Backlash feared over plans to liberalise services sector

Date: 23/11/00

THE potential for liberalising commercial services through talks at the World Trade Organisation is immense.

While the negotiating options for agriculture are vast and well-defined, the debate on services in the Uruguay Round only touched on the possibilities for talks on a range of subjects. But trade officials are already predicting a backlash from non-governmental organisations in the health and education sectors.

Discussions this year have sought to identify possible targets for either continuing or initiating reductions in trade barriers in sectors such as aviation services, telecoms, finance, distribution and maritime transport. Energy and environmental services have only just appeared on the negotiating horizon. "There is still so much to be done," said one trade official. "Services are still trying to figure out where they are going and fix the language for the negotiating guidelines."

Measuring the size of the sector is especially awkward and this has ramifications for the debate over whether governments should be allowed to protect an industry from sudden surges in imports. They can already do this for trade in goods, but undeveloped statistics and ill-defined indicators often cannot prove the necessary cause-and-effect links in services.

Even by conservative estimates, the Union easily outstrips the US as the world's leading services exporter. The UK, France, Germany and Italy collectively exported 367 billion euro in 1999, compared to the US' 288 billion euro.

Future anti-globalisation protesters may still prefer turtle costumes to dressing up as a commercial service, but it is in relation to perceived threats to government-financed health and schooling that the most intense public debate is getting under way.

The WTO vehemently denies accusations that the talks will lead to the weakening or overthrow of public health care or education services. The public and private sectors can co-exist, it argues, and it is entirely up to member governments to decide whether to commit themselves to liberalisation. "Anything to do with public services is likely to cause public concern," says one diplomat. "But nothing says you cannot regulate a sector even if you open it up."

Some developing countries are, for example, looking at allowing foreign investment in their education sector while retaining control over setting standards and the curriculum. The same approach is possible within health care, and could favour EU companies keen to export medical services.

Burgeoning cut-price airlines had hoped that sensitive route allocations could be discussed, despite expected opposition from the US and Canada.

But negotiations will be limited to catering, refuelling and booking services. However, with SwissAir's Gate Gourmet and Lufthansa dominating the global catering business, Union companies could still make in-roads.

The EU will also find itself fighting a new battle with the US in defence of its film industry, as well as coming under pressure from developing countries keen to enter into new European markets.

"Audio-visual services are up for negotiation just as in any other sector," said a diplomat. "If the talks are politically sensitive, governments will have to pay a politically sensitive price, but the EU is not isolated in its caution."

Article forms part of a survey on trade.