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This article provides information about the major concerns regarding liberalisation of trade in developing countries:
Developmental concerns of the developing countries. It has been assumed by a section of scholars that “trade liberalisation in service can result in increased competition, lower prices, more innovation, technology transfer, employment generation, and greater transparency and predictability in trade and investment flows”.
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Significantly, trade liberalisation is also being seen as conducive to the realisation of social, developmental and equity issues. As indicated in the first section, the Social Development Summit, 1995 at Copenhagen categorically mentioned that social development could not be separated from the economic environment.
An important section of scholars are of the view that GATT and the GATS would make a balance between market forces and public policies pertaining to social and equity issues. However, questions are usually raised as to whether in the emerging environment of competitiveness the concern for equity, public distribution, human development of the marginalised, and the sovereignty of the states in fulfilling their national social objectives will get proper attention and treatment.
It is usually pointed out that in the areas of health and education there are recognised market failures and the states are involved as provides of such services in many areas. The lack of commitments in social services by the market forces only widen the scope of such concerns.
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WTO has emphasised uniformity of standards, rules and procedures, which are to be adhered to by all the member governments within a specified time frame. The developing and least developed countries are given more time than the developed ones to formulate the norms, rules and economic policies to match the requirement of global uniformity. The fact is that this harmonising tendency has emerged by undermining the diverse patterns of economy, localised needs and issues.
At times the process of harmonisation has prevailed over economic autonomy and political sovereignty of developing and least developed countries. The GATS agreement is comprehensive and applicable to all levels of the governments – central, state, provincial, local and municipal. It is apprehended that the GATS principle would carve the sovereignty of the state, minimise the national interests and ignore universal service obligations.
It is also said that the agreement for the development of discipline in the accountancy sector by the WTO’s working party on professional services and its possible extension to other services like health and legal areas would undermine the government’s authority to regulate consumer protection, ethical conduct and professional integrity.
It is alleged WTO has been formed under the protracted influence of the West to safeguard the interests of the multinational companies (MNC) of the developed nations especially those of North America. It is again said that the MNCs have a bigger say in the trade negotiations than sovereign states of the developing and least developed countries. Due to pressure from the lobbies in developed countries, GATS would force the developing and the least developed countries to open their services sector to trade leading to a “corporate takeover” of the domestic service sector by the multinationals. Such a takeover would undermine government’s commitment to equity, universal service obligations and consumer protection.
WTO has introduced market driven competition among unequal partners. The developing and least developed countries, who are yet to fully develop their markets, infrastructure, domestic capacity for investment, etc., will face added disadvantages while encountering the process of harmonisation. This process will reduce the possibility of the potential entry of these countries in competitive markets.
Again, the increasing emphasis on labour and environmental standards has put serious trade restrictions on these countries. The problems of unemployment, poverty and illiteracy, which are endemic in these countries, are being undermined in the process of harmonisation. The GATS negotiation would serve the export interests of the developed countries.
Under the given situation the developed, developing and least developed countries are unevenly placed so far as the supply capacity in service is concerned. “Critics note that the present asymmetry and the bias in the market access commitment towards capital mobility as opposed to labour mobility works in the interests of developed rather than developing countries. It reflects a basic imbalance in negotiating positions and lobbying power between the two sides.”
It is pointed out that GATS would not take into consideration the export interests of the developing countries, especially the cross-border mobility of labour. There is considerable asymmetry in the current commitments on labour mobility compared to those on capital mobility, with a more liberal commitments being made on foreign equity participation. Such asymmetry in mode-wide commitments is one of the reasons why many countries do not see GATS as helping them to top their export potential in labour based services and why GATS has been perceived as only in the interest of the developed countries.”
The service sector of economy including both the traditional ventures like transport, physical and telecommunication, tourism and emerging areas like information and communication technologies (ICTs) and environmental and educational services has been undergoing a process of phenomenal expansion all over the globe in recent years. In the developed countries like the UK and the USA, it constitutes more than 72% and in the developing countries like India it is 52% of the GDP.
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This sector also provides a similar proportion of employment to the workforce of these countries. Again there has been considerable expansion in service sector trade and investment flaws. According to WTO Annual Report 1999-2001, the service sector accounts for 40% of the global annual stock of foreign direct investment (FDI) and for 50% of the World annual FDI flows.
It is a fact that developed countries has an exceptionally higher share in FDI in the service sector than the developing and least developed countries. Trade liberalisation in services as initiated through the Uruguay Round was largely due to pressure from the service sector lobby in the developed countries. It is also felt that since one of the modes of supply is commercial presence, “GATS would be a means for commercial interest in the developed countries to access developing country service markets in areas such as in service, banking and telecommunication through foreign direct investment.”
In the emerging global scenario, experts are of the view that in the service sector like construction and engineering, health and education services, the developing countries have considerable export potential due mainly to then availability of skilled and abundant labour. For example, India has already emerged as the leading exporter of software services, and trained human resources too in ICTs.
There are some ambiguities in the scope and coverage of the range of services covered by GATS. At times it is said that services provided in the exercise of government authority are excluded from the agreement. Again it is said that services, which are not supplied on a commercial or competitive basis, are excluded from GATS.
As there is co-existence of private and government suppliers in many of the crucial services, these are amenable to diverse interpretations. GATS have imposed restrictions on the issues of subsidy, government procurement etc. policy. Such restrictions, it is alleged, would have adverse affects on the cost, availability and equitable distribution of services.