SERVICES AND THE GATS
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MARITIME TRANSPORT SERVICES AND THE GATS |
APEC TRANSPORTATION
WORKING GROUP
17TH MEETING, SINGAPORE, 27-31 March 2000
TPT-WG STEERING COMMITTEE
ON MORE
COMPETITIVE TRANSPORTATION INDUSTRY (INCLUDING INFRASTRUCTURE)
INFORMATION PAPER
MARITIME TRANSPORT SERVICES AND THE GATS
DELEGATION OF AUSTRALIA
MARITIME TRANSPORT SERVICES AND THE GATS
Dear Colleagues (Maritime Initiative Group)
To assist in the exchange of views for Agenda Item 5.2 "WTO2000", Australia is submitting the following paper "Overcoming Barriers to Achieving a Maritime Transport Services Agreement at the 2000 Round".
This paper is similar to a paper (with the same title) which Australia prepared for a workshop between the OECD Maritime Transport Committee (MTC) members and Dynamic Non-Member Economies (DNMEs) in October 1999.
Joanne Blackburn
Delegate of Australia
22 March 2000
OVERCOMING BARRIERS
TO ACHIEVING A
MARITIME TRANSPORT SERVICES AGREEMENT AT THE 2000 ROUND
INTRODUCTION
The aim of this paper is to provide a basis for discussion with members of the Maritime Initiative Group regarding possible approaches towards achieving a Maritime Transport Services Agreement at the WTO 2000 services negotiations. There is currently no Maritime Transport Services (MTS) Agreement as negotiations on maritime transport services failed to reach agreement at the end of the post-Uruguay Round Negotiating Group on Maritime Transport Services (NGMTS) negotiations.
This paper outlines the benefits an MTS Agreement would deliver to present and future WTO members and explores several possibilities as to how MTS may be discussed in the coming negotiations. It also provides a number of options on how an MTS agreement could be achieved. There are a number of options as to how this difficult subject may be discussed and members are invited to consider the options outlined below. It is not the intention of this paper to determine negotiating positions of WTO members or the content and extent of possible offers - it is to stimulate interest in the subject.
BACKGROUND
GATS Negotiations in Process
While the 1999 Seattle Ministerial concluded without initiating a new trade round, mandated negotiations on services were formally launched in a special session of the Services Council on 25 February 2000. The lack of a new round means that there is no end date for the negotiations and there can be no trade-offs with other major sectors.
The mandate and essential objective of the services negotiations are set out in Article XIX of the General Agreement on Trade in Services (GATS), which states that, 'Members shall enter into successive rounds of negotiations, beginning not later than five years from the date of entry into force of the WTO agreement and periodically thereafter, with a view to achieving a progressively higher level of liberalisation.' More specifically, they 'shall be directed to the reduction or elimination of adverse affects on trade in services' and their objective should be 'effective market access'. Australia considers that the negotiations should be comprehensive, with no sector excluded on an a priori basis.
A number of mandated reviews of GATS protocols are also in process in special sessions of the CTS. These are focussed on extending GATS disciplines and include reviews of the Annex on Air Transport Services, of international telecommunication accounting rates and of Most Favoured Nation (MFN) exemptions. The air transport review, for example, is focussed on the possible further application of GATS to international air transport services. In addition, work continues on classification of services and general disciplines for all services sectors. Alternative modalities to the request-offer format such as model schedules, horizontal formulas and cluster approaches are also being explored.
Maritime Transport Services and the GATS
The Uruguay Round of negotiations concluded on 15 December 1993, without general agreement on maritime transport services. A decision was taken to continue the maritime negotiations in a special Negotiating Group on Maritime Transport Services (NGMTS) which aimed to achieve commitments in international shipping, port services and auxiliary services by June 30 1996. The NGMTS also considered the possibility of including multimodal transport services as part of a MTS agreement.
However agreement was not reached by June 1996 and a decision was taken to suspend the negotiations. The NGMTS decided to resume maritime discussions 'with the commencement of comprehensive negotiations on Services, in accordance with Article XIX of the GATS, and to conclude them no later than at the end of this first round of progressive liberalisation'. These negotiations are to be on the basis of existing or improved offers and MFN for maritime transport services will not apply until they are completed.
Now is the time for WTO Members to discuss procedures for the conduct of the maritime negotiations. However, there has been little progress to date on an agenda for discussions or the reformation of the negotiating group.
Recommencing of the maritime negotiations will offer WTO Members the opportunity to work towards an open, rule-governed multilateral regime for maritime transport services. Important dimensions of this process will involve considering alternative negotiating modalities and consensus building. There has already been a great deal of work in a number of international fora and the maritime negotiations can benefit from the positive experiences in maritime liberalisation in groups such as APEC.
BENEFITS OF AN MTS AGREEMENT
Although most countries value the pursuit of efficiency in MTS, there is conflict over the best means to achieve efficiency. For example, does one pursue efficiency by either facilitating inter-carrier cooperation and rationalisation of services or by favouring a highly competitive market that allows efficient carriers to drive inefficient carriers out of the market? There are also instances where long term market efficiency is sacrificed in pursuit of short term economic goals, such as high market share and protection of national carriers achieved by direct government intervention.
Sustained protectionist policies cause market distortions and inefficiencies, resulting in higher costs to shippers and impediments to trade. They ultimately cause a reduction in the total demand for maritime transport services, so that national and foreign carriers alike are harmed. The essential issue is how large are the inefficiencies and the reductions in market size created by protectionist policies aimed at redistribution of market share? If the inefficiencies are large enough, there is incentive for abandoning protectionist policies. Even if they are small but significant, they may still encourage countries to abandon their protectionist policies.
A major area for efficiency gains in maritime is access to MTS. To minimise inefficiency, carriers should be free to compete for international cargoes in all markets and shippers have the opportunity to purchase maritime transport services from any carrier. Some countries may have a greater capacity to eliminate protectionist measures than others. The pursuit of efficiency gains must be placed in the context of constraints each country may experience which may relate to development, dependency upon shipping services, size of national fleet, existing government and competition policy requirements, existing bilateral and regional agreements, and reciprocal benefits amongst other considerations.
Maritime transport service delivery has evolved since June 1996, with many governments realising the benefits of increased liberalisation across a number of service sectors. This provides an incentive for countries to participate in future MTS negotiations. Improved access to maritime services through greater transparency in maritime regulations, policies, and practices of trading partners would provide reciprocal benefits. A more efficient, competitive provision of MTS would promote investment and facilitate trade expansion. An agreement on MTS, even if limited, would benefit countries more than bilateral agreements. The benefits of bilateral agreements are limited because the effect derived from efficient services come from only two parties. An MTS agreement would allow all participants to benefit from services provided simultaneously by multiple countries, providing an incentive for countries to wind-down bilateral agreements (commonly used in the shipping sector), or at least not to negotiate new bilateral agreements. Developing countries in particular would benefit as they are often at a negotiating disadvantage in bilateral agreements with strong trading nations.
The efficiencies gained in the provision of MTS would see an increase in the volume of trade, particularly in areas including transport logistics and port/terminal handling and management services. A more competitive international shipping industry would result in lower freight rates and increase access by shipping companies to a greater volume and variety of cargo. A more competitive shipping industry would result in safer ships and if multimodal transport is included, more efficient point to point transport services.
CONSEQUENCES OF NO AGREEMENT
If no MTS agreement is reached, the current inefficiencies will continue, and possibly increase with the development of the MTS sector and associated complexities in the new millennium. WTO members would lose a valuable opportunity to derive even modest benefits that could flow from a basic agreement. Failure to reach agreement for a second time on this sector would clearly indicate that members prefer bilateral or regional arrangements in this sector than negotiating a multilateral agreement.
There is also a risk that current or emerging gaps in regional or bilateral agreements might result in industry dependency upon unilateral measures to facilitate trade liberalisation, which may ultimately be the result of pressure from major trading nations threatening to impose retaliatory measures. This would not only compound existing barriers to reaching a multilateral agreement but lead to an increased lack of harmony, transparency and stability in the sector. Ultimately failure to reach agreement means not only a lost opportunity to improve the status quo but a lost opportunity to improve the efficiency of the provision of MTS for the foreseeable future.
ISSUES FOR FUTURE NEGOTIATIONS
Failure to reach an MTS agreement during the last negotiating round provided some valuable lessons for participants about to enter the new negotiating round. Prior to commencement of the new negotiations, participants may wish to consider the following issues:
1. Agreement in the absence of a major trading nation
Is it feasible for an agreement to be reached in the absence of an offer from one or more major trading nations? It is possible under the GATS Agreement for a member to maintain a measure inconsistent with most-favoured-nation treatment however, the member must apply for the exemption which shall be subject to negotiation in subsequent trade-liberalising rounds. Where a major trading nation has an exemption in a particular service sector, a multilateral agreement in the absence of that member may not be practical, particularly if it exerts significant influence on trade in the service sector. An issue also arises where an influential trading partner benefits from efficiency gains (a "free ride") where other less influential trading partners have removed protection without receiving a reciprocal benefit.
However, the benefits of an agreement without an influential member would have to be carefully weighed against the disadvantages of no agreement being reached for a second time. It would be prudent if this situation is anticipated as arising in the next round for this balance to be identified at an early stage. This would provide maximum opportunity to negotiate an agreement that most benefited those who contributed to the package of offers, thereby minimising the "free rider" risk. A useful mechanism to identify synergies is the questionnaire format used in the last negotiating Round, but members may have alternative information gathering tools that may be more appropriate for the new negotiations.
2. Separate MTS Agreement versus Transport Services Agreement including MTS
Should MTS be negotiated separately with its own agreement or should it be negotiated as a component of an overall transport services agreement that may or may not include one or all of the transport modes? Although air transport services has traditionally been a sector where it has been difficult to achieve an agreement, there is nothing to preclude an agreement being reached which included land, rail and maritime. Members may find it easier to identify certain elements across all modes, facilitating trade-offs between sectors allowing an overall agreement to offer greater efficiencies than a specific maritime transport services agreement.
An integrated approach would also assist in the scheduling of multimodal transport as well as prevent doubling of specific commitments in sectors where the services overlap eg road transport.
Not all members will be able to readily identify benefits from efficiencies gained in all three modes that would justify the sacrifices that would have to be made by that member in relation to the mode regarded as most significant to their national interest. The feasibility of this option would depend upon the number of members interested in pursuing this option, the basis of discussions and the model schedule adopted. Serious consideration should be given to this option which may allow an agreement to be achieved which would cover each of the transport service modes. The development of a comprehensive transport services agreement may not include the level of detail where modes are negotiated separately.
3. What should the Model Schedule include?
Where MTS is negotiated separately from other transport service modes, there remains a significant question as to what types of services the model schedule should include. For example, should issues such as cargo reservations, cabotage and multimodal transport be covered? Are there other contentious issues that immediately preclude a realistic opportunity for an agreement being reached? These should be identified as soon as possible by participants as the basis for discussions to ensure that, as many participants as possible are able to submit offers when negotiating commences.
An important lesson learned from the failure to reach agreement during the last negotiating round is to ensure that all participants identify a common realistic goal to be achieved for the content of any agreement negotiated. This will ensure that although the final agreement may not include the whole range of services initially envisaged, it is a workable agreement that would benefit all participants. This will avoid the "critical mass" problem encountered in the last negotiating Round, whereby one major trading nation felt it was unable to submit an offer because the number and level of commitments made were insufficient.
Consideration should also be given to the position of new members and those seeking entry into WTO. What will be the impact on negotiations if significant MTS providers become members? The entry of significant MTS providers may in itself be a catalyst for encouraging greater participation in MTS negotiation. Should the "critical mass" issue arise it will be important to identify which if any countries are being targeted and the level and type of maritime transport services commitments required. This issue makes it imperative that the model schedule adopted is not too ambitious and precludes members from tabling offers that would result in the achievement of even a basic agreement.
OPTIONS FOR A MTS AGREEMENT
In developing a model schedule it is important to identify and reconcile the key objectives of all interested parties in the MTS sector.
Options for a model schedule that participants may wish to discuss:
The previous negotiating round concentrated on three pillars comprising international shipping, maritime auxiliary services and access to and use of port services. The discussion of multimodal transport services formed an additional "fourth pillar". This model failed to provide the means of reaching an agreement and therefore improvements to the model may need to be identified which would allow an agreement to be reached.
One possible approach could be to retain the model, however, negotiations would concentrate on reaching agreement on a "pillar by pillar" approach. For example, these negotiations may achieve agreement on one pillar only. This approach has the advantage of achieving an agreement that covers a particular sector in great depth as all negotiating effort would be concentrated on a clearly defined sector with agreed elements. If agreement were reached on only one pillar this would provide members with an incentive to reach agreement on remaining pillars in subsequent negotiations.
Another alternative to the "three pillar" approach could be to concentrate on two pillars, namely "maritime auxiliary services" and "access to and use of port services". These pillars would appear to allow for greater efficiency gains and contain less contentious elements than international shipping. By concentrating on two pillars, members would have greater flexibility in making offers than the "one pillar" option but still provide an opportunity to reach agreement on those areas likely to offer the greatest gains. Although the agreement would be unlikely to contain the same degree of depth as the pillar by pillar approach this may be more realistic given previous difficulties in negotiating this contentious sector.
At the last round of negotiations, the issue of multimodal was introduced and discussions were held on how this could be incorporated into an agreement on MTS. Australia produced a paper on Scheduling Options for Multimodal Transport, which focussed on how multimodal should be treated if it is included in discussions for an MTS agreement. The paper was well received by the NGMTS and provides a useful tool in determining how multimodal may be treated in the coming round of negotiations.
The options paper proposed three alternatives for treating multimodal transport under the "three pillar" model schedule discussed in the last negotiating Round. The concept of multimodal involves the carriage of cargo by more than one mode of transport by a supplier of international transport services between a point in one country and a point in another country under a through multimodal transport contract for carriage. One of the options for treating multimodal would be as an additional commitment to the model schedule in the same way as "access to and use of port services" is treated ie a "fourth pillar".
Alternatively, to allow members to make a specific commitment in relation to multimodal, international freight transport could be expanded to include multimodal by altering the definition of maritime international freight transport as "transportation of international freight by seagoing vessel from the port of loading in one country to the port of discharge in another country. This transportation may be combined with freight services from the point of loading in one country by a multimodal transport operation to the point of delivery in another country under a multimodal contract to provide a MT service." Another option is to expand the definition of auxiliary services to include multimodal that would describe onward surface transport services directly supporting the movement of international cargoes by sea. This could be described as maritime/surface transportation services and defined as ‘transportation of international freight by (road/rail/inland waterways) between the point of loading or delivery and the port as part of a multimodal transport contract to provide multimodal transport services."
Are there other alternatives for treating multimodal transport? If the pillar model is adopted should multimodal transport be included as the fourth pillar or should those services which comprise multimodal transport be allocated according to the three original pillars? Can we duplicate commitments across transport sectors eg land/maritime for purposes of achieving agreement on multimodal? Although treatment of the various elements of the multimodal chain falls within the Transport Services Schedule the concept does not fit comfortably within a single mode (land, maritime or aviation). It should be possible to agree which elements fall within each of the modes, and which overlap and could be allocated on a "best fit" basis. As maritime appears to stop at the port/land interface it may be necessary when discussing multimodal transport issues to look at the wider Transport Services Schedule to ensure that coverage of the various elements in the multimodal chain takes place. Participants may wish to consider and discuss these options and other alternatives for treating multimodal transport services.
Maritime Intermodal Transport Services – This is a new concept developed by Japan as an alternative to multimodal services. It is based on the significance of containerisation which links ports and shipping to land transport and excludes services linked with air cargo. Maritime Intermodal Transport Services is defined as the carriage of goods by international maritime transport and land transport by means of the same container. Carriage would be on the basis of an intermodal transport contract from a place in one country at which the goods are taken in charge by the maritime intermodal transport operator to a place designated for delivery situated in a different country. The operations of pick-up and delivery of goods carried out in the performance of a unimodal transport contract, as defined in such a contract, would not be considered as maritime intermodal transport services. Japan has suggested that this sector be included in the draft schedule on maritime transport services.
This model retains the "three pillar" approach but provides additional flexibility by adding other criteria to the agreement. The model would have the flexibility to include multimodal transport. The difference between this model and the other is that agreed criteria would cut horizontally across the "three pillar" or "four pillar" models. Agreed criteria for example, may include tonnage or volume of traffic. Under this model an agreement would encompass commitments in relation to the services provided in each of the pillars. However, the level of commitment may vary according to whether certain criteria that applies across each of the pillars is met. For example, a commitment under the "access to and use of port services" pillar may only apply when a certain tonnage requirement is met. This model would take the form of an agreement comprising three pillars or four pillars but commitments relating to services within each of the pillars may differ according to either the tonnage carried or the volume of traffic entering a port. One or both of these criteria may be used in the agreement to provide different trigger points for the commitments made across the pillars.
The advantage of this model, although more complex than the three pillar or four pillar approach is that it allows greater flexibility to take into account and reconcile the differing concerns of interested parties (ie shippers, carriers and governments). For example, shippers and carriers would benefit by increased liberalisation measures where the tonnage carried was greater. Governments would benefit by protecting national interests including shipping fleets because the level of agreement would be more restricted in relation to the pillars for example, where the tonnage carried was less. Shippers and investors would benefit where the volume of traffic unloaded at port facilities was greater. This would provide an opportunity for all interested parties to maximise efficiency gains gradually. Once benefits are realised from this type of agreement, the criteria could be gradually lowered and eventually removed.
This model takes a completely different approach, where services that are intrinsically linked in the supply chain are identified and an agreement would form around that group of services. This could include services that are not strictly MTS but MTS would remain the major service in the supply chain. For example a cluster of services where an agreement may be reached could include the following services: freight forwarding; shipping agency services; electronic commerce; customs agency services; and multimodal. The advantage of this model would be that if a member agreed to make market access and national treatment commitments in the cluster, it would still be able to maintain non-conforming measures, as in the current schedule of commitments.
This model provides an opportunity to liberalise service sectors of considerable commercial significance, which are not adequately captured by the services sectoral model. This model also affords members greater negotiating flexibility allowing market access and national treatment commitments in the cluster but retaining non-conforming measures in areas of perceived national interest, thereby allowing governments to appease powerful domestic and internal pressures. Once benefits from efficiency gains are fully realised in cluster agreements, this may provide the catalyst for further agreements utilising either traditional sectoral models or improving and expanding on the cluster model.
This model is based on that used by the Telecoms and Financial Services sectors. This model is an understanding that is endorsed by core members that agreed to bind its specific principles at the end of the negotiations. The model consists of a core set of principles and all offers made would be in conformity with those principles. Although not a comprehensive agreement and not agreed to by all participants, this model at least achieved an outcome which could form the basis for a more comprehensive agreement in the future.
There are some synergies between MTS and the telecommunications and financial services. For example, the maritime industry consists of a handful of global companies or alliances and in order to promote liberalisation it is necessary to focus on both the domestic regulatory framework as well as global developments. The OECD Common Shipping Principles could form a good basis for the reference paper and may avoid considerable debate on the content of the understanding. Although this option does not achieve the uniformity of benefits potentially derived from some of the other options, it may provide the best opportunity of at least commencing the liberalisation process in the MTS sector.
CONCLUSION
The failure to reach an agreement on MTS at the last negotiating round clearly indicates that this sector is a difficult one to achieve agreement. Given the time and effort involved in working towards an agreement, members should give serious consideration to whether an MTS agreement is desirable and achievable. Where members agree that an MTS agreement is desirable, fundamental to achieving that agreement will be the model schedule adopted. This paper has attempted to outline various options available as a possible basis for reaching agreement in the coming negotiations.
Members of the Maritime Initiative Group are encouraged to discuss the issues and options raised in this paper as a possible basis for building a foundation for an agreed structure or model for future treatment of MTS in future WTO negotiations.
In September 1999, APEC Leaders expressed strong support for a new round of trade negotiations, and agreed that the new negotiations should include comprehensive market access negotiations covering industrial tariffs and the already mandated negotiations on services and agriculture. This provides an impetus for members of APEC (most of whom are also WTO members) to reconsider the future of maritime transport services.
The Maritime Initiative Group in particular could make a valuable contribution to getting things going in the WTO given its extensive work on maritime liberalisation (the TEQ exercise and the project on facilitation of international shipping) and the likelihood that substantial negotiations on maritime transport services would not commence for some months at least.
RECOMMENDATION
Members of the Maritime Initiative Group consider the issues identified in the paper as a basis for discussion of future WTO work in the Group.
22 March 2000
This page was last updated on 23 March 2000
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