*EPF405 12/14/00
Texts: U.S. Presents Proposals in WTO Services Negotiations
(Plan aims to remove trade barriers on range of services) (4170)

The United States is presenting a series of proposals to the World Trade Organization (WTO) negotiations on services aimed at removing trade barriers across a broad range of services sectors, U.S. Trade Representative (USTR) Charlene Barshefsky says.

The new U.S. proposals seek to open world trading markets and eliminate barriers affecting U.S. companies operating in financial services, telecommunications, energy, audiovisual services, and seven other sectors, Ambassador Barshefsky said December 14.

This is the second major negotiating proposal submitted by the United States since the WTO negotiations under the General Agreement on Trade in Services (GATS) began earlier this year, she said. The GATS negotiations are part of the WTO's built-in agenda from the previous Uruguay Round of negotiations.

"The purpose of the services negotiations is to complete one of the major unfinished tasks in the WTO: putting meat on the bones of the Uruguay Round's GATS framework agreement and applying its market-opening provisions to new sectors and existing restrictions," she said.

Removing barriers to services trade is vital to the United States and the global economy, she said, because service industries account for nearly 80 percent of U.S. employment and gross domestic product (GDP). Services produced $255,000 million in cross-border exports last year, she said.

The United States presented its first comprehensive proposal in the GATS negotiations in July, which set out in broad terms the United States' objectives and expectations, she said.

All WTO member nations are participating in the GATS negotiations.

Following are terms and abbreviations used in the text:

-- billion: 1,000 million.
-- trillion: 1,000,000 million.
-- WTO: World Trade Organization.
-- GATS: General Agreement on Trade in Services.

Following are texts of the USTR announcement and a related fact sheet:

(begin announcement text)

OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE
EXECUTIVE OFFICE OF THE PRESIDENT
WASHINGTON, D.C. 20508
December 14, 2000

U.S. PRESENTS FIRST COMPREHENSIVE SECTORAL NEGOTIATING PROPOSALS IN WTO SERVICES NEGOTIATIONS

United States Trade Representative Charlene Barshefsky announced that the United States will today submit to the World Trade Organization (WTO) a negotiating plan to remove trade barriers across a broad range of services sectors. This is the second major negotiating proposal submitted by the United States since the WTO negotiations under the General Agreement on Trade in Services (GATS) began earlier this year. The new U.S. proposals seek to open markets and eliminate trade barriers affecting U.S. companies operating in financial services, telecommunications, energy, audiovisual services, and seven other sectors, as well as managers and professionals employed by these companies.

"Services are the backbone of the modern economy," said Ambassador Barshefsky. "Our proposals aim to eliminate trade barriers to services across the board. These negotiations can significantly improve U.S. exports of services, and will benefit the over four Americans whose jobs arc supported by these exports, jobs in both the services and manufacturing sectors. Moreover, these are services that many countries want and need in order to help them develop and reap the benefits of a competitive, integrated global economy."

"The purpose of the services negotiations is to complete one of the major unfinished tasks in the WTO: putting meat on the bones of the Uruguay Round's GATS framework agreement and applying its market-opening provisions to new sectors and existing restrictions," continued Ambassador Barshefsky. "With these proposals, we have identified those practices in other countries that adversely affect one of the most critical -- and fastest growing -- parts of the U.S. economy."

The GATS negotiations are part of the WTO's built-in agenda. These negotiations began in January 2000, in the WTO Council for Trade in Services, in which all WTO Members participate. Service industries account for nearly 80 percent of U.S. employment and GDP and produced $255 billion in cross-border exports last year. Cross-border trade in services accounts for more than 25 percent of world trade, or about $1.4 trillion annually.

In July, the United States presented the first comprehensive proposal in the GATS negotiations, setting out in broad terms the United States' objectives and expectations. This proposal was followed by submissions from other countries, both developed and developing. The new U.S. submissions provide greater detail on the restrictions that the United States seeks to address in the negotiations.

Many service industries are subject to government regulation. The United States' new proposals highlight ways in which regulatory procedures can be obstacles to trade in services. Nevertheless, the proposals also recognize that there are appropriate roles for governments in regulating these services and that all WTO Members must continue to be able to set, maintain, and enforce high levels of protection for consumers, health, safety, and the environment. Finally, the U.S. proposals make clear that in areas related to social services including education and postal services, as well as healthcare -- the United States is not seeking to use the GATS negotiations to promote privatization of such public services.

(end announcement text)

(begin fact sheet text)

USTR Fact Sheet
WTO SERVICES -- U.S. NEGOTIATING PROPOSALS
Washington, D.C.
December 14, 2000

The GATS negotiations, which began at the start of 2000, are required under GATS Article XIX and must aim at "the reduction or elimination of the adverse effects on trade in services of measures as a means of providing effective market access." The negotiations are taking place in the WTO Council for Trade in Services, meeting in special session, under the chairmanship of Sergio Marchi, Canada's ambassador in Geneva.

In the current, first phase of the WTO services negotiations under the General Agreement on Trade in Services (GATS), countries have identified the period up to December 2000 as the time to make proposals related to the conduct of the negotiations. In July, the United States presented a broad proposal in the WTO services negotiations, stating generally our interests, objectives, and proposed approaches for the negotiations (this document is available at http://www.ustr.gov/sectors/services/services.shtml.)

To complement and elaborate on the U.S. July submission, the United States has now submitted more specific views on interests and objectives in individual service sectors and in one GATS "mode" of delivery (movement of natural persons, or mode four). These submissions are based on consultations with USTR's statutory advisors, as well as comments received in response to USTR's Federal Register notices.

Generally, each submission proposes negotiation in the WTO of the different aspects of an open, well-regulated regime in the particular sector or mode. This would typically entail countries agreeing to apply existing GATS market access and national treatment disciplines, as well as negotiation of additional GATS disciplines addressing sector- or mode-specific regulatory issues, including transparency and access to networks.

Consistent with these disciplines, governments nevertheless would retain the right to regulate to meet domestic policy objectives. Moreover, in sectors such as express delivery, education and training, and energy services, the submissions recognize that in some countries, including the United States, governments will continue to play important roles as suppliers of public services.

The WTO General Agreement on Trade in Services

Services are what most Americans do for a living. Service industries account for nearly 80 percent of U.S. employment and GDP. U.S. exports of commercial services (i.e., excluding military and government) were $255 billion in 1999, supporting over 4 million services and manufacturing jobs in the United States.

Cross-border trade in services accounts for more than 25 percent of world trade, or about $1.4 trillion annually. U.S. services exports have more than doubled over the last 10 years, increasing from $118 billion in 1989 to $255 billion last year.

U.S. services compete successfully worldwide. Major markets for U.S. services include the European Union ($85 billion in private sector 1999 exports), Japan ($30 billion), and Canada ($21 billion). At $13 billion, Mexico is presently the largest emerging market for exports.

Services are important to an efficient economy; they include:

-- essential infrastructure systems like telecommunications, finance, energy services, transportation, and distribution;

-- professional services like accounting, law, architecture, and engineering; and

-- environmental services such as sewage, refuse disposal, sanitation and exhaust gas reduction services.

The General Agreement on Trade in Services (GATS) is the first multilateral, legally enforceable agreement covering trade and investment in services. The GATS is designed to reduce or eliminate governmental measures that prevent services from being freely provided across national borders or that discriminate against locally-established service firms with foreign ownership.

The GATS:

-- provides a legal framework for addressing barriers to trade and investment in services,

-- includes specific commitments by WTO member countries to restrict their use of those barriers, and

-- provides a forum for further negotiations to open services markets around the world.

The GATS framework lays out the general obligations for trade in services in much the same way that the General Agreement on Tariffs and Trade (GATT) does for trade in goods. Most- favored-nation treatment, market access, and national treatment are three of the important principles included in the general framework of the GATS.

All members of the WTO must have a schedule of GATS commitments. Yet, while all signatories committed themselves to the GATS principles of national treatment, market access, and MFN, each country made different commitments for different service sectors during the Uruguay Round. The GATS therefore has a built-in requirement for subsequent liberalizing trade rounds, and the first such negotiation began in early 2000.

Today's proposals build on the U.S. July submission by identifying, for 11 sectors and one GATS "mode of supply" restrictions that the U.S. believes WTO Members should take up in the negotiations. The U.S. may submit additional proposals in the future, on these or other topics related to the negotiations, including other sectors and/or modes of supply.

Following is an explanation of the importance of these areas to the United States and to the negotiations.

Accountancy

The proposal is designed to make it easier for accountants and accounting firms to serve clients in other countries, as this profession becomes increasingly globalized. It would address citizenship and prior residency requirements for licensing, and would strengthen the Accountancy Disciplines, adopted by the WTO in 1998, which are scheduled to become effective after this set of negotiations. The proposal addresses market access and national treatment obstacles, which were not addressed under the mandate of the WTO Working Party on Professional Services, which developed the Disciplines.

International revenues of accounting firms amount to tens of billions of dollars and are growing annually. Two million accountants are employed worldwide. Accounting firms create job opportunities in virtually all countries; they assist manufacturers and businesses in developing and maintaining cost-effective operations and in preparing tax returns and financial statements.

Audiovisual and related services

The proposal is intended to provide a framework for future negotiations in the WTO that will contribute to the continued growth of this sector by ensuring an open and predictable environment that recognizes public concern for the preservation and promotion of cultural values and identity. Today's audiovisual sector has changed significantly during the last 10 years. New technologies stimulate the growth and development of audiovisual services and products from around the globe and offer consumers worldwide access to a multitude of entertainment and information services.

As part of the explosion in information technology that has taken place in the past decade, audiovisual services, too, play their role in fostering a nation's economic development, both through the spread of information and ideas and by fostering investment in a nation's advanced communications infrastructure. Electronically delivered audiovisual products and services, for example, which increase use of the network, are helping to create an environment that will encourage investment in the digital networks of tomorrow.

Distribution services

This proposal addresses barriers faced by wholesalers, retailers, and other distribution companies in operating supply chains internationally (e.g., restrictions on real estate purchases, store location, etc.). It requests countries that have not yet taken commitments in this sector to match the U.S. Uruguay Round commitments (no limitations on market access or national treatment) or to formulate an offer addressing identified obstacles in this sector. It also proposes that all Members undertake additional commitments relating to regulation in this sector (e.g., provide transparency of domestic laws and regulations; provide an opportunity for service providers to meet with local officials and community representatives to discuss location of facilities).

Efficient distribution is an essential feature in the infrastructure of modern economies. Supply chains from manufacturers to wholesalers, retailers, franchisers, direct sellers, and marketers provide consumers with a wide selection of products and reasonable prices, important factors in improving the quality of life. These companies consistently produce large numbers of jobs and income opportunities both directly and in other ancillary services, such as transportation, packaging, logistics management, and information technology. Retailers and wholesalers are among the largest employers in a number of countries.

Education and training services

This proposal addresses barriers to market access and national treatment for suppliers of education and training services, both cross-border and at facilities abroad. The proposal would be limited to higher (tertiary) education, adult education, and training, and would not apply to primary and secondary schools. It would not seek to displace public education systems, but rather would supplement them and provide opportunities for suppliers to make their services available to students in other countries. The intent is to help upgrade knowledge and skills through these educational and training programs, while respecting each country's role of prescribing and administering public education.

Specialized education and training is needed in many countries, particularly in high-tech fields. Such education is becoming more important in the development and operation of modern economies. Millions of foreigners visit the United States each year to study at our educational institutions. U.S. balance of payments receipts from incoming students amount to some $9 billion annually. In addition, receipts from training services add another $400 million a year. This does not include the receipts of a growing number of branches and other ventures established overseas by U.S. educational service providers. The most popular courses of these establishments are business administration, management and leadership training, language training, computer and information technology education, some of which are delivered by a combination of classroom discussion and interactive Internet sessions ("distance learning").

Energy services

Energy services involve a wide range of activities, from exploration of energy resources to generation, transmission and distribution, to marketing and trading of energy, to services promoting the clean and efficient use of energy necessary to obtain, convert, and deliver an energy resource to consumers.

Liberalization of energy services is a priority for the United States in the current round of services negotiations. At the same time, broad market openings in the sector are fundamental to the economic health of both developed and developing countries. The energy services initiative offers developing countries the opportunity to save hundreds of billions of dollars through enhanced efficiencies in energy development and usage and to provide energy to the roughly 2 billion people today that do not have access to commercial power.

During the last major round of trade negotiations, the Uruguay Round, little attention was paid to energy services. This was largely because, at the time, most service functions were performed 'in-house' by state-owned oil companies and power generation utilities that controlled the whole production and distribution chain. Today, deregulation and privatization have led to an unbundling of energy services activities and the development of a $600-plus billion dollar energy services sector.

The U.S. proposal calls on WTO Members to assure nondiscriminatory access to foreign energy services providers across the entire value-chain of energy services. Equally important, the U.S. proposal suggests that WTO Members consider how best to create an appropriate regulatory environment for energy services so that opaque or discriminatory regulatory practices do not undermine commitments to open markets to foreign service providers

Environmental services

The benefits of services that prevent, reduce, or correct environmental degradation are increasingly seen as important to ensure that environmental problems are adequately addressed and that future problems are prevented or limited. Liberalization in this sector will benefit all countries, not only developed economies that often have the technology to compete in this industry. As we are increasingly aware, the trans-boundary effects of many environmental issues make this sector important to both developing and developed countries. The reduction of barriers to the provision of environmental services will enhance competitive forces ensuring that technology advances are better dispersed and provided at more affordable rates. This will ensure greater access to these services for all countries.

At the same time, liberalization in these sectors must not impair the ability of governments to impose performance and quality controls on environmental services and to otherwise ensure that service providers are fully qualified and carry out their tasks in an environmentally sound manner.

Express delivery services

This proposal addresses barriers faced by express delivery companies in providing integrated services from end-to-end. It seeks the adoption of a separate classification for express delivery services and requests countries to undertake commitments on market access and national treatment. It also proposes that all Members undertake additional commitments relating to regulation in this sector (e.g., provide transparency of domestic laws and regulations; provide an opportunity for service providers to meet with local officials and community representatives to discuss location of facilities).

The world market for express delivery services, estimated at over $50 billion, is projected to grow rapidly over the next several years, partly driven by the increasing use of online purchasing by businesses and consumers and the need for vendors to match the speed of electronic ordering with rapid physical delivery. Consumers benefit, not only from speed of delivery, but from lower costs, resulting from efficiencies of operation. Express delivery service providers employ tens of thousands worldwide. These services have become an essential feature of a modern, efficient economy.

Financial services

Financial services liberalization -- including for insurance, banking, securities, asset management, pension funds, financial information, financial advisory, and other financial services -- enhances and strengthens capital market efficiency, bolsters financial sector stability, stimulates innovation, and provides consumers with the broadest range of services at the lowest cost. The U.S. is one of the world's most competitive suppliers of financial services. In 1997, in the insurance sector, U.S.-owned affiliates' sales in foreign markets reached $ 47.2 billion. The U.S. also is a world leader in providing cross-border insurance services. Even excluding core deposit-taking and lending business, U.S. banking and securities firms recorded cross-border exports of $13.9 billion in 1998, and recorded comparable sales via their affiliates abroad. Growth of the U.S. financial services sector in overseas markets also stimulates demand for a wide range of other U.S. services, including telecommunications, professional services, and computer and related services.

A strong and vibrant financial sector is particularly important for emerging economies to provide a strong basis for their trade in a diverse range of goods and services. Ambitious commitments for financial services also makes countries more attractive destinations for investment in e-commerce networks and associated technologies. In short, liberalization of financial services, when implemented in conjunction with transparent and strong regulatory regimes, is one of the most important catalysts of economic and trade growth.

The United States provides an initial proposal on financial services that establishes benchmarks for further financial services liberalization to include (1) commitments constituting fundamental liberalization, and (2) commitments on transparency and other principles for regulation.

Legal services

With the acceleration of world economic integration, law firms have become increasingly important in advising clients on a variety of business matters, including mergers and acquisitions with foreign companies and business contracts involving multiple jurisdictions. Negotiations on legal services will enable WTO Members to examine liberalization opportunities with regard to market access and national treatment barriers as those terms are understood in the GATS. The specific focus of such liberalization would be most beneficial in examining commercial presence, citizenship and residency requirements for licensing, scope of practice, and association of foreign-qualified lawyers with local lawyers and association of foreign-partner law firms with local law firms. Negotiations should include other relevant modes of supply, including the movement of personnel.

In many respects, lawyers and law firms pave the way for international trade and investment and are regarded as part of the infrastructure of commerce. For the United States, balance of payments receipts for legal services amount to roughly $2.5. billion annually.

Movement of natural persons

An important component of U.S. competitiveness in the services sector is human capital -- skilled managers and professionals involved in the delivery of services in foreign markets. Too often, however, companies face regulatory hurdles in moving personnel to foreign locations

This proposal would apply across all services sectors, recognizing that movement of natural persons is relevant to all services sectors. The proposal highlights the temporary nature of this GATS mode of supply -- WTO Members undertake no obligations with respect to permanent entry or stay of individuals as service suppliers -- and the role that access to information and regulatory transparency can play in ensuring full implementation of GATS commitments in this area.

Telecommunications, value-added network, and complementary services

WTO Members seeking to benefit from the growth opportunities provided by an increasingly "networked" global economy will need to attract extensive private investment to build infrastructure of telecommunications and computer facilities. The WTO and its Members can play a key role in stimulating such investment by:

-- ensuring market access and national treatment for providers of both network infrastructure and key service sectors that use this infrastructure;

-- implementing the Basic Telecommunications Reference Paper commitments that promote competition in basic telecommunications; and,

-- consistent with Article VI of the GATS, avoiding unnecessary restrictions on services offered by competitive suppliers.

To achieve this goal the United States proposes, in conjunction with sector-specific negotiations, a negotiating framework that elicits commitments in both basic and value-added telecommunications services, as well as complementary services which could be integrated into network transactions such as distribution services, express delivery services, computer services, advertising services, and certain financial services. Such a package will ensure that the opportunity to build and fully utilize networks is supported by WTO disciplines, encouraging investment and the broadest possible development of services that are flourishing through the efficiencies of networked transactions.

Worth $650 billion in 1997, the global telecommunications market is now rapidly approaching one trillion dollars in annual sales. Before the agreement came into force, only 17 percent of the world's top 20 global markets were open to U.S. firms; now, measured by annual sales, U.S. companies have gained access to over 95 percent of global telecommunications markets, according to the International Telecommunications Union.

Spending on telecom equipment and services is estimated to reach $983 billion by year-end (2000) in Canada, Mexico, Western and Eastern Europe, Latin America, and the Asia-Pacific region combined. Spending on telecom transport services, equipment, and support services will soar to $1.8 trillion in 2003 at a 16.7 percent compound annual growth rate. U.S. manufacturers are expected to garner $45 billion -- that is 12.7 percent -- of the estimated $345 billion that will be spent on telecom equipment in 2003.

According to 1999 statistics, E-commerce generated over $171 billion in revenue. Forty-four percent of U.S. companies are selling on-line; 36 percent more said that they will do so by the end of 2000. Internet advertising generated $1.92 billion in 1998, double the 1997 figure according to industry estimates.

Tourism services

This proposal focuses on hotels as a sub-sector of tourism. It builds on a proposal by three developing countries on tourism, which is currently under discussion in the GATS Council. It requests countries that have not yet taken commitments on hotels to match the U.S. Uruguay Round commitments (no limitations on market access or national treatment) or to formulate an offer based on a list of obstacles in this sector (e.g., limitations on foreign investment or on purchase of real estate; discriminatory treatment of parties in a joint venture, etc.). It also proposes that all Members undertake additional commitments relating to travelers and international conferences to promote expansion of international tourism.

Tourism, broadly defined, is regarded as the world's largest industry and one of the fastest-growing, accounting for over one-third of the value of total worldwide services trade. Highly labor-intensive, it is a major source of employment, especially in remote and rural areas. Tourism ranks in the top five export categories for 83 percent of countries, according to the World Tourism Organization, and is the leading source of foreign exchange in at least one in three developing countries. Tourism generates not only employment but retail sales and tax revenues. The United States is the world's leading exporter and importer of tourism services, with annual receipts in excess of $75 billion and payments of over $50 billion. American travelers visit hundreds of destinations around the world. The hotel industry is a most important part of the tourism industry with worldwide revenues estimated at $253 billion.

(end fact sheet text)

(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)
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