E-commerce & services, MC12, Other JSI

“Historic” services deal, Laos, investment: plurilaterals fill MC12 space

You don’t need a ministerial conference to take important decisions at the World Trade Organization. Despite the 12th ministerial conference not happening this week as planned there has been movement in quite a few areas this week.

Unsurprisingly perhaps, the greatest movement is perceptible in the plurilateral agreements space. These are topic areas where most countries but the die-hard nay-sayers such as India or South Africa want to move forward with new rules at multilateral level.

Services domestic regulation plurilateral agreement formally announced

The now 67 parties to the ‘services domestic regulation’ negotiations were undeterred: they pressed ahead with their final announcement of their final ‘deal’ – as planned – today.

It was enough to have the Heads of Delegation- with the required authorisation from their capitals – gathering in Geneva to formally make the announcement.

The countries that drove the negotiations were cheerful.

“This is the first negotiated services outcome in 25 years”, said Costa Rica’s WTO ambassador Glora Abraham Peralta, whose country held the pen for these talks.

“To deliver good news: this is why we are here,” said the EU’s envoy to the WTO Joao Aguiar Machado. “This is a historic day”, said George Mina, Australia’s WTO ambassador.

WTO director-general Ngozi Okonjo-Iweala said: “The WTO can deliver”. She hailed the agreement’s potential for small companies in particular.

The services text is the first negotiation under the series of so-called Joint Statement Initiatives launched in December 2017 at the Buenos Aires WTO ministerial meeting.

The deal takes the form of a so-called Reference Paper which echoes a 1997 plurilateral agreement in telecommunications.

The agreement  is not a market-opening exercise. Its aim is to set basic ground-rules that would render bureaucratic processes for foreign suppliers simpler to navigate.

The text covers “licensing requirements and procedures, qualification requirements and procedures, and technical standards affecting trade in services”. The text also foresees somewhat less demanding provisions in this area for financial services.

Rules agreed include the requirement by government to make sure that foreign services suppliers only have one single government office to deal with, and that rules and procedures applied to them follow basic principles of fairness and due process.

The agreement further encourages the recourse to electronic methods of accepting license and other applications.

The agreement breaks new ground compared to traditional trade rule-making: it mandates equal treatment for women and men in all the procedural steps covered in the agreement.

The participants in the initiative will include the reference paper in their current services schedules under the GATS.

The rules – in principle universally applicable – will only apply to the specific sectors where members have made commitments in the WTO in the first place. For many WTO members, this is fairly little.

So far 41 schedules were filed by the participating countries, but the remaining schedules are expected to come in in the first quarter of 2022. The schedules are not public. Some members are said to have added specific sectors to their existing commitments for the purposes of the services domestic regulation agreement.

The schedules would need to be certified by non-participating members.

The EU’s Machado said he doesn’t foresee any potential hold-ups during the certification process: “Benefits will be granted to all non-participants.”

It remains to be seen if India our South Africa – which oppose plurilateral initiatives on principle – will share that view.

Laos joins Information Technology Agreements as first LDC

Laos is the first least-developed country to have joined the Information Technology Agreement since it was first created in 1997. Laos also signed up for the ITA’s second iteration agreed in 2015.

Laos, a landlocked South East Asian country squeezed in between Thailand and Vietnam is perhaps the last country on the Indo-Chinese peninsula to seriously embark on a deliberate path to join global supply chains.

The country has been marred by high levels of poverty and shaky government finances while facing growing influence from its northern neighbour China. Bejing is due to inaugurate a high-speed rail line in Laos this week. The pandemic has devastated the country’s economy.

The leaders of the one-party communist state have now decided that it is time to fast-track some change. “No pain, no gain”, said Laos’ ambassador to the WTO Latsamy Keomany during a press conference in Geneva on Thursday (2 December), which also happens to be Laos’ National Day.

Laos has agreed to liberalise all import duties covered by the ITA and the ITA 2 agreements as of January 2022. The country applied for membership only last June: its accession to a WTO treaty is probably one of the speediest ever seen.

Ambassador Latsamy Keomany explained that the move aims at “fostering more trade and investment in the ICT sector”, which he described as being in an “infant stage” in his country.

Laos’ push is also part of the country’s broader efforts to improve its investment environment. The country recently enacted a new investment promotion law. Vientiane is also actively engaged in the current other plurilateral negotiation towards and agreemenet on Investment Facilitation for Development – see below.

The large powers in the WTO are pleased. China’s ambassador to the WTO Li Chenggang said: “We highly comment Lao DPA’s determination in their accession”. The move, he said “will attract Chinese investments”.

The EU, which has an FTA with Vietnam next door also supports to move. “This a really good decision”, said Hiddo Houben, the EU’s number two in the EU embassy in Geneva.

Laos being one of the world’s poorest countries, it is also calling for greater assistance from WTO members in helping it adapt: “We need further technical assistance,” said its envoy in Geneva.

Laos’ move brings ITA membership to 83. Belarus and Bosnia-Herzegovina have also applied to join the ITA – but their accession process hasn’t proceeded at the same pace.

The ITA is a plurilateral WTO agreement that brings tariffs to zero – on an MFN-basis applicable to all WTO members – in the hardware that has facilitated the global digital revolution. Indeed it covers computers, mobile phones, semiconductors and a range of other electronic devices and their components.

As the world seeks to diversify its supply chains in the ICT sector, Laos’ move can be seen as a means to put itself on global companies’ radar screen in their hunt for new production locations.

Eight more WTO members join Investment Facilitation for Development initiative

Albania, Georgia, the Maldives, Panama, Papua New Guinea, Solomon Islands, Uganda and Zimbabwe formally joined the largest ongoing plurilateral initiative in the WTO, the Investment Facilitation for Development initiative. Now 110 members – out of 164 overall in the WTO – are participants in this initiative.

This week, its leading participants also discussed ways the agreement could be moved forward even if there is no ministerial conference.

“Many participating members supported a proposal by China to work on an adjusted version of the Joint Statement that could be adopted at the level of ambassadors in Geneva in order to maintain the momentum that the joint initiative has achieved in the run-up to MC12, to highlight the progress achieved so far in the negotiations, and to provide further impetus to outreach efforts,” reports the WTO.

Negotiators had hoped to receive a mandate from their ministers this week to conclude negotiations by the end of 2022.

The investment agreement aims at setting benchmarks for good administrative practices in dealing with international investors. It is neither a market access nor an investment protection exercise, but an effort to foster administrative reform in developing countries.

Chile is the country holding the pen for this agreement. China is a big promoter of the agreement – think BRI – but many developing countries are participating on their own initiative and tabling text on a scale rarely seen in other WTO negotiations.

Negotiations to make progress on the current version of the draft treaty text are set to resume in January 2022.

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