Outsourcing and the GATS. May 24, Aaditya Mattoo (World Bank) Sacha Wunsch-Vincent (OECD)

Transcription

1 Outsourcing and the GATS May 24, 2005 Aaditya Mattoo (World Bank) Sacha Wunsch-Vincent (OECD)

2 Outline of Presentation 1. Relevance and virtues of the GATS 2. Market reality: Globalised service production 3. The inadequacies of the scheduling framework and commitments 4. Securing openness of cross-border trade 5. Other issues

3 1) Relevance and virtues of the GATS

4 Chart 2: World Cross-Border Exports of Electronically Deliverable Products Electronically deliverable services: $372.5 billion Digitalizable media products currently traded as goods : $45.7 billion Note : Electronically delivered services include communications, computer and information services, and financial services. Electronically delivered goods include newspapers, recordings, and other printed and recorded media

5 Virtues of the GATS Includes cross-border trade as mode of supply. Provides a framework to make specific commitments granting open trading conditions -market market access -national treatment -underpinned by technological neutrality Other GATS obligations apply to committed services And some concerns -The likeness of electronic and non-electronic services - Are digitally-traded traded services covered by GATS Mode 1 or 2 commitments? - GATS obligations: too much or too little?

6 1) Globalised service production - Trade in intermediate services - Trade in new services

7 Insurance Insurance service fragments Customer Services Helpline. Insurance claims processing Payroll management Business Intelligence & Data Warehousing

8 Example of Information Technology and Business Process Outsourcing Services 1. Information Technology Services Software Development Services, Data processing and Database Services, IT Support Services, Web-hosting and Application Service Providers (ASPs) 2. Business Process Outsourcing Customer Interaction Services, Reservations for Airlines, Subscription services, Payroll Services, Insurance Claims Adjudication 3. More Independent Professional or Business Services Human Resource Services, Finance & Accounting Services, Marketing Services, Product Design and Development

9 3) The inadequacies of existing initiatives and the GATS scheduling framework and commitments A. The irrelevance of duty-free electronic commerce B. The inadequacy of the GATS framework a) Inadequacy of the existing classification scheme b) Inadequacies of Existing GATS Commitments and Offers on Mode 1

10 a) Inadequacy of the classification scheme Implications of Positive list approach WTO Members are free to include only certain (sub)-sectors sectors of the GATS Services Sectoral Classification List (W120) in their schedules. Services are only covered unambiguously when they can be clearly identified under an existing sectoral classification for which commitments have been entered.

11 Fragmentation of goods

12 Fragmentation of Services Hospital service fragments Call Centre for customer service, etc. Medical transcription services Payroll management Web hosting services / application service providers (ASPs)

13 Route 1: Services Directly Specified in the W/120 Health services Hospital services Hospital call centre services Other business services Other Health or Auxiliary Services Supply of office personnel Other Other business services

14 Route 1: Services Directly Specified in the W/120 Example: hospital call centre or medical transcription Step one: Are these serviced explicitly listed under health services? 8. A. Hospital services 9311 Services delivered under the direction of medical doctors chiefly to in-patients, aimed at health status of a patient. 8. D. Other (not defined further)

15 Route 1: Services Directly Specified in the W/120 Example: hospital call centre or medical transcription Step two: Are these services explicitly listed under business services? 1. F. Other Business Services F.k Supply services of office support personnel Services consisting in supplying on a fee or contract basis to the t clients, whether on a temporary or long-term basis, office support personnel hired by the supplier, who pays their emoluments. Included are the provision of personnel such as secretaries, clerks, etc. F.t. Other Other business services Telephone answering services Services consisting in the provision of telephone answering services (eg, wake-up services) Other business services n.e.c.

16 Some new services are specified in the revised CPC Version 1.1 New category: Business and production services Division: 85 - Support services Supply of personnel services Other support services Telephone based support services Telephone call center services Data processing services Other support services n.e.c.

17 But some new services are not even captured in the latest CPC 1.1 Example: Web hosting services / application service providers (ASPs) OECD proposal to the revision of the CPC Hosting and IT infrastructure provisioning services Source: OECD (2004): Classifying ICT Services, DSTI/ICCP/IIS(2004)2 (7 April)

18 Services Sectoral Classification list: A continual catching up? Classification systems become obsolete fast. The CPC was updated twice to cover the evolution of services since the end of the Uruguay 1989: Provisional CPC 1991: GATT secretariat produces the W : CPC : Manual on trade in services 2002: CPC : CPC 2.0

19 Route 2: Indirect Coverage as Inputs to Services Specified in W/120 Argument for The "supply of a service" Art. XXVIII(b) includes production, distribution, marketing, sale and delivery. Argument against But: Fn 9 states that GATS Art. XVI (2) does not cover measures which limit inputs for the supply of services Guidelines for the Negotiations on Services: [...] market access and national treatment commitments [...] do not imply a right for the supplier of a committed service to supply uncommitted services which are inputs to the committed service.

20 b) Inadequacies of Existing GATS Commitments / Offers on Mode 1 Existing commitments on GATS Mode 1 are limited and diverge widely for the different service sectors. Even most liberal GATS schedules offer surprisingly little in categories important for intermediate services

21 Inadequate Commitments in Mode -1 Mode 1 commitments in various services (as a percentage of total WTO Membership) Audio Visual 6% 3% 90% R&D 14 % 3% 83% Medical & dental 13 % 9% 78% Distribution services 10 % 17 % 73% Financial data processing softw are 24% 3% 73% Advertising 21% 11% 67% Data Base 26% 9% 65% Full Legal Accounting 9% 16 % 26% 19 % 65% 64% Partial Architectural Computer hardw are consultancy 25% 29% 11% 8% 64% 63% None Management consulting 28% 10 % 62% Data processing 28% 12 % 60% Softw are Implementation 30% 12 % 59% Online info & data base retrieval 16 % 26% 57% Tourism 38% 13 % 49%

22 Example from Initial GATS Offers (2005 ) Supply services of office support personnel Unbound: Australia, Brazil, China, India, EC (majority of MS), Japan Other business services n.e.c. Unbound: Australia, Brazil, China, India, EC (all MS), Japan, USA, etc. Only few sectors where some Members made commitments on other categories or at the higher two-digit level Few updates to incorporate elements of CPC 1.1 classification updates or deliberations in the Committee on Specific Commitments

23 Three inter-related related issues 1. What services sectors do Members schedule? 2. What obligations do they assume? 3. How do they negotiate commitments? Sector Limitations on Market Access Limitations of National Treatment

24 Example of how elements of I, II and III may be combined Existing approach What services Specified services What obligations Variable Negotiating process Request and offer Intermediate Specified services + selected other Non- discriminatio n only Collectivel y agreed model Advanced All services except agreed exceptions Full market access and national treatment Collectively agreed model

25 Options to Secure Openness of Cross- Border Trade in Services Option 1: Targeted Commitments for Cross-Border Trade, for example in IT and BPO Services Option 2: A Horizontal Commitment To Liberalize Cross-Border Trade in a Wide Range of Services

26 Case for going further on Mode 1 collectively Open already Not giving up desirable freedom Shared interest

27 Regional Distribution of Business Services Exports In Billion US Dollars Africa and the Middle East South Asia LAC East Asia and the Pacific OECD Source: IMF Balance of Payments Statistics; Note: -The Business Services category includes Total Services minus Transportation, Travel and Government Services. Alternatively, Business Services consist of: Communication, Construction, Insurance, Financial, Computer & info, Other business, Personal, cultural and recreational services, as well as Royalties and License fees.

28 Average Growth Rate of Exports of Business Services for selected countries, during India Israel Dominica Brazil M auritius Nicaragua Estonia Nigeria 28% 20% 20% 19% 15% 14% 14% 43% Romania Australia China United States 11% 11% 11% 13% Canada Barbados 8% 11% Jamaica Peru Euro Area Argentina Ghana 6% 5% 4% 7% 6% Japan 1% Source: IMF Balance of Payments Statistics

29 4) Other issues Transparency Domestic regulation -applicable jurisdiction, -data privacy issues Mutual recognition Government procurement Taxation.

30 Conclusion The WTO may not be the appropriate forum for trade-facilitating deep integration (e.g. with regard to taxation, privacy...) But the WTO can and should prevent discrimination in trade both in the sense of national treatment and most-favored nation treatment

31 Bibliography Mattoo, A and Wunsch-Vincent, S (2004) Pre-Empting Protectionism in Services: The WTO and Outsourcing, Journal of International Economic Law, vol 7, no 4, Dec 2004, pp OECD (2005), Growth in Services: Fostering Employment, Productivity ity and Innovation, OECD Services Economy Project, Directorate for Science, Technology and Industry Wunsch-Vincent, Sacha (2005): The WTO, the Internet and Digital Products, Oxford: Hart Publishing (