International Trade

Trade in Services - General Agreement on Trade in Services

Indian Papers/ submissions on Services in WTO

JOB(04)/87
Council for Trade in Services 28 June 2004
Special Session

Communication from Chile, India and Mexico
Joint Statement on Liberalization of Mode 1 under GATS negotiations

The following communication, dated 25 June 2004, from the delegations of Chile, India and Mexico is being circulated to the Members of the Council for Trade in Services.

1. We would like to draw attention of the Members to an aspect that has so far not received, in our opinion, the due attention that it deserves. Mode 1, i.e. cross border supply, is fast emerging as an important mode of delivery of a wide range of services especially through electronic means. This growth is driven by two types of technological developments: the computerization and digitization of a range of services, particularly business services; and the rapid increase in telecommunications capacity and the steep decline in telecommunications prices. As a result, it is possible to transmit information, and hence services, across countries at low cost. This is particularly important for small and medium services suppliers.
    
2. These developments have spurred the growth of exports of IT services and the whole range of Business Process Outsourcing (BPO) services by the developed countries and more recently also by developing countries. Numerous studies have demonstrated the benefits of global outsourcing for both sides - that needing to outsource and that carrying out the outsourced activity - pointing to the potential welfare gains of further liberalization in this area.
    
3. The existing schedules of commitments as well as the initial offers in Modes 1 and 2 are limited and uneven. The emergence of this new phenomenon has also unfortunately created certain protectionist backlash. This could threaten the liberalization in this field unless attempts are made by all Members to lock in the current liberal regimes in Modes 1 and 2 in these negotiations thereby preventing future protectionist actions. However, we also realize the legitimate concerns regarding commitments in cross-border supply in certain specific sectors and the appropriate flexibility for individual developing country Members. The importance of policy space for domestic regulations in pursuit of legitimate objectives is also recognized.
    
4. We believe this is an important market access issue having a bearing on a wide range of service sectors and therefore needs to be suitably addressed in the market access negotiations. It is our belief that the negotiations based on the existing bilateral request-offer approach alone may not deliver broad based commitments across a wide range of relevant service sectors which may be needed for overall growth of the services sectors. Given the uncertainty regarding treatment of electronic delivery of services as Mode 1 or Mode 2, we believe that the most practical way forward would be to obtain similar level of commitments with respect to both these Modes in the majority of service sectors and activities. A critical mass is also needed for achieving desired levels of liberalization.
    
5. All this calls for special attention being paid to this mode and creative approaches for broader and deeper liberalization being developed. This Group hopes to come back in the future with more specific negotiating proposals on these lines. In the meantime, we are also open to having more detailed technical discussions to move the process forward.
    
6. We look forward to constructive engagement by Members on this issue given its increasing importance and systemic implications for future services growth and liberalization. We also believe that this may be one of the useful areas to consider in the context of the review under paragraph 15 of the Negotiating Guidelines and Procedures.