Trade rift between rich, poor countries growing wider

HONG KONG – The rift between rich and poor countries has grown even wider as developing countries rejected provisions in the draft text of the general agreement on trade and services (GATS) that would commit developing economies to further opening up their service sectors to foreign competition.

Philippine party list representatives and 28 other Asian parliamentarians are supporting the call of the G-33, G-20 and the G-90 to scrap Annex C of the GATS that sets specific timelines and numbers for the liberalization of the services sector by developing countries.

Earlier, the Association of Southeast Asian Nations (ASEAN) submitted a "watered-down" GATS proposal to the World Trade Organization (WTO) that would ensure domestic services sectors of poor countries are protected.

"There is concern that Annex C will undermine countries’ capacity to undertake services sector liberalization at their own pace and to the extent that is most appropriate for their preferred development strategies," said, Bayan Muna Rep. Teodoro Casino.

Casiño said developing countries are apprehensive about Annex C because it sets qualitative benchmarks that require member countries to bind existing levels of liberalization in Mode 2 (cross-border supply) and Mode 2 (consumption abroad) while asking for increased foreign equity participation in Mode 3 (commercial presence).

He said the unpopular Annex C reverses previously established negotiating procedures in GATS from the voluntary "request-offer" approach to a more mandatory "plurilateral" and "sectoral and modal" that were previously left to individual countries to decide.

Under a plurilateral approach, a member or a group of members can request other members to enter into plurilateral negotiations. This makes it a requirement for those receiving requests to negotiate with groups of countries demanding new or additional commitments. This eliminates the right of a developing country not to participate in plurilateral talks.

Developing countries said this approach will greatly expand the opportunity of big service firms and their governments to form clusters that would demand to negotiate with poor countries and pressure them to increase their level of liberalization commitments that will threaten the survival of local service enterprises.

Another Bayan Muna Rep. Satur Ocampo said Annex C provisions will have a negative impact on the Philippine services sectors which are still essentially weak.

"One practical application of this is that it will restrict the movement of our overseas Filipino workers. The developed countries could easily demand that for a certain number of Filipinos that could work in their countries, the Philippines should in turn open up its services sector to accommodate their own special interests," Ocampo said, adding that the agreement endangers Philippine service providers ranging from telecommunication firms, water and power utilities, health services, professional services like law, accountancy, engineering and architecture.

"Even janitorial services and vehicle repair services could end up in the hands of foreign monopolies if we are not careful."

The GATS text is highly contentious and has drawn strong criticisms from developing countries.

For one, the qualitative benchmarks would place developing countries under greater pressure and in a weaker bargaining position. Under the current flexibilities, poor countries can choose their own level of commitment based on their national policies and priorities.

This includes the option of liberalizing in practice but not making GATS commitments or not to the same degree; and regulating firms and their participation at the appropriate levels of foreign ownership in each sector and the type of legal entity such as joint ventures with locals.