II. Issues:

• Rule- Making Disciplines

1. Domestic Regulations
   
   Article VI (4) of GATS calls for the development of any new necessary disciplines on domestic regulations to ensure that relations relating to qualification requirements and procedures, technical standards, and licensing requirements do not constitute unnecessary barriers to trade in services.
   
   

2. Emergency Safeguard Measures (ESM) for Services
   
   Article X (GATS) mandates Members to undertake multilateral negotiations on the establishment of a mechanism which would allow a country to temporarily backtrack on its commitments when there are unforeseen consequences of import of services in increased quantities and domestic suppliers are threatened with serious injury. Developed countries are skeptical and question the feasibility and desirability of any ESM.  Overall, WTO Members are divided over the necessity of the ESM, and on whether these are to be applied horizontally, or only on a sector-and-mode-specific basis.
   
   

3. Subsidies
   
   Article XV (GATS) mandates multilateral trade negotiations to develop multilateral disciplines to avoid the possible trade-distortive effects of subsidies.  Negotiations are to take due account of the role of subsidies in economic development and the need for flexibilities for developing countries.
   
   

4. Government Procurement
   
   Article XIII (GATS) calls for multilateral trade negotiations on government procurement (GP) in services of purchases by governmental agencies of services for governmental purposes.  GP of goods and services is covered under the Agreement on GP which is a plurilateral agreement with signatories mostly from developed countries.
   
   The Members remain divided over the scope of the mandated negotiations.  Developed countries believe that negotiations under Article XIII cover disciplines on non-discrimination, national treatment, and market access with transparency issues to be dealt with under the Working Group on Transparency in GP of which for the moment there will be no negotiations following the "July Package".  Most developing countries believe that transparency in GP is outside of the scope of the negotiations mandated under GATS and only those linked to transparency in services trade per se should be addressed by the Working Group on GATS Rules.

• Facilitating the Participation of Developing Countres in Global Trade in Services (GATS Article IV)

Developing Countries express the view that their participation in world services trade should be assessed, and actions taken by developed countries to provide access to technology, distribution channels, and information networks to services providers in developing countries should be examined by the Council for Trade in Services (CTS).

• Horizontal Issues

1. Assessment of Services Liberalization
   
   Developing countries call for such an assessment as they feel uncomfortable about entering into new services commitments without fully understanding the effects of prior ones.  The debate is currently on whether individual Members should carry out their own national and/or regional assessments or should be conducted by the CTS.
   
   

2. Special Treatment for Least-Developed Countries (LDCs)/Modalities
   
   Article XIX (3) provides that modalities must be established on special treatment for LDCs and giving priority to facilitating their increased participation in world services trade.
   
   

3. Credit for Autonomous Liberalization ( AL )
   
   The debate is over how AL measures (i.e., measures undertaken unilaterally by WTO Members to liberalize a service sector, as a result of their own national liberalization process or WB/IMF structural adjustment programmes since June 1995) or liberalization undertaken autonomously since the previous negotiations should be treated.
   
   

4. Request-and-Offer Method
   
   The Developing Members find the request-and-offer method time consuming and very resource intensive.

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III.  Status

• Services Negotiations

The number of offers made has improved but overall quality remains unsatisfactory. Few provide new business opportunities to services suppliers and majority of the offers do not propose any improvement. Offers so far on the table still fall short of expectation in terms of both member and content. The overall expectation is that the final outcome of the market access negotiations will include commitments by a critical mass of Members in each of the sectors and modes of supply identified.

In May 2005 the Philippines submitted offers in a) computer and computer-related services, b) construction services, c) distribution services (commission agents' services), d) energy services and environmental (sewerage) services, and e) improved commitments in tourism services. 

• Negotiations on Rule-Making

1. Multilateral Disciplines on Domestic Regulations
   
   Some progress had been reported since the Members agreed on disciplines for the accountancy sector in 1998.  Members have been engaged in developing general disciplines for all professional services and, where necessary, additional sectoral disciplines. Japan presented a proposal for a new GATS Annex on Domestic Regulations in March 2003. EC also made a proposal in July 2003, which sets a transparent regulatory framework for licensing procedures.
   
   

2. ESM in Services
   
   Negotiations were targeted to be concluded by 15 March 2004 (agreed deadline: 1997) but failed to be achieved. The proposal is progressing slowly due to:

   the concerns of some Members on the desirability and technical feasibility,  the absence of convergence in the negotiations on the issues of developed and developing countries (there is continuous disagreement on the mandate itself, on what it means, stipulates or intends to do), and the Philippines is quite vocal on the importance of an ESM.

3. Multilateral Disciplines for Subsidies in Services
   
   The negotiations thereon were supposed to conclude on 1 January 2005 . Discussions in the Working Party on GATS Rules (WPGR), however, are still very immature. No substantive debate has yet taken place on issues such as the role of subsidies in the pursuit of public policy objectives, and the need for special and differential treatment for developing countries on the appropriateness of a countervailing mechanism. The WPGR came up with a synthesis of views expressed by some Members on the definition of subsidies and possible types of measures that might constitute a subsidy in January 2005.
   
   

4. Disciplines on Government Procurement
   
   Discussions are still in a tentative "brainstorming" mode.
   
   

• Facilitating Developing Country Participation in Services Trade

Eighteen (18) developing countries made a joint statement in the CTS on the possible ways to implement this. They have indicated that the best way to assess whether services offers were fulfilling the mandate in Article IV and XIX (2) is to establish a set of questions that could facilitate the analysis of the initial offers. The questions could relate to the quality and technical analysis of the offers, and the evaluation of the economic and commercial importance of the commitments proposed. No decision has so far been taken on the proposal.

• Horizontal Issues

1. Assessment of Trade in Services 
   
   Nothing has so far been achieved with regard to initiating an overall assessment of services liberalization at the multilateral level.
   
   

2. LDC Modalities
   
   Final decision on modalities for LDCs has not yet been reached.
   
   

3. Autonomous Liberalization
   
   In March 2003, the CTS approved modalities for the treatment of AL in the current negotiations. These new modalities indicate that the granting of credit will be determined by bilateral negotiations.

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IV.  Unofficial Policy Thinking and Suggestions

The Philippines should support the negotiating mandate subject to respect for national policy objectives, flexibility to open fewer sectors and to liberalize fewer types of transactions.   The Philippines also should obtain concrete market access gains for domestic service providers in the developed countries.  Moreover, in any liberalization measures proposed, the Philippines should work for the provision of emergency safeguard measures ( EMS ) and consistency with domestic laws.

The Philippines should also accord appropriate consideration of the needs of small and medium-size service suppliers and should push for the exercise of certain options by Members (i.e., where commitments will be made, apply horizontal limitations to all services, invoke general exceptions to justify existing regulations or to enact new ones in pursuant of legitimate public policy concerns and invoke restrictions to safeguard BOP).  There should be no prior exclusion of sectors or modes.

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