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Talking Trade blog

Bargaining over services in TISA


Published 09 September 2015

This week, President Tabare Vazquez agreed to withdraw his country from ongoing negotiations over services. Uruguay will now notify the other 24 members [1] of the Trade in Services (TiSA).

This presents a good opportunity to examine TiSA.  Negotiations got underway in 2013 out of a shared frustration with a lack of progress in global trade talks for services coupled with a desire to push forward new, better suited rules for today’s interconnected, globalized economy and to give services an improved platform for growth. 

Services are an increasingly vital part of international trade.  The Asian Trade Centre has been part of an ongoing research project to track how much of the content of manufactured items like auto parts, aircraft engines, printer dyes, outdoor jackets, watches, whiskey, or making a table comes from services.  The full project will be out soon, but what has been particularly striking from this case study research is how much value is tied up in services content.

We often think of goods as physical items only—something you can drop on your foot and have to transport across borders in trucks, trains or ships.  But it turns out that for many value or supply chains today, at least half and perhaps as much as 80 percent of the value of a good is actually derived from services.

Such services can include research and product development, managing human resources, cleaning, security, distribution, logistics, warehousing, retail, and even after sales service and repair. 

TiSA members together contribute more than 70% of global trade in services.  For most, services also constitute a significant portion of domestic output contributing substantial numbers of jobs and generating important revenue for companies both large and small.   

Despite the critical importance of services, global rules for services remain underdeveloped and often lacking.  In part this is because services are devilishly hard to see and measure. 

Take examples from the Asian Trade Centre.  Our brochure was designed by a graphic artist in Pakistan, connected to us through an Australian online platform (www.freelancer.com).  Our website is hosted by an American company (Squarespace) and this blog is distributed by a different US company (MailChimp).  [All are receiving unsolicited endorsements.]  The blog content is written by me sitting in my lovely office today in Singapore and distributed to readers all across the globe. 

So how would available data capture all these services?  The short answer is not very well at all. 

In the mid-1980s when government officials were trying to design the first batch of global rules to govern trade in services,[2] most of what I just described would have been unimaginable.  Or, rather, some of the services might have been possible but the methods of delivery, the scale and the scope would not.

Consider Freelancer.  This company currently brings together more than 16 million people in 247 countries to provide a wide range of services from software writing and data development to engineering and accounting.  Connections can happen instantly and millions of files, pages, images, and data points are moving around and across borders daily.

At the time of the Uruguay Round negotiations, however, officials could mostly imagine delivering services via post, land line telephones or, perhaps, fax machines.  Otherwise, the primary methods of getting services to travel across borders meant the movement of people—I might travel to another country for medical treatment or to deliver a stakeholder workshop in Korea for the next RCEP round (currently planned for October 14 in Busan, by the way!  Stay tuned for details).  Or I might invest directly in a company, or travel temporarily as a business employee of a big firm to set up a project.

In short, officials were struggling with how to categorize services and to understand how they might be delivered across borders.  Hence the rules they created in the 1980s and early 1990s were rather crude.  Whenever I have to explain to businesses how services are broken up in the rulebook, I am usually met with blank stares.  In addition, services commitments suffered because governments were reluctant to commit to much, as no one was entirely certain about what might happen.

This is a long way round to explaining why services were part of the “built in” agenda for the start of a new round of global trade negotiations.  These talks started in Doha, Qatar, in November 2001, and have been moribund for a very long time.

Countries that are active in services trade became increasingly unsatisfied with old rules and limited market access commitments.  Unable to push forward the broader global negotiations, a handful of key countries decided to start parallel talks outside the WTO in Geneva.  These parallel talks, now called TiSA, might eventually be brought back into the WTO.

I don’t have room here to delve into trade geek obsessions with how TiSA can be reconnected with the WTO, but suffice to say that officials are trying to craft an agreement that unleashes more economic growth for services for the members while remaining conscious of likely issues and interests from the broader community. 

After 13 rounds of TiSA, the jury remains out on how successful officials are likely to be in meeting their ambitions.  The basic idea is to continue to build on existing commitments at the WTO but expand market access and to try to reduce domestic level regulations that make it hard for services to be competitive.  For example, one goal is to try to get foreign service providers to receive the same treatment as domestic service firms as much as possible.  Many similar rules do exist in various free trade agreements.

Yet TiSA talks are challenging.  Uruguay just became the first country to withdraw from negotiations, citing concerns about its ability to regulate sectors like financial services and telecommunications.  Frankly, this is likely to be overblown, as officials do not give up their right to regulate easily and these sectors are seen as highly sensitive in most countries.  TiSA will not violate a government's right to regulate for health, safety, and environmental outcomes, nor will it alter all qualifications for service providers or allow for unfettered access to job markets.

In a rapidly changing environment, designing appropriate services rules are both necessary and difficult to do well.  We will have to watch and see how successfully TiSA manages the task.

*** 

[1] Remaining TiSA members include: Australia, Canada, Chile, Chinese Taipei (Taiwan), Colombia, Costa Rica, the European Union, Hong Kong, Iceland, Israel, Japan, Lichtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, Republic of Korea, Switzerland, Turkey, and the United States.

[2] As part of the Uruguay Round negotiations in what was then the Global Agreement on Tariffs and Trade (GATT) and is now the World Trade Organization (WTO).

© The Hinrich Foundation. See our website Terms and conditions for our copyright and reprint policy. All statements of fact and the views, conclusions and recommendations expressed in this publication are the sole responsibility of the author(s).


Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore.  Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

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