Speech by David Hartridge

"New Round of  Negotiations on Trade in Services in the World Trade Organization" David Hartridge Director World Trade Organization Brussels, 18 May 2000

I am grateful for the invitation to talk to you today. The timing is good, from my point of view and I hope from yours because we have just started in the WTO a new round of negotiations on trade in services:  that includes road transport services along with all others, and it is important, I think that you should be aware of this negotiation and of the opportunity it presents to advance the interests of your industry in the removal of barriers to your international operations.

 The commitment to negotiate on services and agriculture was made five years ago, in the Uruguay Round, and it has not been affected by the failure of the Ministerial Conference in Seattle to launch a wider round of negotiations.  The work on services is going forward seriously and in good faith, just as if the Seattle Conference had not failed.  Of course, when we come to the point of binding decisions, in three years time or so, it may very well be the case that a substantial surrounding agenda makes it easier to achieve major liberalization in services.  For that reason and for many others we must hope that WTO Members will agree to launch the wider round as soon as possible.  It would be very unfortunate, above all for the poorest countries of the world, if false and self-interested scare stories about the effects of trade liberalization on development and the environment were to frighten governments away from pursuit of the liberalization process.  It is badly needed:  your own industry, like many others, carries a burden of administrative and economic barriers which could and should be eliminated.  It is not an attractive sight to see the children of the middle classes in the rich world claiming to protect developing countries from development. 

But for the time being the services negotiations are in good shape. What is the new services round intended to do?  Broadly speaking, it is intended first to complete the framework on the General Agreement on Trade in Services (the GATS) through negotiations on domestic regulations, subsidies, government procurement of services and emergency safeguard measures.  Secondly, it is intended to improve the scope and value of the commitments which governments have made under the Agreement to allow the provision of services in their markets by foreign suppliers.  There is no time to describe the GATS in detail, but I can say that it has two parts:  the short framework agreement, which is in many ways similar to the GATT and the schedules of national commitments which Members have undertaken and which form an integral part of the Agreement in the same way that tariff schedules are part of the GATT.  One of the main features of the GATS is that governments are free to choose which services they will include in their schedules, and, even within the committed sectors, to maintain limitations on the degree of market access and national treatment they are prepared to guarantee.  Negotiations for further liberalization will therefore involve negotiators pressing their partners to include more sectors in their schedules and to remove some of the limitations they now maintain. 

Another key feature of the Agreement is that it covers every means by which services can be traded and supplied:  not just cross-border trade, as with the GATT, but also consumption abroad, which in the context of your industry means the freedom of shippers to use foreign transport providers, establishment trade, which means the right to set up any type of business to supply the service in the export market, and the temporary movement abroad of individuals to provide a service.  This means that the GATS is among other things an Agreement about foreign direct investment.

There is a very striking disparity between service sectors in terms of the number of countries which have made commitments on them so far.  Thus, 125 WTO Members have made market access on tourism, which you may say is easy enough since all countries want to boost their tourist trade.  But 104 countries have commitments on financial services, which is clearly a much more sensitive area and 89 have commitments on telecommunication services, which until quite recently were thought to be a national monopoly.  By contrast, only 43 Members have made commitments on education and 47 on health.  By these standards road transport does rather badly.  Only 25 Members have made commitments on inter-urban passenger services, for example, and only 27 on any type of freight transportation.  Many of the commitments which do exist are subject to economic needs tests, exclusive licences  or other restrictions such as the exclusion of foreign registered vehicles.  And you should note that I am talking about the minority of countries which have made any commitments at all on road transport;  the great majority have made none.

Of course, road transport is rather special in that regional links are so very important:  what really matters is to be able to trade in and with neighbouring countries.  So a great deal of the international regulation of the industry is at bilateral or regional level, rather than fully international.  In order to protect preferential arrangements at the regional level, many WTO Members have taken exemptions from the general obligation of most-favoured-nation treatment which is one of the basic principles of the GATS.  Nevertheless, it seems unfortunate that the industry is not exploiting all the possibilities for growth which are offered by GATS commitments - perhaps especially in the third mode of supply, which is commercial establishment in the export market.  Of  course, it is for the "importing" country to decide whether to allow foreign firms to set up in its market, but they could usually expect a foreign trucking company to employ local employees as executives and drivers, and even local trucks.

The comparative neglect of the road transport sector by GATS negotiators also seems strange in view of the liberalization that has taken place at national and regional level on such matters as tariffs, licences and even cabotage.  It is also strange in view of the increasing importance of express delivery services (strongly linked with the growth of electronic commerce) which are increasingly using trucking as a complement or  a substitute for air transport in business of high added value. 

I suppose part of the explanation is that GATS negotiators have never focused on the road transport sector (whereas we have had highly focused negotiations on financial services and telecommunications, for example) and that governments have been made aware only of the defensive or protectionist interests of the industry.  There is also a great shortage of statistics and of information on the regulation of the industry:  we tried last year to collect regulatory information through a questionnaire, but the effort appeared to be unwelcome and it failed. 

 Although my own responsibility is for trade in services, the WTO's involvement in your industries' concerns goes very much wider.  One of the initiatives that failed at Seattle and which we must revive was to strengthen and elaborate on the existing GATT disciplines on the facilitation of trade, covering such matters as harmonized documentation and automated customs clearance.  The transport sector is like financial services and telecommunications - part of the vital infrastructure of the world economy - and we ought not to allow protectionism, corruption or over-regulation to increase the cost or diminish the efficiency of any of these services on which economic prosperity depends.  Let me end by urging you to think about the services negotiations as an opportunity to make known to your governments the impediments which you suffer in doing business internationally.  Governments are now putting together their request lists which are their negotiating objectives for this new round, make sure they know what you want.

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