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Table of contents

Developing countries reluctantly accepted services as part of the Uruguay Round agenda. At first, they adamantly refused to enter into any negotiation on this issue. In addition, because of their scarce negotiating resources, they would find it difficult simultaneously to follow negotiations on the traditional GATT agenda which comprised farm and textiles goods and on services. There were some voices arguing in favour of an agreement, 52 and chief among them was the London-based Trade Policy Research Centre TPRC , founded in by an Australian economist, Hugh Corbet, one of the pioneers of the study of trade and investment in services.

Drake and Nicolaidis 55 probably got it right when they concluded that the epistemic community did not substantially influence the drafting of specific GATS provisions, but provided useful comments that helped negotiators understand what was at stake. The negative attitude of hard-line developing countries was such that the national services studies ended up being examined in an informal group.

As of November , 16 such studies had been circulated and examined. In , the US made its intentions clear: Our objective in services negotiations would be the establishment of a legal framework of rules and procedures that would 1 make trade in services as open as possible through a commitment to transparency of practices and the resolution of problems through consultation, and 2 negotiate commitments of a sectoral or functional character dealing with problems unique to individual services industries.

This group did not manage to produce something concrete regarding trade in services but kept the discussion on the new round alive.

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Encouraged by a number of delegations, Arthur Dunkel, the Director General DG of the GATT, decided to turn to some eminent persons in an effort to provide some extra intellectual legitimacy to the voices calling for a new round. The group produced the Leutwiler report , named after the group's chairman. It did not address the merits of negotiating an agreement on trade in services in any meaningful detail, but provided those arguing in this sense with an encouragement through its advocacy of trade liberalization.

Negotiators met in Punta del Este, a few miles off Montevideo, the capital of Uruguay, with the intention of launching the eighth round of multilateral trade negotiations. The leading developing countries Brazil, India, Yugoslavia were all part of G and were staunchly opposed to the inclusion of services in the round. The G position was in fact jeopardizing the launch of the round.

However, two events helped unblock the deadlock:. G is the heir to G-5, its expanded version. On 23 June and 16 July , the G presented two draft Ministerial Declarations, as well as an addendum on 22 July. In all these drafts, it rejected the idea of including trade in services in the new multilateral agenda, considering that time was not yet ripe for such an inclusion.

Srinivasan and Tendulkar 69 partly attribute this attitude to the fact that Brazil and India lagged behind other developing countries when it came to domestic reforms privatization, etc. At the time of Punta del Este they were both still living within the confines of the old statist paradigm. In June , the US tabled a concrete proposal for a Ministerial Declaration which included clear terms for a negotiation on trade in services.

Felipe Jaramillo presided over the group's meetings.

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Under the leadership of Colombia and Switzerland, the group prepared a draft 78 which became the basis for the talks during the Punta del Este Ministerial Conference. It presented itself as a bridge-building coalition engaged in mediation-type diplomacy in the space provided by the extreme positions of the US and G The country was definitely not the main target of section initiatives by the US, so one could hardly make the argument that it bowed down to US pressure. Hamilton and Whalley 80 offer the following explanation: Argentina, fearing implications for its agricultural interests in the round proposed a third draft which it hoped would bridge the gap between what had now become a solidly supported Swiss-Colombia proposal from the EFTA process and the G 1O text.

The Chairman of the Preparatory Committee forwarded these three texts of a possible declaration to the Ministers at Punta del Este. However, the effort on the third text came too late and was not given serious consideration. From a negotiating perspective, the link between services and agriculture made by Argentina was neither unique nor unreasonable the EU had made the same link but for different reasons, as we saw supra.

The US seems to be at the origin of this distinction. In its view, this issue was intimately linked to the relevance of GATT principles for trade in services: the general framework would thus encompass the GATT principles that were judged relevant, preliminarily at least , which would then be further developed to cater for sector specificities. Besides the GNS, which was the main forum for negotiating on trade in services, and where all GATT contracting parties participated, the negotiators established later on a number of sectoral working groups which were meeting regularly and submitted periodically reports to the GNS.

Participation in all these groups was open to all Uruguay Round participants. The US wanted a meaningful comprehensive agreement in services: meaningful in terms of liberalization, and comprehensive in terms of sector coverage and participation. It was opposed, however, to widespread free riding and was not prepared to extend this courtesy to developing countries that did not qualify as LDCs.

The distribution of competences across the EU and its Member States was, as we alluded to supra , uncertain at the moment the Uruguay Round was launched. Although sitting in the driver's seat, and acting as if it was fully competent, throughout the round the EU agent, the Commission, was on a tight leash: its negotiating positions were not only ex ante decided but also ex post scrutinized by the EU Member States. De facto, however, this does not seem to have been a major impediment.

The EU kept very comprehensive and detailed records of each and every discussion, participated in practically all meetings, and emerged as a key player in the negotiations. The EU was in favour of a comprehensive agreement as well.

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They had more or less similar strategies: they were all in favour of including some specific sectors, while being adamant on excluding others. Developing countries were divided into two camps. On one side, the reluctant players, that is, those that believed that there was not much in these negotiations for them and that saw no reason why the negotiation should take place in the first place. They held that their competitive advantage was in goods, not in services.

They adopted a passive — if not obstructive — attitude towards the negotiations, at least early on. First, the respect of the policy objectives behind national regulations was explicitly recognized in the Punta del Este mandate, which to a great extent alleviated the fears of developing countries. Second, development was stated as the ultimate goal of the negotiations, in other words whatever rules and disciplines were to emerge should promote the development of developing countries.

Thus, the recognition of the development objective was to meet the concern that the element of equity could be ignored or inequity increased, as a result of the negotiations. If a broad coverage had been intended, the mandate would have been framed in terms of negotiations on services or negotiations on transactions of services. Instead, the Ministerial Declaration refers to trade, which is natural for a forum that basically deals with trade matters and not with the whole body of transactions that are associated with any economic activity.

Those are the basic principles of the Punta del Este Declaration, which were designed to take care of the concerns of developing countries. It is interesting that the mandate does not speak of liberalization per se as the goal of negotiations. It aims at expansion of trade, not liberalization, of expansion of trade as an instrument for the growth of all trading partners and for the development of developing countries.

That is the central goal of the multinational framework that must evolve. This group included such GATT members as Hong Kong China, which became over time an active participant in the services negotiations, vigorously supported by an organized CSI as of The group survived in various versions — sometimes referred to as the Friends of Services Group — but had minimal visibility and minimal successes to its credit. In short, it was an active participant throughout the process. It is worth recalling that, with few exceptions, there was hardly any embedded expertise, either within national governments and delegations or within international bureaucracies regarding trade in services in Negotiations went through many ups and downs.

Schematically, this is where countries stood at Punta del Este:. By the end of the round, the compromise reached by Uruguay Round participants, which also reflects the more complex dimensions that characterized the negotiations, could be summarized as follows:. Trading partners struggled during the initial phase of the negotiation, roughly between Punta del Este and mid By September , the discussion on the issues particularly on definitions was at best abstract or academic.

A rather unfortunate initiative of the developed countries did not help to narrow down the gap between them and developing countries. It was thwarted immediately by developing countries, only because it had been prepared by the OECD and, consequently, they had had no opportunity to debate it and negotiate it. Negotiations should start from a clean slate, not from an OECD dictum, in their view. It is worth noting that the GATT Secretariat, through DG Dunkel, argued quite explicitly in favour of the involvement of business in the negotiations from early on. DG Dunkel understood that business was a natural ally since its interests lay in the fast resolution of the round and the liberalization of trade.

As became the GATT practice, half way through the round or around that time negotiators would meet to take stock of the progress made and agree on whatever needed to be done in order to complete the negotiations. Montreal was more the phase of the negotiation where the negotiation itself had to be maintained.

Unfortunately, the US adopted a hard, uncompromising line, and developing countries refused to give in.

The Doha Round And Financial Services Negotiations Aei Studies On Services Trade Negotiations

The EU essentially saw itself as mediator between the US on the one hand and developing countries on the other. The language of this document is hortatory, calling for extra efforts, agreements to continue studying particular questions, and identifying a list of principles such as transparency, progressive liberalization, etc. And yet — politically — something had been achieved: the number of paragraphs dedicated to trade in services compared with the en passant references in the Punta del Este Declaration was evidence that the negotiation was there to stay and that there should be no doubt as to the resolve of the trading nations to go ahead with it; then, there was the resolve not to leave, in principle at least, any sector outside the realm of the negotiation; and, finally, the idea emerged first to negotiate in adequate detail the general framework which started to take shape before moving to discussing the initial liberalization commitments, i.

In this context, two questions emerged as the basic issues: first, the manner in which the initial liberalization commitments would be entered, that is, the subject-matter of what was eventually termed specific commitments; secondly, the manner in which services would be traded under the eventual GATS, that is, the modes of supply;. Between April and July , the so-called July Text was prepared and circulated. Chief among them were the coverage; MFN and market access; and the negotiation and application of specific commitments. Based essentially on the July Text, another text was prepared and formally submitted to all trading partners when they met in Brussels Brussels Ministerial Conference.

The Brussels text contained 35 provisions just like the July Text. Basically all the GATS provisions as we now know them, albeit not verbatim , are thematically there:. Failure to agree on farm issues ipso facto led to general failure. The doom and gloom was back in Geneva. Negotiations in the GNS context continued: the so-called Room B meetings multiplied and it is there that delegations attempted once again to iron out their differences and hammer out the GATS general framework. The meetings were of course open to all GATT contracting parties.

As in any negotiations, but particularly in services where new ground had to be broken, personalities played a key role. At the risk of being unfair to others, it is clear that three delegates almost monopolized the negotiations between the Brussels Ministerial Conference and the preparation of the Dunkel Draft: Jonathan Scheele EU, stationed in Brussels , Richard Self US, originally stationed in Washington and later on in Geneva , and B.

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They frequently met together and with the Secretariat, and together managed to produce a number of drafts for various key provisions that would ultimately be included in the Dunkel Draft. DG Dunkel put together a text, the Dunkel Draft, which, its limited legal value notwithstanding, provided — content-wise — the basis for the eventual agreement.

Dunkel decided himself to chair the negotiating groups on Agriculture and on Textiles, obviously holding the view that these two groups held the key to the successful conclusion of the Uruguay Round. The text contained no brackets. Nevertheless, the negotiations still had some way to go:. This is how DG Dunkel conceived the process: based on the confessionals and the ongoing negotiations in Rooms B and F, he requested the various Chairs of negotiating groups to put together a text without brackets.

In the case of services, it would be in fact the view of two chairs, because, since April , Ambassador Jaramillo had been assisted in his tasks by Ambassador David Hawes Australia , who became a sort of co-chair of the GNS, and succeeding Jaramillo when the latter left Geneva; DG Dunkel did the multilateral system a service by sticking out his neck and signing a text which was approved by him and his close staff but not necessarily by all delegates participating in the negotiations.

The text represented a compromise that, in Dunkel's view, could carry the day. It should be noted here that little of substance was added to the Dunkel Draft in subsequent negotiations. Eventually, and after some self-imposed unrealistic deadlines had been passed, following a trade-off between EU concessions in the farm sector and US additional opening of its services market, together with new offers from developing countries in some sectors, the agreement on services was concluded. The new DG, Peter D. Sutherland, played an important role in bringing the overall Uruguay Round package to a successful conclusion.

The successful conclusion was not without some late friction though: the EU, surprisingly for many, changed its attitude on maritime transport days before the final agreement, now requesting the exclusion of this sector from the package.

This led services negotiators back to the room where the Annex on Negotiations on Maritime Transport Services was finally concluded. For all practical purposes, negotiations on maritime transport were postponed for a later day, that is, after the entry into force of the Uruguay Round package.

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It was thanks to this final compromise, which was reportedly achieved one hour before the gavel in the hands of Peter D. Sutherland marking the end of the round went down, that the GATS had been finally agreed.