATT of the information that should be included in national studies. This request inevitably led to procedural struggles with Brazil and India over the use of GATT facilities to arrange such meetings, the attendance of members of the GATT secretariat, and the preparation of minutes and other documents. These struggles continued through most of 1983 and 1984, first in connection with the coordination of the national studies and next in connection with the exchange of views on the national studies. The United States was the first country to submit a national study on trade in services at the end of 1983. Other countries followed.
The ministerial communiqué on the GATT work program provided for a review of the work at the end of 1984, with the objective of deciding on the topics that might be ripe for inclusion in a new round of multilateral trade negotiations. The GATT council took up the issue at its meeting in November 1984 but could not reach a consensus on the terms for the establishment of a preparatory committee that could lay the groundwork for a new round of multilateral negotiations. The failure to reach a consensus on the agenda of a new round of multilateral trade negotiations was largely due to disagreements over the inclusion of trade in services. It was all the more noteworthy that the council agreed on the establishment of a committee to examine whether services should be included in a new round of negotiations. The committee promptly elected Ambassador Jaramillo, the Colombian ambassador to the GATT, as chairman. Ambassador Jaramillo had previously been chairman of the more informal sessions organized to exchange information on the national studies. He now played an indispensable role in facilitating a dialogue between developed countries and developing countries on trade in services. The meetings proved invaluable in persuading a substantial group of developing countries to support the inclusion of services, thus isolating such hardliners as Brazil .and India, and paving the way for a consensus by the trade ministers. Besides Ambassador Jaramillo, the key players in this process were Richard Self, the U.S. representative on the committee, and John Richardson, the representative of the European Community. In preparation for the meeting of ministers at Punta del Este, a group of mostly small and medium-sized developed and developing countries, acting under the leadership of the Swiss and Colombian ambassadors to the GATT, developed a draft text of a mandate for the negotiations. That draft text ultimately became the key working document at the ministerial. As in the 1982 GATT ministerial, the debate over trade in services was one of the principal issues facing ministers at their meeting in Punta del Este. Clayton Yeutter, who had replaced Bill Brock as the U.S. trade representative in 1986, was as determined as Brock to include services in the negotiations, and was prepared to allow the meeting to fail if acceptable terms could not be worked out for including services in the negotiations. In the end, agreement was achieved on a mandate acceptable to everyone, and the Uruguay Declaration was approved by the ministers as the basis for launching the Uruguay Round of multilateral trade negotiations. 3
1. For other sources on the history of U.S. and international
efforts to build support for multilateral negotiations, see Margaret
Sims and Richard Rivers (1987), Ron Shelp (1979), and Christopher
Madison (1981(. |