Stakes for Philippines
High as WTO Services Talks Near Deadline
The Philippines has not much to gain except on Mode 4 and a great deal
to suffer from liberalizing its services sector
By Jennifer del Rosario-Malonzo
IBON Features
Posted by Bulatlat
The end of May could
breathe new life or kill the services talks in the World Trade
Organization (WTO). It is the deadline for the submission of new and
revised offers of services sectors up for liberalization.
Crucial to the present negotiations is the “request-offer” process, in
which individual WTO members request new market access and national
treatment commitments, and respond with offers of new commitments.
As of the February 2005 negotiating cluster, the last formal cluster
before the May 31 deadline, 45 member countries are still expected to make
offers (excluding the Least Developed Countries or LDCs).
Of crisis and benchmarks
The chair of the Services Negotiating Committee and the WTO Secretariat
declared the negotiations in crisis and a proposal twas floated to
establish quantitative benchmarks -- a minimum level of commitments that
any WTO member would have to make in this round of negotiations.
The United States said the “request-offer” approach has failed to
sufficiently advance the current round of talks and suggested
“supplementing” the approach with a new initiative designed to bring other
countries up to US standards. American negotiators have been discussing
the initiative with other developed countries, including the European
Union, Canada and Japan.
According to the US, a number of WTO members with potentially significant
services markets, such as the Philippines, South Africa, Pakistan, and
Morocco, have failed to submit initial market-opening offers in the talks,
and many offers currently on the negotiating table contain no commitments
in sectors such as distribution, maritime transportation and construction.
Other sectors where offers are weak include healthcare, education,
environmental services, and postal/courier services.
The depiction of a crisis in GATS talks appears to be a ploy however to
force many Third World countries to submit offers in services. The
proposed benchmarks are also meant to compel countries to commit their
services to be liberalized even if they do not intend to.
Mode 4
Given the continuing offensives of developed countries in opening up their
services sector, governments of Third World countries are pushing for Mode
4 (Temporary Movement of Natural Persons) as a key issue.
Many poor countries have registered their disappointment in the services
talks because of the lack of improvement on Mode 4 offers of developed
countries while they are being pressured to submit offers for
liberalization on other modes. For these governments, Mode 4 represents
one of the few areas that provide gains for them in the liberalization
process.
In general, Mode 4 of the GATS covers: 1) persons providing services
where a foreign service supplier obtains a contract to supply services to
the host country company and sends its employees to provide the services;
2) independent service providers abroad: an individual selling services
to a host country company or to an individual; 3) persons employed abroad
by foreign companies established in the host country (but excluding
nationals of the host country).
Underdeveloped countries have criticized the United States and other rich
countries for failing to offer any substantive offers on Mode 4. Among the
issues being raised in the negotiations regarding Mode 4 commitments are:
1) “De-linking” or separation of Mode 4 from Mode 3- the application of
Mode 4 at present is restricted and often associated with commercial
presence. Third World countries,
led by India, have been urging the
separation of Mode 4 from Mode 3. The main argument is that only
transnational corporations (TNCs) from developed countries can afford
commercial presence.
2) Horizontal commitments are limited- despite the fact that Mode 4
commitments are mostly horizontal and cover almost all services, these are
subject to various limitations regarding immigration rules and economic
needs test. Due to these limitations, the application and benefits from
Mode 4 as a mode of supply is relatively narrow and biased toward highly
skilled workers and professionals employed by the TNCs.
Brazil, India, and China are pushing for more ambitious Mode 4
commitments. However, developed countries are not receptive due to rising
unemployment rates as well as political reasons in their own homefront.
For instance, the US Congress recently declared that it would continue to
oppose any agreement negotiated at the WTO that would allow foreign
business and professional personnel to enter the US to work on a temporary
basis. These comments came as the US was preparing to submit its revised
offer on services trade at the WTO by end-May.
Philippines’ stakes
The Philippines has been identified as one of the WTO members with
potentially significant services markets that have not yet submitted
offers of sectors to be liberalized.
Services accounts for roughly 44 percent of the Philippines’ gross
domestic product (GDP). GDP growth in 2004 was mostly driven by the growth
of services particularly telecommunications and finance, with activities
in call centers and business process outsourcing, private services, trade
and real estate boosting consumer spending and investments. It is thus
unsurprising that the Philippine government is being pressured to further
open up the services sector to foreign service providers under the GATS.
In the current services negotiations, developed countries have made it
clear that they want to open up sectors that are also publicly provided
such as healthcare, education and environmental services (e.g., water). At
present, the Philippine government’s policy thrust of privatizing and
commercializing social services is making life more miserable for the
average Filipino.
For example, the privatization of water and power has made these vital
utilities more inaccessible to the poor as rates continue to escalate. In
healthcare, public hospitals are instituting a pay-for-service policy that
limits access to health service for poor families. Also, the privatization
of state colleges and universities and the deregulation of private
education resulted in higher tuition, making education too costly.
The liberalization of these services under the GATS will further limit
government involvement, facilitate the entry of foreign providers that
will only take advantage of the profit opportunities and leave many
Filipinos without access to basic social services.
Furthermore, foreign investments flocking in would not only bleed the
economy dry through dollar repatriations; they would also compete with and
eventually squeeze out domestic businesses.
Meanwhile, the Philippines
has a stake in getting Mode 4 commitments from developed countries. About
eight million overseas Filipino workers (OFWs) are in over 140 countries.
In the 1970s, the country initially started exporting low-skilled labor to
the Middle East. But recent trends show that Filipino migrant labor has
broadened into a variety of skills-- from professionals (medical, IT,
health), to middle skilled (caregivers, entertainers, seafarers), and low
skilled (domestic helpers and unskilled labor).
If Mode 4 commitments become more liberal, Filipino workers are expected
to find it easier to offer temporary services abroad. Thus, given the fact
that the Philippines has not much to gain except on Mode 4 and a great
deal to suffer from liberalizing its services sector, the government’s
trade negotiators should not respond to liberalization requests and must
not submit any offer this coming May 31 without substantially improved
Mode 4 offers especially from the US and other developed
country-destinations of OFWs.
The GATS negotiations should also be made a venue to discuss the negative
effects of services liberalization. A comprehensive assessment of the
impact of GATS should be demanded and that until such evaluation has been
done, there is actually no basis for proceeding with liberalization.
In the local scene, there is a need to truly assess the direct and
indirect effects of liberalizing services. Congress must initiate a review
of policies implemented in line with the GATS as well as other WTO
agreements, and the impact of these policies on the economy and especially
on the Filipino people. Posted by Bulatlat
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