Services liberalisation and developing countries: does liberalisation produce deprivation?

October 10, 2005 - nr.39
Summary

 

1 GATS and services

If countries reciprocally increase the access of goods and services to their markets, the welfare of all concerned increases. It is often assumed that the resulting gains in prosperity would be so substantial that potential losers could be compensated and the costs of adapting economies could be absorbed. However, it is questionable whether this assumption is still justified, especially in the case of developing countries. This is because, in practice, the key issue seems to be whether these countries have met the conditions that help to ensure that liberalisation of the international trade in services does not turn against local initiatives or cause too much harm to local power structures. The most important message in this advisory report is therefore that developing countries should not – and need not – be left behind, but that it is vital to examine on a case-by-case basis whether a country’s economy, policies and institutional capacity contain adequate safeguards to ensure that liberalisation does not ultimately have the wrong effect.

It is difficult to indicate exactly how much services liberalisation will contribute to these gains in prosperity, if only because the General Agreement on Trade in Services (GATS) distinguishes between eleven sectors and 160 subsectors. GATS is the forum for the negotiations on services. The current four-year round of multilateral negotiations focuses in particular on the interests of developing countries.

Developing countries, however, got cold feet with regard to liberalisation because the negotiations were technical and complicated, and because many of them did not fully understand the economic benefits of liberalisation and feared being played off against each other. In the framework of the Doha negotiations, under the leadership of India and Brazil, developing countries have now successfully started to form blocs on issues such as agriculture, sugar and cotton. The effect of such initiatives might also extend to GATS. In order to promote understanding and transparency regarding the effects of the negotiation process, an article encouraging the member states to carry out assessments was included in GATS, but few have so far responded to this call.

The AIV advises the government to promote the performance of individual country assessments regarding the status of services liberalisation. The Netherlands should supply the necessary research capacity for this purpose and/or provide resources to establish or strengthen the capacity of developing countries to perform these assessments by themselves. By doing so, the Netherlands could serve as an example for the other EU states.

In addition, the AIV recommends that, on its own initiative, the Netherlands commission studies into the economic effects of the liberalisation of trade in services in developing countries and that it encourage the European Union to address the issue, too. The effects of liberalisation on the economies of developing countries have not been clearly identified, and this reduces the willingness of developing countries to liberalise.

2 Negotiations

Another reason for the reluctance of developing countries is the rule that, in principle, countries cannot withdraw commitments previously undertaken under GATS.

The AIV recommends that, when the grounds for the use of emergency safeguard measures (Article X GATS) are formulated, provisions granting developing countries the right to suspend or withdraw commitments that seriously disrupt their domestic markets are included. This should include the design of a mechanism for identifying the vital interests of developing countries. This would make it possible to remove unforeseen disadvantages for these countries, preventing further delays in the actual negotiations.

Furthermore, the negotiations on services have been incorporated into the Doha Round, which also covers negotiations on other issues. Agriculture, for example, is a well-known stumbling block. It is regrettable that developments within GATS appear to depend primarily on developments outside it.

The AIV recommends that the government examines whether the agreement that the Doha negotiations should be seen as a single undertaking (nothing is decided until everything is decided) can be amended if significant progress fails to materialise in other areas of the negotiations, as power games should not be allowed to overshadow the intended effects of liberalisation. Issues on which agreement has been reached in the past and secondary issues with potential should then perhaps be granted special status in the negotiations. The TRIPS negotiations on the issue of medicines, which were concluded in 2003, are an example of this. Uncoupling GATS from GATT – and thereby from stumbling blocks such as agriculture – could perhaps lead to progress in the liberalisation of trade in services.

In addition, the AIV recommends that the Netherlands encourage the international community to take advantage of delays and pauses in the negotiations to tackle the horizontal issues in GATS (e.g. emergency safeguard measures). This should happen both in Brussels, during the adoption of the European Commission’s negotiating mandate, and at WTO level in Geneva. Success in this area could significantly improve the climate of the actual negotiations.

The outsourcing of services to low-wage countries by companies in developed countries is very important for developing countries. At the same time, outsourcing is a controversial issue in developed countries because of its short-term effects on employment.

The AIV recommends that, on the basis of an inventory of measures that could or do form an obstacle to outsourcing by means of positive or negative incentives, the government urges EU member states at least not to introduce any new restrictive measures, starting from a mutually agreed date.

In addition, developing countries require direct assistance in order to acquire the capacity to conduct negotiations and implement trade rules.

The AIV recommends that, in the framework of its development cooperation policy, the government further assists developing countries – especially LDCs – with institutional development and the monitoring and application of trade rules, in general, and with conducting WTO and other trade negotiations and formulating offers in particular. This requires strengthening the institutions responsible for monitoring, upholding and applying trade rules. Additional options include support in establishing chambers of commerce and agencies.

The AIV also recommends establishing training programmes and courses to increase the negotiating capacity of developing countries. In the AIV’s opinion, experts from developing countries can be employed for this purpose, which would also help to strengthen South- South cooperation. Finally, with a view to assisting developing countries in the negotiation process, a digital handbook facilitating the performance of ‘liberalisation assessments’ could be jointly developed.

In order to ensure that consultations with Western companies take place on a level playing field, it is vital to introduce a basic level of skills in local businesses in developing countries by providing opportunities for retraining and in-service training.

The AIV believes that the government should extend its development cooperation activities aimed at strengthening the local private sector, especially in the area of services. This can be achieved, first of all, by strengthening legislation, the administration of justice and the supervisory organisations. If these vital government tasks lack credible force, the business sector will find it difficult to develop successfully. Because the interplay of the public and private sectors – each in its own role – is so important for the effective and responsible functioning of the business sector, the AIV also recommends that the government provides more development assistance in the framework of public-private partnerships than it has in the past.

3 Regarding mode 4

The developing countries themselves single out mode 4 as the most promising opportunity within the GATS framework. Mode 4 covers the temporary presence of natural persons performing a specific task in another country. One of the annexes to the agreement states explicitly that GATS does not apply to measures affecting persons seeking access to the labour market in general, nor to measures regarding residence on a permanent basis. The problem is that the duration of temporary residence is not explicitly stipulated.

The AIV recommends that the government seeks agreement within the European Union on the definition and interpretation of GATS rules, in particular concerning the concept of temporariness. This would facilitate the application of predictable and transparent admission rules along the external borders of the recently enlarged European Union and help prevent ‘work permit shopping’ and transmigration.

A more explicit definition of the concept of temporariness would increase predictability for countries of origin, recipient countries and the migrants themselves. Sanctions and fines could be used to enforce the timely return of labour migrants, but it is almost impossible to use such measures against individual service suppliers. It would seem more effective to promote return after a certain period of residence by offering some kind of reward. It is easier to convince a temporary labour migrant to return to his country of origin if he knows that after a certain period of time he will be able to return temporarily to the country of destination. Such circular migration (shuttling) promotes an optimal circulation of knowledge and experience, and creates a win-win situation for countries of origin, countries of destination and the labour migrants themselves.

 

The AIV recommends that, in line with its policy memorandum on migration and development of July 2004, the government examines the possibilities for circular migration within the European Union. In particular, the creation of a special GATS visa or similar multiple entry visa (green card) for temporary labour migrants under mode 4 deserves further consideration. The duration of the stay should depend on the requirements of the country of destination.

With regard to knowledge migrants, the AIV sees possibilities in the phenomenon of brain circulation, whereby highly-qualified individuals from developing and developed countries become involved in international networks, attend conferences, etc. Digital communication facilitates the exchange of ideas.

In addition, the AIV recommends that the government examines the possibilities for establishing twinning partnerships with institutions in developing countries through public-private partnerships involving, for example, universities and hospitals. In this way, institutions in developing countries can be offered the opportunity to establish links with persons and institutions in developed countries that possess expertise and experience relevant to them. The AIV recommends that the government promotes reciprocal visits – such as exchanges, conferences and short courses – for example by simplifying the rules for admission and for issuing travel documents.

Although in theory GATS opens the door to workers of all levels, developed countries still limit admission to highly-qualified workers by means of restrictions in their schedules. In the case of low and semi-skilled labour (where the developing countries enjoy a comparative advantage), they offer significantly less scope for temporary admission. Due in part to the ageing of the population in the Netherlands and other industrialised countries, however, there is an increasing need for assistance in the care sector, with household activities and with a wide range of simple tasks. In the AIV’s opinion, EU member states should therefore ask themselves whether the time has not come to review the policy of not applying migration under mode 4 to low-skilled workers.

 

The AIV notes that the current policy of not applying migration under mode 4 to lowskilled workers merits serious debate and plans to devote attention to this issue in a future advisory report.

In addition, the AIV recommends that the government already extends the GATS definition of specialist as used in this country to include semi-qualified groups. The expansion of market access for such groups will work in favour of developing countries. The AIV also advocates redefining the existing categories of workers in GATS, as countries often do not recognise each other’s educational qualifications, even within the European Union.

Finally, the AIV recommends that the economic needs test be abolished, given that in any case there is little demand for admission under mode 4. For the same reason, the AIV sees little need for the introduction of quotas on labour migrants.

Advice request

 

Mr F. Korthals Altes
Chairman of the Advisory Council on International Affairs
Postbus 20061
2500 EB Den Haag

The Hague, 22 August 2003
 

Dear Mr Korthals Altes,

The Fourth Ministerial Conference of the WTO held in Doha in November 2001 declared that development of developing and least developed countries should be among the main aims of the negotiations on services. This declaration reaffirmed in general terms what was set out in more detail in the WTO guidelines for the negotiations on services, with reference to Articles 4 and 19 of the GATS. Below are relevant passages taken from the guidelines:

  • The negotiations shall aim to increase the participation of developing countries.
  • There shall be appropriate flexibility for individual developing country members.
  • Special priority shall be granted to least developed country members.
  • The process of liberalisation shall take place with due respect for national policy objectives, the level of development and the size of economies of individual Members.
  • Special attention shall be given to sectors and modes of supply of export interest to developing countries.

These passages were drawn up with a double-edged purpose: developing countries would be offered improved access to markets abroad and they would have to open up their own markets in the interest of development. Given the urgency (all WTO negotiations must be concluded by 31 December 2004) and the limited scope to influence national policy in developing countries, this request for advice focuses only on the first of these: offering developing countries market access for services.

I request the Advisory Council on International Affairs to examine how developing countries can benefit from improved access to the services markets of developed countries, the member states of the European Union in particular. Given the great differences between developing countries and their interests in the negotiation on services, it would be useful for the purpose of this study to group them by income level (LDCs, LICs, etc.) or share of services in GNP or region. The following questions could be studied:

  • In which sectors and modes of supply do which developing countries have a comparative advantage?
  • To what extent do the offers made by the EU in mid-April 2003 to various developing countries satisfy the commitment to pay special attention to needs and conditions within them?
  • How can negotiations improve the export of services from developing countries to developed countries?
  • What are the main non-discriminatory obstacles facing service suppliers from developing countries?
  • How can WTO agreements on domestic regulation (horizontal discipline) help to improve the export of services from developing countries to world markets?
  • Given the importance of mode 4 to developing countries, how much scope is there within the European Union for extending provisions in this field to include lower qualified forms of labour, a longer stay and/or wider coverage of the services sector? Perhaps attention should be paid to possible drawbacks of mode 4, such as brain drain.
  • In which areas is technical assistance to developing countries most effective?

Yours sincerely,
 

A.M.A. van Ardenne-van der Hoeven
Minister for Development Cooperation

Government reactions

Mr F. Korthals Altes                                                                               Sustainable Economic

Chairman of the Advisory Council                                                             Development Department

on International Affairs                                                                             International Markets Division

Postbus 20061                                                                                       Postbus 20061

2500 EB Den Haag                                                                                 2500 EB Den Haag

 

 

Date                 9 May 2005

Our ref.             DDE-174a/2005

 

Re:       Response to the AIV’s advisory report:

  ‘Services Liberalisation and Developing Countries:

   Does Liberalisation Produce Deprivation?’

 

cc         The President of the Lower House

   of the States General

 

 

The AIV’s advisory report, ‘Services Liberalisation and Developing Countries: Does Liberalisation Produce Deprivation?’, comes at a time when the negotiation process for a new trade accord has been restarted following the failure of the Cancún conference. It was therefore with great interest that I read the report, which I discussed with several of my colleagues due to its broad scope. I am sending you the present response in my own capacity as Minister for Development Cooperation, as well as on behalf of the Minister for Foreign Trade, the Minister for Immigration and Integration and the State Secretary for Social Affairs and Employment, who is responsible for labour migration policy.

 

The Doha Round and the status of the GATS negotiations

 

In your report, you state that a large number of obstacles still need to be overcome to facilitate the successful conclusion of the negotiations on services in conjunction with the Doha Round. I believe it will be useful to provide an overview of the latest developments in these negotiations before discussing the report in detail.

 

Following the failure of the September 2003 Ministerial Conference in Cancún, the WTO negotiations – and thus the GATS negotiations – became deadlocked. Last summer, the Doha Development Agenda (DDA) negotiations were put back on track. On 1 August 2004, WTO members concluded a framework agreement in Geneva on the continuation of negotiations, a move which also gave a fresh impetus to the negotiations on services. The WTO members are expected to submit revised offers in May 2005, and those members that have yet to submit their initial offers will have to do so as soon as possible. In addition, the annexe to the framework agreement includes provisions on such issues as improving the quality of the offers, devoting special attention to the needs of developing countries and providing technical assistance. There have been clear indications of increased activity relating to the negotiations on services in Geneva in recent months, including meetings of the official multilateral negotiation groups as well as discussions about specific service sectors in informal plurilateral groups. The recent increase in the number of bilateral market access negotiations between WTO members is another sign that the GATS negotiations have been revitalised. In February 2005, the European Union held a series of bilateral talks on market access on the basis of a number of recent, renewed requests. Like the European Union itself, the Union’s main trade partners also appear to be convinced of the importance of achieving significant progress in the GATS negotiations before the next Ministerial Conference in Hong Kong. In order to realise this ambition, the European Commission will work with the EU member states during the coming months to produce an improved offer with respect to services.

 

The advisory report

 

Turning to your advisory report, I would like to compliment you, first and foremost, on the way in which you have succeeded in presenting the complex issue of the GATS negotiations in a concise yet clear manner. In addition, your report paints a balanced picture of the expected benefits and possible risks of the desired liberalisation of the service sector for the various parties involved in the negotiation process. That being said, the report only indirectly discusses the fact that, by liberalising their own service markets, developing countries will enjoy significant opportunities to further their own development. This is because, in accordance with the government’s request for advice, the report focuses mainly on developing countries’ opportunities for gaining greater access to the service markets of developed countries.

 

With regard to the areas in which market access should be expanded, the report essentially focuses on mode 4, that is to say temporary labour migration for the purpose of providing services. The question is whether this does justice to the offensive interests of wealthier developing countries, in particular with regard to other forms of cross-border service provision, such as ICT services and transport (mode 1), health care (mode 2) or the establishment of branches or daughter companies (mode 3). After all, it is clear that the export of services from developing countries is on the rise. According to the International Trade Committee (ITC), the average developing country exports no fewer than 68 different services, especially infrastructural services (financial services, telecommunications and transport), water services, distribution services and tourism. I share the view that there is a lack of clarity regarding the effects of the liberalisation of the service sector on developing countries and the opportunities for obviating the suspected negative effects. Indeed, part of the resistance demonstrated by developing countries can be attributed to cold feet resulting from this very lack of clarity. As the report itself implies, it appears that the lack of understanding of the consequences of liberalisation is equally responsible for the unwillingness of developed countries to grant broader access to temporary labour migration. In this context, it is unfortunate that the advisory report does not devote more attention to the scope that exists within the European Union to expand market access in mode 4. Outside the GATS framework, various countries offer opportunities for the temporary migration of certain categories of workers who are less highly-qualified than those for whom the European Community has offered to open up its borders under GATS. A better understanding of the background of these regulations, their effects and the protective measures against potential negative effects could help the European Union to determine its position in the negotiation process.

 

Recommendations

 

In what follows, I will examine the report’s recommendations in the order in which they appear in the concluding chapter.

 

Under the heading of ‘GATS and services’, the AIV advises the government to promote individual country assessments of the status of services liberalisation, by supplying research capacity and/or strengthening the capacity of developing countries to perform these assessments themselves. In addition, the AIV recommends that, on its own initiative, the Netherlands commission studies on the economic effects of the liberalisation of trade in services in developing countries and that it encourage the European Union to address the issue, too. A lack of understanding of the effects of liberalisation on the economies of developing countries makes developing countries less willing to liberalise.

 

Within the European Union, the Netherlands has argued for national assessments of the status of – and the opportunities for – service sector liberalisation against the background of the GATS negotiations. Unfortunately, these assessments have failed to get off the ground. Nevertheless, various organisations, including UNCTAD and the ITC, are already carrying out international studies, often in conjunction with efforts to strengthen the negotiating capacity of developing countries. The OECD is also carrying out several studies on services liberalisation. In addition, in 2004, the Swedish government examined the implications of the WTO agreements (including the GATS agreement) for developing countries. In 2003, at the request of the Ministry of Foreign Affairs, the University of Groningen also analysed several examples of services liberalisation in developing countries.

 

In the longer term, the Integrated Framework for Trade-Related Technical Assistance (IF), which is also supported by the Netherlands, provides a basis for conducting diagnostic studies of trade-related problems and opportunities in a large number of least developed countries (LDCs). In the short term of the current negotiation process, however, the proposed new research activities will not make a significant contribution. In the short term, it is particularly important that developing countries are offered adequate opportunities and guarantees, which will enable them to exploit the opportunities and risks associated with the commitments they will undertake as part of the GATS negotiations. They will be able to undertake more commitments if they have some assurance that they will be able to develop the necessary legislative and monitoring institutions, if necessary with assistance from donors. It is possible to conclude agreements to this effect. All this does not alter the fact that an overview of country-specific assessments – particularly the key assessments that are still missing – could be useful. I will find out whether the European Union or the OECD, for example, could draw up an inventory of such assessments. In addition, I am willing to fund research in this area, for example through the World Bank, but preferably through reliable research institutes in developing countries. In fact, the Netherlands is already actively contributing to strengthening research and assessment capacity in developing countries.

 

In the section entitled ‘Negotiations’, the AIV recommends, first and foremost, the formulation of grounds for the use of emergency safeguard measures that grant developing countries the right to suspend or withdraw commitments made within the GATS framework that seriously disrupt their domestic markets. These measures should include a mechanism for identifying the vital interests of developing countries.

 

The establishment of an emergency safeguard mechanism within GATS (Art. X) has proved controversial in recent years. The mechanism has assumed a clear political character due to the fact that its main advocates (ASEAN countries such as the Philippines, Indonesia, Malaysia and Thailand) regard its establishment as a condition for progress in the market access negotiations and an important component of the balance that should ultimately characterise the conclusion of the WTO negotiations on services. The closing date for the discussions on this instrument has already been pushed back several times in recent years. It has now been agreed that the issue will be resolved, at the very latest, at the end of the DDA negotiations.

 

Supporters of the emergency safeguard mechanism wish to use it as a big stick if it becomes clear that the increased ‘import of services’ as a result of market access commitments undertaken under GATS damages or threatens to damage a country’s domestic service industry. Within the WTO, however, there has been a great deal of resistance to this mechanism. In the first place, some have questioned the need for such a mechanism. This is because there are already various possibilities for protecting the domestic service sector, for example deciding not to undertake commitments in sensitive areas, or – if such commitments have already been undertaken – modifying commitment schedules in accordance with the procedure laid down in Article XXI. In addition, it is difficult to demonstrate that expanded market access is damaging or threatening to damage local economies, since a deterioration in the domestic service sector may also be caused by structural problems. Furthermore, there are many doubts about the feasibility of an emergency safeguard mechanism for services. Are there enough relevant statistics on the import of services? How long after undertaking WTO commitments can a country still invoke the emergency safeguard mechanism? How long should emergency safeguard measures remain in force? How should existing rights that are already being exercised, for example in the case of establishment (mode 3) or the presence of natural persons (mode 4), be handled? Another question is whether there is a danger that investment will be discouraged as a result of uncertainty surrounding market access in the longer term.

 

It is clear that an emergency safeguard mechanism under GATS has more political and operational snags than the existing mechanism for products (WTO Safeguard Agreement). In recent years, the European Union has therefore adopted a highly critical approach, with the support of the Dutch government, in discussions concerning this mechanism. It should be noted, however, that both the European Union and the Netherlands realise, in light of the political reality, that negotiations on the emergency safeguard mechanism will continue and that the creation of this instrument as part of a package of agreements under the Doha Development Agenda remains a very real possibility. Under such circumstances, the main objective of both the European Union and the Netherlands will be the creation of an acceptable and effective instrument that provides adequate responses to the above-mentioned questions as well as any other questions that arise during the discussions.

 

The AIV recommends that the government examine whether the agreement that the Doha negotiations should be seen as a single undertaking can be amended if significant progress fails to materialise in other areas of the negotiations. Uncoupling GATS from stumbling blocks such as agriculture could perhaps lead to progress in the liberalisation of trade in services.

 

As noted in the advisory report, the failure of Cancún did temporarily halt the negotiations. It is also true that progress in one area of the DDA negotiations partly depends on progress in other areas, following the ‘single undertaking’ principle. Nevertheless, it would be an oversimplification to claim that the negotiations on services are being held hostage purely as the result of a lack of progress in the negotiations on agriculture. Apart from anything else, this argument has already been overtaken by recent developments in Geneva. Since the conclusion of the agreement on the continuation of the negotiations – which consists primarily of a framework establishing modalities for the negotiations on agriculture – in the summer of 2004, it appears that the GATS negotiations have a lot of catching up to do as the DDA negotiations continue. In fact, there appears to be a better chance of successfully continuing the negotiations on liberalising trade in services within the framework of the broader trade round and as part of the single undertaking. This is already clear from the increased interest in the GATS negotiations on the part of developing countries during the past six months.

 

The AIV recommends that the Netherlands encourage the international community to take advantage of delays and pauses in the negotiations to tackle a number of so-called horizontal issues. These include regulations and definitions relating to emergency safeguard measures, subsidies, public tenders, domestic legislation and so forth. Agreement on these issues could significantly improve the climate of the actual negotiations.

 

The Dutch government recognises the importance of the negotiations on the elaboration and implementation of the GATS treaty. The topics of these negotiations include: (1) the aforementioned emergency safeguard mechanism, (2) yet to be drafted subsidy rules for the service sector, (3) agreements on government tenders in the service sector and (4) yet to be drafted rules concerning domestic legislation. The GATS treaty itself provides the mandate for these so-called rules negotiations. Despite all the time that has been devoted to them in Geneva in recent years, the negotiations have still produced few tangible results. Since all the issues under negotiation have proved to be quite controversial, it is by no means certain that a greater focus on the rules negotiations can improve the climate of the market access negotiations. On the contrary, many WTO members believe that progress in the market access negotiations could breathe new life into the rules negotiations, with some going so far as to assert that such progress is a condition for the latter. Now that the market access negotiations are starting up again thanks to the new deadline for revised offers (May 2005), the European Union will be focusing primarily on these negotiations in the coming months. That said, this does not preclude the European Union – or the Netherlands – from remaining actively involved in the rules negotiations, which are taking place simultaneously. The Netherlands will make every effort to ensure that these talks take place in a constructive atmosphere.

 

The AIV recommends that, on the basis of an inventory of measures that could or do form an obstacle to outsourcing, the government urge EU member states at least not to introduce any new restrictive measures, starting from a mutually agreed date.

 

I am aware that the transfer of employment opportunities to developing countries, which is linked to the growing trend towards the outsourcing of services, leads to protectionist responses. Following last year’s political debate on this issue in the United States, the French government has recently also announced plans to discourage the transfer of business activities. The French plans, which focus on granting tax exemptions, have met with considerable resistance at international level. The Dutch government is of the opinion that the transfer of business activities should be regarded as a natural part of the economic process which, on balance, produces positive results. Governments should not try to obstruct this process. The Dutch government is therefore not contemplating any national measures in this area.

 

Enacting measures to prevent the transfer of business activities is actually a national matter that falls under the competence of the governments of the individual EU member states. The only condition is that the measures are compatible with EU competition rules and the rest of the acquis communautaire. In this context, it is not practicable to prevent new restrictive measures from being introduced. By undertaking GATS commitments for each service sector, however, the European Union and its WTO partners can ensure by law that no restrictions are imposed on the cross-border provision of a particular service. By undertaking commitments in the area of mode 1, they would be able to establish conditions for outsourcing and thus for creating employment in developing countries. The European Union – and the Netherlands in particular – is a strong supporter of making existing market access binding with respect to cross-border service provision (mode 1) during the current WTO negotiations on services. This is also apparent from the European Union’s line of services and the requests it has made to its WTO partners concerning market access. Incidentally, it is also important that developing countries present specific requests in this area.

 

The AIV also recommends that the government further assist developing countries – especially LDCs – with institutional development and the monitoring and application of trade rules in general and with conducting WTO negotiations in particular. This requires strengthening the institutions responsible for monitoring, upholding and applying trade rules. Additional options include support in establishing chambers of commerce and agencies.

 

The AIV also recommends establishing training programmes and courses to increase the negotiating capacity of developing countries, employing experts from developing countries for this purpose, in order to strengthen South-South cooperation. With a view to assisting developing countries in the negotiation process, a digital handbook facilitating the performance of ‘liberalisation assessments’ could be jointly developed.

 

I endorse the importance of supporting the institutional development and negotiating capacity of LDCs. The Netherlands makes a significant contribution to programmes in this area, such as the Integrated Framework for Trade-Related Technical Assistance (IF) and the Joint Integrated Technical Assistance Programme (JITAP), which brings together the International Trade Centre (ITC), the WTO and UNCTAD. The ITC focuses on the private sector, while the WTO organises seminars and workshops under the Doha Development Agenda Global Trust Fund for a number of groups, especially negotiators. With specific regard to the GATS negotiations, the Netherlands is contemplating funding a programme to improve the negotiating capacity of various developing countries, particularly those in Africa. This programme would have the same purpose and be operated by the same NGO as an earlier, successful programme focusing on the GATT negotiations. The programme in question is based largely on exchanging ideas in a South-South context. Policies aimed at improving the local business climate in partner countries with which the Netherlands maintains bilateral aid relations concentrate primarily on institution building. In this context, the Netherlands also devotes attention to improving the functioning of local chambers of commerce and related institutions.

 

At the end of the section on negotiations, the AIV states its opinion that the government should extend its development cooperation activities aimed at strengthening the local private sector, especially in the area of services, and recommends that the government provide more development assistance in the framework of public-private partnerships than it has in the past.

 

I fully endorse this recommendation. In recent years, Dutch policy has in fact been specifically retooled to meet these objectives. In the context of improving the local business climate, the Dutch embassies in our partner countries have carried out an initial examination of the main problems in this area, which also brought to light the inadequacy of the legislative and legal systems. The World Bank’s report, entitled ‘Doing Business 2005’, has also provided us with a clear overview of the problems affecting the business climate in developing countries. Building on this information, the Netherlands will now try to develop more specific activities to strengthen such vital institutions. In doing so, it will work in partnership with the private sector as much as possible and consider where and how Dutch knowledge and know-how can be usefully deployed to tackle the problems that have been identified. As noted in the advisory report, a number of important steps have already been taken in the field of public-private partnerships. In the service sector, the key issue is how to tackle privatisation and liberalisation in such a way that development and poverty reduction are encouraged rather than obstructed. The key factor here is effective interaction between the government and the private sector in an environment characterised by good legislation and well-functioning monitoring institutions.

 

In the final section on mode 4 – temporary labour migration – the AIV recommends, first and foremost, that the government seek agreement within the European Union on the definition and interpretation of GATS rules relating to mode 4, in particular concerning the concept of temporariness.

 

I share the view that transparent and uniform EU legislation on temporary labour migration for the purpose of providing services can contribute to the smooth progress of the negotiations and also prevent undesired effects such as ‘work permit shopping’ by migrants from outside the European Union. It is worth noting that the European Commission has very recently taken the initiative towards greater uniformity in the undertaking of commitments relating to mode 4. This should help to increase transparency. The European Union has therefore taken the lead in creating uniformity in the inclusion of various categories of temporary workers in commitment schedules.

 

I recognise the importance of a uniform interpretation of the concept of temporariness. Discussions on this issue are currently taking place within the European Union. With respect to the relevant services, the EU member states apply the same periods to the various categories of service providers under mode 4. Thus, for example, intra-corporate transfers (ICTs) are subject to a period of three years (managers and experts) or twelve months (graduate trainees); business visitors (BVs) are subject to a period of 90 days within a given 12-month period, and contractual services suppliers (CSSs), including independent professionals (IPs), are subject to a period of six months within a given 12-month period.

 

The AIV also recommends that the government examine the possibilities for circular migration within the European Union and that it consider, in particular, the creation of a special GATS multiple entry visa for temporary labour migrants under mode 4.

 

As noted in the policy memorandum on development and migration, the Dutch government recognises the importance of circular migration within the framework of its national immigration policy. One aspect of this is the temporary or permanent return of skilled immigrants, which enables them to use their knowledge and know-how for the benefit of their countries of origin. I am therefore willing to examine the options for supporting circular migration. As promised to the House of Representatives, I will report on this issue in the next semi-annual progress report on the implementation of the policy memorandum.

 

As regards the European Union, the European Commission is drafting a communication on the subject of development and migration that will form the basis for further debate. In addition, the Commission has published a Green Paper that is meant to encourage the debate on EU legislation governing the admission of economic migrants from outside the European Union.1 In both cases, I will ensure that the possibilities for encouraging circular migration are taken into account in the policy-making process.

 

The international debate on the advantages and disadvantages of introducing a GATS visa or a different special multiple entry visa under mode 4 is still going on. It is likely that removing the need for labour migrants to submit to another demanding (and always somewhat uncertain) admission procedure if they again wish to work in another country will stimulate temporary – and possibly permanent – return to their countries of origin and reduce illegal residence. At the same time, however, we will have to examine what implementation costs and risks the introduction of such a new arrangement (which would have to be coordinated between the Schengen partners) would entail. The United Kingdom has already introduced a GATS visa for contract workers. Its experiences in this area will serve as an example for the European Union and the Schengen countries.

 

In the interests of brain circulation, the AIV recommends that the government examine the possibilities for developing twinning or partnerships, for example between universities and hospitals and similar institutions in developing countries, by means of public-private partnerships. In this context, the AIV also advocates promoting exchanges and participation in courses and conferences by simplifying visa regulations and procedures.

 

I welcome the development of twinning and partnerships as proposed in the advisory report. In fact, the Netherlands actively supports such initiatives in cases where they are compatible with bilateral programmes involving the partner countries with which it maintains bilateral aid relations. The government can only play a limited role outside this framework. It must facilitate these forms of brain circulation – and should certainly not obstruct them – but a policy of active encouragement cannot be expected to produce miracles.

 

I am aware that visa procedures can form an administrative burden and be time-consuming. It is important to continue trying to improve the efficiency of procedures, but it is also essential to strictly apply the rules laid down under the Schengen regime in order to prevent an unwanted influx of persons. In addition, the government sees little scope for a significant simplification of these procedures. One option might be to issue a multiple entry visa under the relevant Schengen rules.

 

The AIV notes that it does not regard the policy of not applying migration under mode 4 to low-skilled workers as a matter of course and that it plans to devote attention to this issue in a future advisory report. The AIV recommends that the government already extend the GATS definition of specialist as used in the Netherlands to include semi-qualified groups. It also advocates redefining the existing categories of workers in GATS, as countries often do not recognise each other’s educational qualifications. Finally, the AIV recommends that the economic needs test be abolished, given that there is little demand for admission of temporary labour migrants under mode 4. For the same reason, it sees little need for the introduction of quotas on labour migrants.

 

I look forward with interest to the AIV’s upcoming supplementary advisory report on temporary migration of low-skilled workers under mode 4. The European Union derives particular benefit from selective and – except in the case of highly-qualified migrants – temporary labour migration that is attuned to the demands of the labour market and the flexibility of society. Temporary migration to EU member states can offer labour migrants from third countries the possibility of contributing to the development of their countries of origin by enhancing their knowledge and skills and by earning an income. To promote this goal, the Netherlands wants to make the best possible use of the scope offered by its current labour migration policy. This is also its objective in the current WTO negotiations on services (in particular for natural persons under mode 4). Within the framework of Dutch labour migration policy and the commitments concerning market access that it plans to undertake within the WTO, the Netherlands is willing to examine the possibilities for expanding and facilitating well-regulated, temporary labour migration from developing countries in order to deal with specific problems in the labour market. The European Union and its member states could also support brain circulation by including certain aspects of the issue in the policy dialogue with developing countries, as part of development cooperation programmes aimed at strengthening migration management, education and training.

 

I share the view that it is desirable to work towards the abolition of overly strict demands regarding educational qualifications and towards a more precise categorisation of workers within GATS.

 

The economic needs test will be abolished for those categories of services for which the Netherlands is undertaking commitments. In addition, the government will make every effort to increase the transparency of labour market tests in the Netherlands and other countries. Such tests should be prevented from becoming unregulable trade barriers. Incidentally, the government does not support the AIV’s argument regarding the abolition of the economic needs test due to the current limited influx of temporary labour migrants under mode 4. In our view, the obstacles to temporary labour migrants in the admission procedure are mostly to be found in such areas as the procedures for issuing visas and permits and the non-recognition of qualifications and diplomas, which the AIV also mentions in its report.

 

As regards admission quotas for labour migrants under mode 4, the Netherlands already belongs – together with Denmark and Sweden – to the limited group of countries within the European Union that have submitted quota-free offers.

 

Conclusion

 

In conclusion, the AIV notes that developing countries should not – and need not – miss out on the opportunities afforded by the liberalisation of trade in services, but that it is vital to examine on a case-by-case basis whether a country’s economy, policies and institutional capacity contain adequate safeguards to ensure that liberalisation does not ultimately have the wrong effect. I believe that this is a good starting point for the rest of the negotiations on the liberalisation of the service sector in the ongoing DDA process. The government is keen to help bring these negotiations to a successful conclusion, in particular for the developing countries. In addition, the further refinement of Dutch policy on temporary labour migration will take place in the context of the wider EU debate on development and migration, on the one hand, and the management of economic migration, on the other.

 

 

Agnes van Ardenne-van der Hoeven

Minister for Development Cooperation

 

1 Green Paper on an EU approach to managing economic migration, COM (2004) 811 final, 17 January 2005.

 

 

Press releases

The press release related to this report has not been translated.