What Has the Philippines Recently Offered for Negotiations in Trade in Services with the EU?

CURRENT TRADE CONCERNS
Elpidio V. Peria
15 March 2017

from : http://www.ustr.gov

We have recently come across a document which somehow points to Philippine offers in its start of negotiations with the European Union on the proposed EU-Philippines Free Trade Agreement and among the trade sectors that will be negotiated by the two trading partners (PH and EU) is the sector on services.

What does trade in services mean and how is it important to the growth and development of the two economies (EU and Philippines)?

According to UNCTAD, the United Nations body that keeps track of global trends in trade and development, the services sector plays an increasingly important role in the global economy and the growth and development of countries and it cited as an example the 2011 World Development Indicators which show that the services sector accounted for almost 71% of global GDP in 2010 and is expanding at a quicker rate than the agriculture and the manufacturing sectors. Moreover, trade in services is growing at a pace faster than trade in goods since the 1980s and in 2011, commercial services exports grew 11% to US$ 4.1 trillion.

Explaining further, the UNCTAD also described International trade in services which includes tradeables that are intangibles (or trade in intangibles), unlike goods, such as peoples’ skills . Services trade is carried out through four modes of supply namely cross-border supply, consumption abroad, commercial presence and presence of a natural person. International trade in services through these modes does not physically cross national border and thus is not affected by customs tariffs and other taxes applied to merchandise trade.

Before we tackle the question of what sort of rules on trade in services the Philippines will put forward in its negotiations with the EU, let us first ask what the Philippines will put into play in the negotiations that will later on be covered by these rules.

From the text that we have seen, the Philippines has proposed to include “measures by Parties affecting trade in services and taken by central, regional or local governments and authorities as well as by non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities . It shall apply to all services sectors except services supplied in the exercise of governmental authority .”

This sentence can be broken down into two key components, namely:

a) Measures by Parties affecting trade in services and taken by central, regional or local governments and authorities as well as by non-governmental bodies in the exercise of powers delegated by central, regional or local governments or authorities and

b) All services sectors except services supplied in the exercise of governmental authority.

This measure in (a), as per the WTO GATS Training Manual indicates, can be “in the form of a law, regulation, rule, procedure, decision, administrative action, or any other form, … in respect of:

– the purchase, payment or use of a service;
– the access to and use of, in connection with the supply of a service, services
which are required by those Members to be offered to the public generally;
– the presence, including commercial presence, of persons of a Member for the
supply of a service in the territory of another Member”.

The second component in (b), does not include “services supplied in the exercise of governmental authority” and this is in turn defined in art. 1, para. 3 (c) of GATS as any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers.

These two components (a) and (b) as described above are actually included in the scope and definition of the WTO General Agreement on Trade in Services, so there is no problem having that kind of formulation being offered to the EU.

While these concepts may give an idea of what may be included in the negotiations, one will now have to look at what the Philippines tried to exclude, meaning, not part of the free trade negotiations with the EU, which are the following :

a. in respect of air transport services, measures affecting air traffic rights, however granted; or to measures affecting services directly related to the exercise of air traffic rights, other than measures affecting:

(i) aircraft repair and maintenance services;
(ii) the selling and marketing of air transport services; and
(iii) computer reservation system services;

b. subsidies provided by a Party or a state enterprise thereof, including grants, government-supported loans, guarantees and insurance;

c. cabotage in maritime transport services;

d. measures pursuant to immigration laws and regulations; and

e. measures affecting natural persons seeking access to the employment market of a Party, or measures regarding nationality or citizenship, or residency or employment market of a Party, or measures regarding nationality or citizenship, or residency or employment on a permanent basis .

What this means is that what are not included in the exclusion list are now part of the offers being made by the Philippines to EU, which in turn, as based in a UNESCO briefing material are the following 12 GATS service sectors, namely Business; Communication; Construction and Engineering; Distribution; Education; Environment; Financial; Health; Tourism and Travel; Recreation, Cultural, and Sporting; Transport; “Other”, which may mean any kind of service that does not yet have any concrete categorization.

Given that the textual offers of the Philippines tracks what is already in the GATS, these then are the possible sectors that may be subjected to negotiations with the EU in the coming months.

Government should be able to thoroughly discuss with the public the nitty-gritty aspects of these negotiations so that the affected services sectors, which are fairly broad, may be able to comment and make their concerns known to the negotiators of the Philippine government with the EU.

The civil society groups monitoring the negotiations should also be able to track closely the negotiations so that it can offer timely comment and suggestions which hopefully should improve the Philippine offers and make for a better deal.

This last part of our comment on improving the Philippine offers is surely wishful thinking on our part as it is contingent on the Philippine negotiators listening in and taking into consideration in their positions, these civil society comments. This will also require that government and civil society including the professional sectors will work together. Let’s see if that is what will happen in the coming weeks.

OoO

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