TITLE: Quad To Meet On Services Next Week As WTO Talks Falter

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DATE: March 2, 2001

As senior-level officials from the U.S., European Union, Canada and Japan prepare to meet in Washington next week, disagreement over negotiating guidelines among the members of the World Trade Organization is threatening to stall multilateral services talks. Most developing countries have rejected the latest version of the guidelines issued by the WTO Secretariat over how it addresses their right to special and differential treatment. Quad country officials will seek to devise ways to bridge differences with developing countries on the guidelines by the time of a stocktaking meeting at the WTO later this month and will wrestle with how the services talks should proceed after that meeting, officials said. The WTO agenda after the stocktaking will likely focus on reviewing current proposals in full committee, not forming subsidiary bodies that could engage in actual negotiations, as the U.S. had hoped as late as December. The meeting of the so-called "Quad" country officials on March. 8-9 is the most recent in a series of periodic meetings that also addresses electronic commerce and investment issues, officials said. Barring a lengthy stalemate on the negotiating guidelines, countries will either spend time between March and the Qatar ministerial in November reviewing individual countries' pending sectoral proposals, or bring in technical experts for in-depth discussions of specific sectors. The latter approach is seen as moving more quickly to request-offer negotiations, trade officials said. Both approaches would keep the discussion going under the special session of the Committee on Services. Amongst the quad countries, both the EU and Japan have favored a slow-going approach, officials said. In the Japanese view, a decision to move to break out groups would be based on a mid-summer assessment of whether a new round can be launched at the November Qatar ministerial, according to one official. This approach is also based in part on the view that the fight over the guidelines signals a resistance from developing countries that would likely stymie the political decisions necessary to form subsidiary bodies in which to conduct experts' reviews. The EU believes any move to break-out groups would have to wait at least until after the Qatar ministerial, officials said. Because of this interlinkage of the services talks to larger negotiations, the quad meeting will also likely delve into prospects for a new round, officials said. Either of these approaches to reviews falls short of the U.S. desire, expressed in December, that members would form "break-out groups" to discuss individual sectors. This approach would foresee discussions proceeding from pending proposals to a listing of barriers to liberalization in each sector to negotiation to remove these barriers, a U.S. industry source said. At this point, the U.S. is likely to be satisfied if there is agreement on the guidelines at the March stocktaking and countries move on to a discussion of negotiating proposals, according to an informed source. But one informed source said that whatever form the review takes, it is essentially a way for countries to keep up the appearance of making progress on services. "They're heading for a challenging time in terms of keeping the momentum going," he said. He noted that with the exception of sectors such as energy there is little technical work that is actually needed. "It's almost like filling in air." If countries cannot reach agreement on the negotiating guidelines by the stocktaking session this month, it could reveal that the talks are stalemated, sources said. Under WTO rules, the guidelines must be approved by members before they can proceed to negotiations. At the same time, it has been clear for a long time that neither the services nor the on-going agriculture talks can move towards negotiations in the absence of a larger negotiation. In services talks in Geneva last week, the Group of 24 developing countries, which includes India and Pakistan, rejected the latest guidelines draft from the Secretariat. They argued that negotiators should return to an earlier version which provided for special and differential treatment through provisions that would allow them to make fewer market access commitments. The earlier version of the guidelines also would have required reviews on how increased services liberalization would benefit developing countries. In addition to the Group of 24, African and Caribbean countries also opposed the latest version of the guidelines. Industrialized nations considered the earlier Secretariat proposal on guidelines as skewed too much towards special exemptions for developing countries. They favored the subsequent proposal which they saw as restoring the balance negotiated in the General Agreement on Trade in Services. That balance consists of Article 19, which deals with the flexibility for developing countries' commitments and Article 4, which deals with their ability to participate effectively in services trade by among other things calling for the liberalization of sectors that are of export interest to developing countries. A number of trade officials from developed countries argued that the Group of 24 did not make substantive suggestions for amending the latest draft of the guidelines, which was similar in outline to a proposal these developing countries had tabled in December. On key issues, such as the absence of a deadline for talks and that negotiations should start from bound commitments, the latest draft mirrors the Group of 24 proposal. That led some officials to believe the disagreements could be breached, though others speculated that external factors, such as a lack of progress on implementation issues and concerns about prospects for agriculture negotiations could influence the outcome. Also likely to feature on the agenda for the Quad meeting are the feasibility of a special safeguard for services, and the slow progress of work in the Working Party on Domestic Regulation, trade sources said. On the safeguard issue, the EU and Japan have been open to investigate issues concerning the feasibility of a services safeguard on the basis of a proposal tabled by some ASEAN countries in December (Inside U.S. Trade, Dec.1, p.10). These countries maintain the general skepticism about the need for a safeguard, but, without prejudice to this position, have been willing to investigate how such a safeguard could work, in particular how its impact on existing investments, and investor confidence, could be limited. If a safeguard becomes politically necessary in negotiations, countries would be better informed on how to proceed, these trade officials said. The working party on domestic regulation is supposed to develop guidelines so that services regulations are not unduly burdensome, based on objective and transparent criteria and, in the case of licenses do not restrict the supply of a service. That work has progressed little, however, because it has no deadline and because countries' trade officials and regulators are often divided on the substantive issues these talks raise, trade officials said. On electronic commerce, officials will likely discuss whether the WTO should form an ad-hoc working group and whether that group's mandate should explore such issues as privacy, and pro-competitive regulations. The U.S. has been reluctant to discuss these broader issues, preferring to have them studied first in the Organization for Economic Cooperation and Development. The U.S. is looking for the group to focus on ensuring that goods transmitted electronically are not disadvantaged by trade rules in comparison to physically delivered goods and has opposed any new regulations on the internet. END top