India must embrace plurilateral talks on services

Sumanta Chaudhuri | Updated on April 19, 2021

The WTO’s latest Joint Services Initiative is more flexible, which will benefit India and help us develop good regulatory practices

Selection of the first lady Director-General of the WTO and the new Biden administration in the US will hopefully generate a new momentum at the world trade body. However, one area that seems to be generating momentum of its own, with an expected outcome at the Ministerial Conference later this year, is the Joint Services Initiative (JSI) on Domestic Regulations in Services, seeking to develop and adopt disciplines in pursuance of the mandate contained in Article VI:4 of the GATS .

This group now consists of 63 members, constituting more than 70 per cent of world services trade. India, however, is not part of this group as is the case with the other three plurilateral groups on Investment Facilitation, E –Commerce and MSMEs, all of which sprung up at the 11th Ministerial in 2017, reflecting frustration at the continuing impasse in the WTO. India has a systemic issue with plurilateral negotiations in WTO as they could undermine the multilateral system.

Article VI:4 contains inbuilt negotiations for developing disciplines on qualification requirements and procedures, licensing requirements and procedures and technical standards to prevent such measures from constituting unnecessary barriers to trade in services. A new Working Party on Domestic Regulations (WPDR) was established in 1999 to carry forward this mandate.

This was needed to not only prevent nullification/impairment of the services commitments particularly in Mode 4 but also other modes and as Good Regulatory Practices to develop these service sectors. It became part of the single undertaking of the Doha Round in terms of Para 5 of Annex C of the Hong Kong Ministerial, 2005.

Since then, the WPDR has been involved in intensive textual negotiations with many variants, with India playing a significant role. The last Consolidated Text was of 2011. However, the Doha Round floundered and this failed. These negotiations have had a long multilateral history. While one can understand India’s stand on the other three issues that were “new” in the sense of not having any multilateral mandate for launching negotiations, this is not the case with Domestic Regulations.

The latest text of the JSI is of December 2020, indicating only a few areas left where consensus is still to be achieved. A comparison of the Consolidated Text of WPDR 2011 and 2020 indicates considerable similarity in all elements except qualification requirements, which are missing in the latter. Qualification has always been contentious particularly for the US and lesser extent, the EU, which had major objections to the inclusion of substantive elements as these were within the competency of the individual states and one of the major reasons why this text failed to get consensus — the other being the Concept of Necessity test.

It is worth noting that the US has remained outside this initiative. Any disciplines on Domestic Regulations are unlikely to include this element, wherever it may be negotiated. The disciplines in the JSI initiative also seem to be more flexible, which should benefit developing countries like India. Transition periods of 2-7 years (under negotiation) would be available for implementation of specific disciplines by developing and LDC members.

These disciplines will apply only to scheduled services sectors, which have not been revised since the Uruguay Round of Commitments in 1995, except for the extended negotiations on basic telecommunication and financial services in 1997. India has scheduled only about 30 amongst the 160 sub-sectors covered under GATS while the average of developed nations is more than 70 sub-sectors. Therefore, in terms of sectoral coverage, India is likely to gain more than what it will give up.

The only legal way

Further, these commitments are to be available on MFN basis at the end of the Round as they will be inscribed in the schedules of commitments as Additional Commitments under Article XVIII of GATS. There may be some concern over this way of incorporation of the disciplines as opposed to an Annex, but this is possibly the only legal way as there is no multilateral consensus. This may also lead some to conclude that when you can be a “Free Rider”, why one should take commitments on these disciplines?

This argument, however, misses the crucial point of this being a great opportunity domestically in India to discipline the reluctant sectors, mainly professional services. The only significant developing member missing from this list is South Africa.

Further, not surprisingly, the bigger Asean members like Indonesia, Malaysia and Vietnam are also out (Thailand is included given its huge export of manpower), given their greater reluctance on services sector reforms. However, if India were to join this initiative and take commitments, it may be able to use this as leverage in subsequent negotiations with Asean on services, and if India at some point decides to join the RCEP, it could also be beneficial.

At a more substantive level, the attempt is to develop Good Regulatory Practices in Services, many of which are directly in the nature of ease in doing business. An analysis of the applicability of such disciplines to the relevant services sectors clearly indicate that India is already broadly compliant with them and it would get some transition period, except in financial services, relating to opportunity to stakeholders to provide comments and their due consideration. Nothing prevents India from introducing deeper reforms in some selected service sectors where it is in national interest, without any commitment to binding obligations.

It is perhaps time for India to consider giving up on its systemic opposition to plurilateral negotiations at the WTO, specifically on Domestic Regulations in Services, which is crucial for the country.

The writer is a retired IAS officer. Views are personal

Published on April 19, 2021

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