*EPF208 10/22/2002
Researcher Calls for Liberalization of Trade in Energy Services
(Says further commitments vital for energy sector and WTO members) (620)

By Andrzej Zwaniecki
Washington File Staff Writer

Washington -- World Trade Organization (WTO) negotiators should aim at establishing an international trade framework for realizing long-term benefits of more open and competitive energy markets, a U.S. energy researcher says.

Speaking October 22 at the American Enterprise Institute, Peter Evans, a senior associate at Cambridge Energy Research Associates, said that the trade round launched in Doha, Qatar, has created an opportunity for WTO member countries to expand their existing obligations and make additional commitments, mostly in the regulatory area.

Energy services covered by the WTO negotiations include oil and gas exploration and production, construction of energy facilities, energy transportation and storage, operation and maintenance of electricity and gas networks and other facilities and supply of energy.

These talks are conducted under the rules of the WTO's General Agreement on Trade in Services (GATS,) which made the 136 signatories subject to such general obligations as equal treatment of services and service providers from all member countries, transparency of laws and regulations, and specific commitments related to market access and national, or non-discriminatory, treatment of foreign service providers.

But because "framers" of the GATS recognized that these primary disciplines do not ensure the full benefits of trade liberalization and because few countries made specific commitments, Evans said, countries now need to negotiate additional commitments.

He argued that the energy sector would benefit most from GATS trade disciplines that would guarantee third-party access to essential energy facilities including natural gas pipelines and electric power transmission. GATS rules should also cover market transparency including real-time access to information on prices and transmission capacity, as well as competition safeguards and independent regulation, he said.

Specifically, Evans said, WTO negotiators should seek improvements in regulatory environments and the elimination of restrictions on providing services across borders, establishment of commercial presence in another country and temporary movement of executives, technicians and other specialists to foreign countries.

Among the major challenges to achieving an energy services agreement, Evans said, are demands for special treatment for developing countries and the establishment of primacy of public policy goals over GATS goals as well as resistance by entrenched energy industries.

He argued that the benefits of any stronger trade disciplines could be "significantly" undermined if larger and wealthier transition countries such as China, India, Brazil and Venezuela are given long transition periods to comply. While countries should continue to enjoy a sovereign right to regulate their energy industries with public policy objectives such as health and safety in mind, Evans said, they should not be allowed to rely on trade restrictions when and where alternative means are available.

In July, the United States submitted at the WTO a proposal on services that would require countries to agree 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.

Evans praised the U.S. proposal as "seeking the broadest possible market access commitments from WTO members." But he said that as a consequence of "complications" in liberalization of some U.S. domestic electric power markets, primarily in California, the U.S. proposal refrains from defining electricity distribution as a service.

Because of that situation, said Christopher Melly of the U.S. International Trade Commission, the United States is not pushing for energy services markets privatization in other countries either.

He said the U.S. submission at the WTO includes the index of energy activities and a view on classification of energy services, which needs to be agreed on before negotiations on liberalization can move on.

Evans said that this initial phase could be pretty contentious, citing the European Union position that electricity constitutes a good rather than a service. If adopted, that position would make electricity subject to the General Agreement on Tariffs and Trade (GATT) rules rather than GATS rules.

(The Washington File is a product of the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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