Trade in Services: The Doha Development Agenda Negotiations and U.S Goals

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

The United States and the other 151 members of the World Trade Organization (WTO) have been
conducting a set or “round” of negotiations called the Doha Development Agenda (DDA) since
the end of 2001. The DDA’s main objective is to refine and expand the rules by which WTO
members conduct foreign trade with one another. A critical element of the DDA round is the
negotiations pertaining to foreign trade in services. Trade in services has been covered under
multilateral rules only since 1995 with the entry into force of the General Agreement on Trade in
Services (GATS) and of the Uruguay Round Agreements creating the WTO.
The negotiations on services in the Doha Development Agenda (DDA) round have two
fundamental objectives. One objective is to reform the current GATS rules and principles. The
second objective is for each member country to liberalize or open more of its service sectors to
foreign competition. The WTO services negotiations have been going on for more than six years.
However, as with the negotiations in agriculture and non-agriculture market access, the services
negotiations have proceeded slowly with missed deadlines and few results.
The prospects for the negotiations are difficult to evaluate at this point. It is not unusual for
negotiations to lag as participants wait to place their best negotiating positions on the table until
just before crucial deadlines are reached. On July 24, 2006, WTO Director-General Pascal Lamy
suspended the DDA negotiations, including the services negotiations because major WTO
members could not agree on the terms or modalities for negotiations in agriculture and non-
agriculture market access. He resumed the negotiations in 2007, and negotiators from major
groups of developed and developing countries have been working to nail down the basic elements
of a draft text; however, negotiators have failed to reach a consensus on the basic negotiating
objectives.
Several factors will determine if and when the services negotiations will be completed. One factor
is the political will the WTO members can muster to overcome the obstacles that hamper the
negotiations. Another factor is to what degree the various participants are willing to compromise
on goals in order to reach agreements. And a third factor is how quickly the issues in agriculture
and non-agriculture market access are resolved; the sooner they are resolved the sooner
negotiators can devote their attention to the services negotiations. This report will be updated as
events warrant. The DDA negotiations, including the negotiations on services, could be the ^th
subject of oversight during the 110 Congress.

The Significance of Services...........................................................................................................2
The GATS: The International Rules of Trade..................................................................................3
The Four Modes of Delivery.....................................................................................................4
The Structure of the GATS........................................................................................................4
Post-Uruguay Round Negotiations and Agreements.................................................................6
Schedule of Commitments........................................................................................................7
The Negotiations.............................................................................................................................7
The Evolution of the Negotiations............................................................................................8
The Structure of the Negotiations.............................................................................................9
The Status of the DDA Negotiations and Major Issues.................................................................10
U.S. Goals...............................................................................................................................10
Quality of Commitments...................................................................................................10
Regulatory Transparency..................................................................................................10
Commercial Presence (Mode-3)........................................................................................11
Temporary Entry of Professional Employees (Mode-4)....................................................11
Financial Services..............................................................................................................11
Telecommunications Services............................................................................................11
Express Delivery Services................................................................................................12
Energy Services................................................................................................................12
Environmental Services....................................................................................................12
Distribution Services.........................................................................................................12
Education and Training Services (ETS)............................................................................12
Professional Services........................................................................................................12
Other services...................................................................................................................13
U.S. Offers..............................................................................................................................13
Major Issues in the Negotiations.............................................................................................14
Negotiating Format...........................................................................................................14
Mode-4 ......................................................................................................................... ..... 15
Negotiations on Rules.......................................................................................................17
Prospects ........................................................................................................................................ 17
Author Contact Information..........................................................................................................18

he United States and the other 151 members of the World Trade Organization (WTO) are
engaged in a set or “round” of negotiations called the Doha Development Agenda (DDA).
The DDA’s main objective is to refine and expand the rules by which WTO members T

conduct foreign trade with one another. A critical element of the DDA round is the negotiations
pertaining to foreign trade in services. Trade in services has been covered under multilateral rules
only since 1995 with the entry into force of the General Agreement on Trade in Services (GATS)
and the Uruguay Round Agreements creating the WTO.
The U.S. services sector is among the world’s most advanced, efficient and open, especially in
such areas as financial services and telecommunication services. Services are a significant part of
the U.S. economy and the source of most U.S. employment. Such is the case also with many other
economically advanced countries. For many years, many in Congress and successive
Administrations have been pressing to make trade liberalization in services a priority in
multilateral trade negotiations and a priority in the current round. In so doing, the United States
has sought trade opportunities especially in developing countries for a competitive sector of the
U.S. economy.
The U.S. business community considers the DDA negotiations in services critical to providing ¹
predictability in global markets for services. Furthermore, the outcome of the services
negotiations likely will have a significant impact on the credibility of the GATS which remains a
fledgling system of rules. If the negotiations fail, it would be considered by many observers a
setback for U.S. trade policy.
Congress would have to pass implementing legislation in order for any agreement on services (or
for any agreement reached during the DDA) to become part of U.S. obligations under the WTO.
However, before the agreement stage, the Congress plays a consultative role during the
negotiations as required by the legislation granting the President the fast track trade negotiating ²
authority. Under this authority, the President can negotiate trade agreements that would be
handled under expedited congressional procedures (limited debate and no amendments). Through
consultation, Members can try to ensure that the Administration fulfills negotiating objectives as
set out in trade law and is otherwise protecting U.S. economic interests as the Congress perceives
them. The current trade promotion expired on July 1, 2007, and will have to be renewed before
any DDA agreement would receive expedited congressional consideration.
This report is designed to assist the 110^th Congress to understand and monitor progress of the
negotiations and the major issues that the negotiators are addressing. The report provides a brief
background section on the significance of services to the U.S. economy. It then explains briefly
the General Agreement on Trade in Services (GATS) and the structure and agenda of the services
negotiations in the DDA round, including U.S. objectives in the negotiations. The report
concludes with a status report on the negotiations and an examination of potential results. The
report will be updated as events warrant.

¹^Iⁿ^f^o^r^m^a^{tion w}^a^s^obtaⁱ^ne^{d in}^a^m^e^e^ting^w^{ith J}^{ohn G}^o^y^e^r^,^Vic^e^-^P^r^e^s^ideⁿ^{t f}^o^r^Iⁿ^te^rⁿ^a^tio^na^{l T}^r^a^d^e^N^e^g^o^tia^tions^a^nd
^Inv^e^s^t^m^e^{nt, U}^.^{S. C}^o^a^litioⁿ^of^Se^rv^ic^e^s^Indus^trie^s^.
²^T^itle^X^X^{I (Bipa}^r^tⁱ^s^a^{n T}^r^a^d^e^P^r^o^m^{otion A}^u^thori^t^y^A^c^{t of}^2002),^T^r^a^d^e^A^c^{t of}^{2002. (}^P^.L^{. 1}^07-²¹⁰⁾

“Services” encompass an ever-widening range of economic activities. According to one
definition, services are:
^“^{...a div}^e^{rse g}^r^ou^{p of}^econ^o^mⁱ^{c activ}^itie^{s n}^o^{t directl}^y^assocⁱ^ated^wⁱ^t^h^th^e^m^a^nuf^actu^r^{e of}
^g^oods^,^mⁱⁿⁱⁿ^g^{or ag}^ri^c^u^l^t^u^r^{e. Th}^e^y^t^y^pi^cal^l^yⁱⁿ^v^o^l^v^e^t^h^{e prov}ⁱ^sⁱ^oⁿ^o^f^h^u^m^aⁿ^v^a^l^u^e^-^{added i}ⁿ
^th^e^f^o^r^m^o^f^lab^o^r^{, ad}^vⁱ^ce,^m^aⁿ^a^g^e^rⁱ^{al s}^k^il^{l, en}^ter^t^ain^m^eⁿ^{t, tr}^aⁱⁿⁱⁿ^gⁱⁿ^ter^m^ed^iatioⁿ^,^aⁿ^d^th^e³
^lik^e.”
Services differ from manufactured goods in that they are intangible, cannot be stored and must be
consumed at the point of production (trips to the doctor, enjoying a meal at the restaurant).
However, rapid changes in technology are reducing even these restrictions on services (computer
software that can be stored online, on disks, tape, etc, accounting services that are provided via ⁴
the internet). Illustrative examples of services include wholesale and retail trade; transportation
and warehousing; information; banking and insurance; professional, scientific, and technical
services; education; arts and entertainment; health care and social assistance; food and ⁵
accommodation services; construction; communication; and public administration.
Services are an increasingly significant sector of the U.S. economy. In 1965, they accounted for ⁶

41% of U.S. GDP. In 2006 they accounted for 58% of U.S. GDP. In 2006, workers in the ⁷

services sector accounted for about 83% of the total nonagricultural civilian workforce.
Many services have not only intrinsic value but are also critical to running other parts of large
economies. For example, financial services (banking, investment, insurance) are the means by
which capital flows throughout an economy from those who have it (savers, investors) to those
who need it (borrowers). Financial services are often called the lifeblood of an economy. Delivery
services are critical to ensuring that intermediate production goods and final end-user goods are
available when needed. Distribution services (retail and wholesale services) provide the means by
which goods are made available to consumers. Inefficiencies in any of these industries could have
adverse consequences for the whole economy.
U.S. trade in services, as customarily measured, plays an important role in overall U.S. trade,
albeit, a much smaller role than trade in goods. In 2006 services accounted for 29% of total U.S.
exports of goods and services and 16% of total U.S. imports of goods and services, shares that ⁸
have remained about the same for a number of years.
Because most services require direct contact between supplier and consumer, many service
providers prefer to establish or must establish a presence in the country of the consumer. For

³^O^E^C^D^{. Sc}^ie^nc^e^T^e^c^hnolog^y^Iⁿ^d^u^s^t^r^y^B^u^sⁱ^ne^s^s^a^{nd I}ⁿ^dus^tr^y^Polic^y^For^u^m^Se^rⁱ^e^s^.^The^Se^r^v^ic^e^Ec^onom^y^.²⁰⁰⁰^.^P^a^rⁱ^s.
^p.7
⁴^Ibid^.
⁵^Ibid^{. O}^E^CD^,^p.^39.
⁶^C^a^lc^ula^tions^ba^s^e^d^on^da^ta^{in W}^h^ite^H^o^us^e^.^C^o^unc^il^of^Ec^on^om^ic^A^d^vⁱ^s^e^r^s^.^Ec^onom^ic^Re^por^t^{of t}^h^e^Pr^e^s^ideⁿ^t.
^Fe^br^ua^r^y²⁰⁰⁷^.^Washⁱⁿ^gt^on^.^Tab^l^{e B}^-⁸^.^p.²⁴^0.
⁷^Ibid^{. T}^a^ble^B-46^{. p}^.²⁸⁴^.
⁸^C^R^S^c^a^l^c^u^la^tio^ns^ba^s^e^d^da^ta^f^r^om^U^.^{S. D}^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^{e. B}^u^r^e^a^u^of^the^C^e^ns^us^.^U^.^{S. I}ⁿ^te^r^nati^oⁿ^a^l^Tr^adeⁱⁿ
^G^oods^an^{d Se}^r^v^ic^e^s^FT^-^{900. p}^.^1.

example, hotel and restaurant services require a presence in the country of the consumer.
Providers of legal, accounting, and construction services prefer a direct presence because they
need access to expert knowledge of the laws and regulations of the country in which they are
doing business and they require proximity to clients. Thus, cross-border services trade data do not
capture all of the trade in services.
Data on sales of services by foreign affiliates of U.S.-owned companies and by U.S. affiliates of
foreign-owned firms help to provide a more accurate, albeit still incomplete, measurement of
trade in services. In 2005 (the latest year for which published data are available), U.S. firms sold
$528.5 billion in services to foreigners through their majority-owned foreign affiliates (compared
to $367.8 billion in U.S. cross-border exports). Foreign firms sold U.S. residents $389.0 billion in
services through their majority-owned foreign affiliates located in the United States (compared to ⁹
$281.6 billion in cross-border imports). Even these two sets of figures do not capture the total
value of trade in services. Two other modes of services delivery are through the temporary
movement of consumers to the location of the provider and the temporary movement of the
provider to the location of the consumer. U.S. data on the sales of services via these two modes of
delivery are not readily available.

The seeds for multilateral negotiations in services trade were planted more than a quarter century
ago. In the Trade Act of 1974, the Congress instructed the Administration to promote an
agreement on trade in services under the General Agreement on Tariffs and Trade (GATT) during
the Tokyo Round negotiations. The Tokyo Round concluded in 1979 without a services
agreement, but the industrialized countries, led by the United States, continued to press for its
inclusion in later negotiations. By contrast, developing countries, whose service sectors are less
advanced than those of the industrialized countries, were reluctant to have services covered by
international trade rules. Eventually services were included as part of the Uruguay Round ¹⁰
negotiations launched in 1986. During the Uruguay Round, GATT members agreed to a new set
of rules for services, the General Agreement on Trade in Services (GATS), and a new agency, the
World Trade Organization (WTO), to administer the GATS, the GATT, and the other Uruguay ¹¹
Round Agreements, known as the Marrakesh Agreement.
Trade scholar, Geza Feketekuty, identifies three main challenges to constructing rules for
international trade in services: (1) to target the rules at domestic regulations that are the primary
sources of barriers to trade in services; (2) to distinguish the legitimate use of regulations to
protect the health and safety of residents and from the use of regulations to protect domestic
service providers from competition; (3) to take into account that most services transactions take

⁹^B^u^r^e^a^u^of^Ec^o^nom^ic^Aⁿ^a^l^y^s^is^{. U}^.^{S. D}^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^.^Sal^e^s^{of Se}^r^v^ic^e^s^{to F}^o^r^e^ign^a^{nd U}^.^S^.^M^a^r^k^e^t^s
^Thro^ug^{h Cross-Bor}^d^e^r^Tra^d^e^aⁿ^d^Thro^ug^{h Af}^fili^ate^s^.^ht^tp:/^/www^.be^a^.^g^o^v^.
¹⁰^Fe^k^e^te^k^u^t^y^,^G^e^z^a^.^Iⁿ^te^r^nati^oⁿ^a^l^Tr^adeⁱⁿ^Se^r^v^ic^e^s^:^{An O}^v^e^r^vⁱ^e^w^a^{nd B}^l^ue^prⁱⁿ^{t f}^o^r^N^e^g^o^tia^tio^ns^.^A^m^eri^can
^Ente^rprise^Iⁿ^stitute^.^Ba^lling^e^r^Pu^blishe^rs.¹⁹^88.^p.¹⁹⁴
¹¹^T^h^{e M}^a^rrakesh^A^g^r^e^e^m^en^tⁱⁿ^cl^u^d^e^{s GAT}^T⁽¹⁹⁹⁴⁾^and^o^t^h^e^{r agreemen}^t^s^t^h^at^go^vern^t^r^ad^{e i}ⁿ^goo^d^s^;^t^h^{e agree}^m^en^t
^{on T}^r^a^d^e^-^Re^la^te^{d Inte}^lle^c^t^ua^l^Pro^p^e^r^ty^Rig^h^{ts (T}^RIP^S^);^the^G^A^T^S^{; D}ⁱ^s^pute^Se^tt^le^m^e^{nt U}^nde^r^s^ta^ndiⁿ^g⁽^D^SU⁾^a^{nd t}^h^e
^so-c^a^lle^{d pl}^urila^te^ra^{l a}^g^re^e^m^eⁿ^{ts (}^a^g^r^e^e^m^e^{nts tha}^t^W^T^O^m^e^m^b^e^r^{s a}^r^e^not^ob^lig^a^t^e^d^{to sig}ⁿ^)—^the^G^o^v^e^rn^m^e^nt
^P^r^oc^ure^m^eⁿ^{t Ag}^re^e^m^eⁿ^{t, A}^g^r^e^e^m^eⁿ^{t o}ⁿ^T^r^a^d^e^Civ^{il A}ⁱ^rc^ra^f^t^{, Inte}^rna^tiona^{l Da}^iry^A^g^re^e^m^eⁿ^{t, a}^{nd t}^h^e^Inte^rna^tio^na^l
^Bo^viⁿ^e^M^eat^A^g^re^e^m^en^t^.

place behind customs borders rather than at customs border (as in the case of like goods trade).¹²
In addition to these, one might identify a fourth challenge: technology advances, such as the
introduction of the internet, make once non-tradeable services, for example consulting, tradeable
and also have led to the rapid introduction of services products that can be “outsourced” across
borders. All of these challenges suggest a set of rules sufficiently flexible to meet them yet
sufficiently rigid to provide meaningful discipline to WTO members’ activities.
An important element to the structure of the GATS and the negotiations to expand the coverage of
the GATS has been the recognition that most services transactions are conducted inside borders
and that barriers to trade in services occur inside customs barriers. Effective trade rules would
have to take into account the various modes of delivery in order to discern the barriers that
foreign providers of services encounter when trying to sell in a trade-partner’s market. The GATS
divides the modes of delivery of services into four categories. As will be discussed later, the
concessions that a member country makes in opening up its services market are largely mode-
dependent. The four modes of delivery are:
• Cross-border supply (mode 1)—the service is supplied from one country to
another. The supplier and consumer remain in their respective countries, while
the service crosses the border. For example, a U.S. architectural firm based in
Chicago is hired by a client in Mexico to design a building. The U.S. firm does
the design in Chicago and sends the blueprints to its client in Mexico.
• Consumption abroad (mode 2)—The consumer physically travels to another
country to obtain the service. A Mexican client travels to the United States to
obtain the services of a U.S. architectural firm.
• Commercial presence (mode 3)—The supplier of a service establishes a branch,
agency, or wholly-owned subsidiary in another country and supplies services to
the local market. A U.S. architectural firm establishes a subsidiary in Mexico to
sell services to local clients.
• Presence of natural persons (mode 4)—Individual supplier travels temporarily
to country of consumer. A U.S. architect travels to Mexico to provide design
services to her Mexican client.
The GATS is an agreement among the 151 WTO members representing many levels of economic
development. It provides the only multilateral framework of principles and rules for government
policies and regulations affecting trade in services. The GATS remains a work in progress.

¹²^Fe^k^e^te^k^u^t^y^,^G^e^z^a^.^As^s^e^s^sⁱ^{ng the}^W^T^O^G^e^ne^r^a^{l Agr}^e^e^m^eⁿ^{t o}ⁿ^Tr^a^d^eⁱⁿ^Se^r^v^ic^e^s^{and I}^m^pr^ovⁱⁿ^{g t}^h^e^G^A^TS
^A^r^chⁱ^t^ect^u^r^e.^A^Brook^ing^s^P^a^pe^r.^htt^p^://w^w^w^.c^o^m^m^e^rc^ia^ldiplom^a^cy^.org^/^a^rtic^le^s^_ne^w^s^/^b^rookⁱⁿ^g^s^.ht^m^{. 1999.}

The preamble to the GATS sets out its overall purposes and principles:
• trade expansion to promote economic development;
• progressive trade liberalization;
• preservation of member governments’ right to regulate services sectors to meet
national policy objectives; and
• facilitation of participation of developing countries and recognition of special
circumstances of least developed countries (LDCs).
The GATS is divided into six parts.¹³ Part I (Article I ) defines the scope of the GATS and
provides that its provisions apply—
• to all services, except those supplied in the routine exercise of government
authority;
• to all government barriers to trade in services at all levels of government—
national, regional, and local; and
• to all four modes of delivery of services.
Part II (Articles II-XV) presents the “principles and obligations.” These principles and
obligations apply to all services sectors whether or not the sectors are specifically listed in a
member’s schedule of commitments—the list of service sectors that are to be covered by the
GATS. They include
• unconditional most-favored-nation(MFN) non-discriminatory treatment—
services imported from one member country cannot be treated any less favorably ¹⁴
than the services imported from another member country;
• transparency—governments must publish rules and regulations to ensure that
foreign providers have access to those rules and regulations;
• reasonable, impartial and objective administration of government rules and
regulations that apply to services; and
• monopoly suppliers must act consistently with obligations under the GATS.
Part II also lays out some exceptions:
• a member incurring balance of payments difficulties may temporarily restrict
trade in services covered by the agreement; and
• a member may circumvent GATS obligations for national security purposes.

¹³^T^h^{is de}^sc^riptioⁿ^of^the^GAT^{S is ba}^se^{d on}^W^T^{O Se}^c^r^e^t^a^r^ia^t—T^r^a^d^e^{in Se}^rv^ic^e^s^Divⁱ^sion.^Aⁿ^Iⁿ^tro^d^u^c^tio^{n to}^the
^GAT^S^.^Oc^to^be^{r 1}⁹⁹⁹^.^htt^p^://w^ww.w^t^o.org^.^{Not a}^l^l^se^rv^ic^e^s^issue^s^w^e^r^e^re^solv^e^d^w^h^eⁿ^the^Urug^ua^y^Roun^{d w}^a^s
^c^o^m^p^le^te^{d in 1}⁹⁹³^{. Ne}^g^o^tia^ti^ons^{on f}ⁱ^na^nc^ia^{l se}^rv^ic^e^s^a^{nd te}^le^c^o^m^m^unic^a^{tions se}^rv^ic^e^s^c^ontinue^{d u}ⁿ^{til a}^g^re^e^m^eⁿ^ts
^w^e^r^e^reach^edⁱⁿ¹⁹⁹⁷^.
¹⁴^T^h^{e GAT}^S^dⁱ^ff^ers^f^r^o^m^t^h^{e GAT}^Tⁱⁿ^t^h^atⁱ^t^h^a^{s al}^l^o^w^e^d^m^e^m^b^{ers t}^o^t^a^{ke t}^e^m^p^o^r^ar^y^(t^o^expⁱ^{re t}^h^{ree years a}^f^t^e^r
^GAT^S^en^act^m^eⁿ^t^f^o^{r o}^rⁱ^gⁱⁿ^al^m^e^m^b^{ers o}^r^t^h^{ree years a}^f^t^e^{r a n}^e^w^me^m^b^{er’s ac}^cessi^oⁿ⁾^exe^m^p^tⁱ^oⁿ^s^t^o^M^F^N^t^r^eat^m^eⁿ^t^.
^T^h^{e exe}^m^p^tⁱ^oⁿ^s^{are l}ⁱ^s^t^e^dⁱⁿ^{a s}^p^eci^al^anⁿ^e^{x t}^o^t^h^{e GA}^T^S^.^T^h^{e GAT}^S^al^l^o^w^s^oⁿ^l^y^t^h^{ese o}ⁿ^e^-tⁱ^m^{e e}^x^e^m^p^tⁱ^oⁿ^s^.^T^h^e
^GAT^S^{(as i}^s^t^h^{e case o}^f^t^h^e^GAT^T⁾^al^so^al^l^o^w^s^M^F^{N exe}^m^p^tⁱ^oⁿ^sⁱⁿ^t^h^{e cases o}^f^regi^oⁿ^a^l^agree^m^en^t^s^.^(A^rtⁱ^c^l^e^V⁾^.

Part III (Articles XVI-XVIII) of the GATS establishes market access and national treatment
obligations for members. The GATS—
• binds each member to its commitments once it has made them—a member may
not impose less favorable treatment than what it has committed to;
• prohibits member-country governments from placing limits on suppliers of
services from other member countries regarding: the number of foreign service
suppliers, the total value of service transactions or assets, the number of
transactions or value of output, the type of legal entity or joint venture through
which services may be supplied, and the share of foreign capital or total value of
foreign direct investment;
• requires that member governments accord service suppliers from other member
countries national treatment—a WTO member service provider may not be
treated any less favorably than a domestic provider of a like service; and
• allows members to negotiate further reductions in barriers to trade in services.
Importantly, unlike MFN treatment and the other principles listed in Part II, which apply to all
service providers more or less unconditionally, the national treatment and market access
obligations under Part III are restricted. They apply only to those services and the four modes of
delivery listed in each member’s schedule of commitments. National treatment and market access
obligations do not apply to services sectors outside the schedule of commitments. (The “Schedule
of Commitments” is described in detail below.) This is often referred to as the positive list
approach to trade commitments. (The negative list would include all services sectors unless
specifically excluded.) Each member country’s schedule of commitments is contained in an annex
to the GATS.
Parts IV-VI (Articles XIX-XXIX) are technical but important elements of the agreement.
Among other things, they require that, no later than five years after the GATS went into force,
WTO members start new negotiations (which they have done) to expand coverage of the
agreement, and they require that conflicts between members involving implementation of the
GATS be handled in the WTO’s dispute settlement mechanism.
The GATS also has annexes. They include annexes on : MFN exemptions; financial services that
allows governments to take “prudent” actions to protect investors or otherwise maintain the
integrity of the national financial system; transportation services; telecommunication services;
maritime services; and mode-4 delivery. The schedule of commitments from each WTO member
are also included as an annex.
Signatories to the GATS determined negotiations had not been completed, but they did not want
to delay the completion of the rest of the Uruguay Round agreements. The GATS stipulated that
negotiations were to continue on financial services, telecommunication services, maritime
services, and mode-4 delivery. The agreements reached would be included as part of the GATS
when they entered into force. Agreements were concluded on basic telecommunications in

February 1997 and financial services on December 1997.¹⁵ Negotiations on mode-4 (movement
of natural persons) ended on July 28, 1995 with few results, and negotiations on maritime
services ended in June 1996 without conclusion and were to resume in current round.
The commitments that WTO members make regarding national treatment and market access in
specific service sectors or subsectors constitute a major portion of a member’s obligations under
the GATS and a significant element of the negotiations during the Doha Development Agenda
round. Therefore, a general explanation of what comprises a member’s schedule of commitments
(SC) is in order.
Each WTO member was required to submit a SC during the negotiations of the GATS. Each new
member is required to submit a schedule of commitments when it accedes to the WTO. Each of
the national schedules is a part of the GATS. The SC has been compared to the tariff schedules of
each WTO member; however, the schedules of commitments on services are more complex than
the tariff schedules.
The schedule is divided into four columns. The first column lists the sector or subsector for which
commitments are made. The second column lists for that sector or subsector the restrictions on
market access that are to be applied for each of the four modes of delivery. The third column lists
the restrictions on national treatment that are to be applied for each of the four modes of delivery.
The fourth column lists any additional commitments the member has made for the sector or
subsector. The schedule is also divided into two parts. In the first part, the member country
identifies its horizontal commitments, that is, commitments on trade liberalization that apply to all
services sectors and subsectors listed in the schedule. The second part lists the sector-specific
commitments. The SCs tend to be long documents because the WTO member must identify each
service sector and subsector for which it is making a trade liberalization commitment, and the
member must identify the exceptions on market access and national treatment for each of the four
modes of delivery for each sector and subsector.

The negotiations on services in the DDA have two fundamental objectives. One objective is to
reform the current GATS rules and principles. The second objective is for each member country
to refine and expand its schedule of commitments to increase the number of service sectors to be
covered and to reduce the limitations on national treatment and market access.
This section examines the evolution of the current negotiations, their structure, and their status. It
also discusses U.S. goals and those of other major trading partners and groups of members.

¹⁵^For^m^o^r^e^inf^o^r^m^a^{tion o}ⁿ^the^fⁱ^na^nc^ia^{l s}^e^r^v^ic^e^s^ne^g^o^tia^tions^{, s}^e^e^C^R^S^R^e^por^t^R^L³¹¹¹⁰^,^U.^S.^T^r^ad^{e in}^Fⁱⁿ^aⁿ^cⁱ^a^l
^S^e^rvi^{ces: A}ⁿ^Overvi^ew^{, b}^y^P^a^tricⁱ^a^A^.^W^e^rt^m^a^{n a}^{nd W}^illia^m^H^.^Coope^r.

At the end of the Uruguay Round, the negotiators acknowledged that they needed to maintain the
momentum of the service negotiations even if a comprehensive new round of negotiations was
not to be launched. Thus, Article XIX of the GATS required WTO members to begin a new set of
negotiations on services no later than five years after the GATS entered into force (that is, 2000)
as part of the so-called WTO “built-in agenda.” Article XIX stipulates that participants work to
resolve some conceptual and procedural issues, for example, how to provide special treatment to
least developed countries.
The GATS also mandates that the negotiations address the issue of government subsidies in trade
in services and possible countervailing actions (Article XV), emergency safeguard measures, that
is, measures to counter surges in imports that cause or threaten to cause injury to a domestic
industry (Article X), and government procurement in services trade (Article XIII).
The new services negotiations began in 2000 but progressed slowly in part because of the adverse ¹⁶
political climate caused by the failure of the 1999 WTO Ministerial in Seattle. In March 2001,
the WTO’s Council for Trade in Services, the body that administers the GATS and oversees
negotiations on services, approved the guidelines that shape the current set of negotiations. The
guidelines incorporate the mandates and procedures rooted in the GATS. The guidelines stipulate:
• Objectives and Principles: The main objective is progressive liberalization of
trade in services as a means to promote economic growth and development while
recognizing the sovereign right of members to regulate services sector and
introduce new regulations.
• Scope: All service sectors and subsectors and all modes of delivery are subject to
negotiations. Negotiations on safeguards measures, were to be completed by
March 2002. (That deadline was extended eventually to the end of the DDA.)
• Modalities and Procedures: The negotiations are to be conducted in special
sessions of the Council for Trade in Services and open to all WTO members and
acceding countries. The starting point of the negotiations would be the scheduled
commitments at the time. The “request-offer” format (discussed below) is to be
used for negotiating new commitments. In addition, special attention is to be
given to the special needs of developing countries in requesting commitments
from them and making commitments to them. (Modalities were adopted on
September 3, 2003.) Furthermore, the members are to negotiate modalities on
how to give negotiating credit for autonomous liberalization—reduction in trade
barriers on services undertaken outside of negotiations. (On March 6, 2003, ¹⁷
members agreed to a modality on the treatment of autonomous liberalizations.)
Modalities are methods or measures, such as formulas, to negotiate trade
liberalization.
After the false start in Seattle, the WTO members successfully launched DDA in November 2001.
The Ministerial Declaration that announced the mandates for the round folded the services

¹⁶^W^o^r^l^{d T}^r^a^d^e^O^r^g^a^niz^a^tion.^WT^O^Aⁿ^nu^al^R^e^po^rt^—²⁰⁰⁵^.
¹⁷^T^h^{e W}^o^rl^d^T^r^ad^{e Organ}ⁱ^zatⁱ^oⁿ^.^G^u^ide^lⁱⁿ^e^s^an^{d Pr}^oc^e^dur^e^s^for^t^h^e^N^e^gotia^tio^ns^oⁿ^Tr^adeⁱⁿ^Se^r^v^ic^e^s^.^S/L^/^93.^Ma^r^c^h
²⁹²⁰^01.^A^v^a^ila^ble^a^t^http://w^ww.w^t^o.org^.

negotiation into the agenda of the DDA round. The Declaration reaffirms the March 2001
guidelines but included deadlines to spur the negotiators: participants were to submit their initial
requests for market access and national treatment commitments from each member by June 30,

2002, and their initial offers of commitments they would be willing to make by March 31, 2003.

The services negotiations floundered as deadlines passed. The rest of the DDA negotiations were
on the verge of collapse after the member countries could not agree at the September 2003
Ministerial in Cancun on modalities for the agriculture negotiations and non-agricultural market
access. After much consternation and discussion, WTO members forged a negotiating framework
or “package” of objectives to put the round back on track in July 2004.
The framework reaffirms the mandates contained in the Doha Ministerial Declaration. The July
framework specifically charges the negotiators to complete and submit their initial offers as soon
as possible, to submit revised offers by May 2005 and to ensure that the offers are of “high
quality.” These pronouncements were in response to complaints from WTO officials that only a
few of the participants had met the deadlines for initial offers and the quality of those offers left
much to be desired.
Although the July framework mentions services only briefly, the fact that it was mentioned at all
is considered important to the U.S. business community. In so doing, the DDA negotiators placed
services on par with the negotiations on agriculture and on market access for non-agricultural ¹⁸
goods.
The negotiations on rules are conducted by working groups of representatives of interested
members. The negotiations on national treatment and market access commitments are addressed
by all members using the request-offer format.
In the initial phase of the negotiations, each WTO member submits its “wish-list” or “request” of
what commitments it would like other members to “offer” to make. The negotiations then
continue with each member responding to the requests with its initial “offer” of the commitments
it would be willing to make. The process continues with more negotiations and revised offers
until the parties have reached a consensus that the commitment offers of each member are
acceptable. Unlike the negotiations on goods in the WTO that are conducted multilaterally among
all members at the same time, the services “request-offer” negotiations consist of many series of
simultaneous bilateral, plurilateral (many participants), and multilateral (WTO-wide) negotiations
among WTO members. The final set of commitment offers or agreements must be accepted by all
members to become part of the GATS.

¹⁸^Oⁿ^e^b^u^sⁱ^ne^s^s^r^e^pr^e^s^eⁿ^ta^tiv^e^s^t^a^t^e^d^tha^t^the^s^e^r^v^ic^e^s^indus^tr^y^ha^{d t}^o^fⁱ^g^h^{t to ha}^v^e^s^e^r^v^ic^e^s^gⁱ^v^e^{n this}^l^e^v^e^{l of}
^im^porta^nc^e^.^Me^e^ting^w^{ith Joh}ⁿ^G^o^y^e^{r, V}ⁱ^c^e^-^P^r^e^s^ideⁿ^{t f}^o^r^Iⁿ^te^rⁿ^a^tⁱ^ona^{l T}^r^a^d^e^N^e^g^o^tia^tions^a^{nd I}ⁿ^v^e^s^t^m^e^{nt, U}^.^S.
^Coa^litioⁿ^of^Se^rv^ic^e^s^Indus^try^.^A^u^g^u^s^t^9,²⁰⁰⁵^.

The WTO services negotiations have been going on for more than five years. However, as with
the negotiations in agriculture and non-agriculture market access that have proceeded slowly with
missed deadlines and disappointing results. In July 2006, WTO Director-General Pascal Lamy
suspended the entire DDA negotiations, including the services negotiations, because member
countries could not agree on fundamental modalities for the negotiations in agriculture trade. This
section reviews the main objectives of the United States and of chief trading partners and
examines some of the critical issues that have emerged during the negotiations.

The United States presented its major goals for the negotiations in the Doha Development Agenda
(DDA) Round in July 2002 in its initial set of requests, although it had stated many of the goals in
earlier negotiating sessions prior to the launch of the DDA. U.S. negotiators derived these
objectives during consultations with U.S. service industry representatives. The main U.S. goal is
to secure as many market access commitments from as many trading partners as possible. U.S.
policymakers have targeted several other goals for the services negotiations.
A long-standing U.S. complaint has been that the market access and national treatment
commitments that were made during the Uruguay Round were not as liberal as the then-existing
market environment. That is, WTO members were reluctant to commit to maintaining (or
“binding” in WTO parlance) the market openness at the levels that were actually in place. The
United States has called on countries to raise the level of bindings to actual levels to prevent
slippage.
Government regulation is a pervasive aspect of services trade, even more so than in manufactured
goods trade, in virtually all developed and developing economies. GATS rules recognize
legitimate needs for governments to regulate services to ensure the health and safety of
consumers, for example, by making sure that lawyers and doctors are qualified to practice their
professions. However, in most governments, services sectors are regulated by different agencies
depending on the service, and one service sector may be regulated by more than one government
agency. Some sectors may be regulated by central or federal agencies, while others are regulated
by regional or local agencies or perhaps by agencies at various administrative levels. Service
providers whether domestic or foreign must be aware of regulations and regulatory procedures in
order to conduct business.

¹⁹^T^h^e^inf^o^rm^a^{tion i}ⁿ^t^h^{is se}^c^tion^is^la^rg^e^l^y^ba^se^d^oⁿ^Of^fⁱ^c^e^o^f^t^h^{e Un}ⁱ^t^e^d^S^t^at^{es T}^r^ad^{e Rep}^r^esen^t^a^tⁱ^v^e.^U^.^{S. Pr}^op^os^als
^f^o^{r L}ⁱ^b^e^ra^lⁱ^zⁱⁿ^g^T^r^a^d^eⁱⁿ^S^e^rvi^ces^{: E}^xecu^tⁱ^{ve S}^u^mma^ry.^J^u^ly^{1, 20}⁰²^.

U.S. service providers have cited the lack of transparency in the development and implementation
of regulations as a primary obstacle to increasing foreign trade in services in many markets,
particularly in developing countries. The United States wants WTO member countries to make
commitments
• to establish clear, publicly available domestic procedures for application for
licenses or authorizations and their renewal or extension;
• to establish domestic procedures that provide for a standard formal process for
informing the public of regulations or changes to existing regulations, prior to
their final consideration by the relevant authority and entry into effect; and
• provide opportunities for interested parties to comment and ask questions as
regulations are developed, changed, and implemented.
U.S. service providers across a number of sectors point to the importance of establishing a
commercial presence in a local market in order to conduct business. U.S. negotiators have
requested from WTO members that they commit horizontally (across all sectors) to eliminate
unnecessary restrictions on foreign direct investment, such as limits on the forms in which a
foreign direct investment can take (partnership, branch, minority ownership, etc.).
The United states has asked trading partners to commit to reducing restrictions on the temporary
entry of foreign skilled managers and professionals involved in the delivery of services to their
local markets. Specifically, the United States cites economic needs and labor tests, restrictions
that delay the admissions approval process, and limits on multiple-entry visas. (The issue of
mode-4 is discussed later in more detail.)
Financial services include insurance, banking, securities, asset management, pension funds,
financial information and advisory services. The United States has requested that trading partners
make commitments to improve market access in financial services, on transparency in financial
services regulations, and fairness in applying financial services regulations. Regarding insurance
in particular, the United States proposed commitments to expedite new-to-market initiatives.
The United States requested that WTO partners increase market access in telecommunications
services, including value-added services, adopt commitments made in the 1998
Telecommunications Agreement, and privatize telecommunications carriers. In addition, the
United States has requested market access commitments regarding owning and leasing cable
facilities.

The United States has requested increased access for road freight transport, order processing
services, inventory management services, among other express delivery services. In addition, the
United States asked WTO members to address the issue of cross-subsidization of express delivery
services, where government authorized monopolies (such as first class postal services) share
revenues with express delivery carriers.
This category includes energy exploration services, energy transmission and distribution, energy
marketing and trading, and energy conservation and anti-pollution services. The United States has
requested increased market access to all of these services markets. In addition, the United States
has requested that trading partners make commitments regarding third-party access to and use of
energy transportation facilities, such as interconnection with energy networks and grids. Energy
services do not include energy generation or ownership.
Services that protect the environment from degradation have been another priority for the United
States in the services negotiations. The United States has requested trading partners to provide
increased access to markets for services related to wastewater treatment services, solid/hazardous
waste management, soil and water cleanup, noise and vibration abatement, protection of
biodiversity and landscape, among other environment-related areas.
The United States has requested trading partners to provide full market access to retail, wholesale,
and franchising services. This access would include both services direct delivery to the customer
or remotely through catalogue, video, or electronic sales.
In the context of U.S. requests, ETS includes higher education, training services, and testing
services provided in universities and schools, as well as in work places. Training services include
job-related courses. ETS do not include primary or secondary education, and U.S. requests for
commitments to increased market access do not aim to replace public education.
The United States has asked that trading partners increase market access for foreign lawyers,
accounts, and other providers of professional services. To do so, they should remove citizenship
requirements for licensing, remove restrictions on foreign ownership, lift restrictions on form of
organization (subsidiary versus branch or partnership), and remove restrictions on associations
with local professionals.

The United States has requested increased market access for computer and related services
including computer consulting, software development, data processing, and systems integration
and maintenance services. It has also requested improved market access commitments for
audiovisual and advertising services.
The United States presented its initial offer of proposed commitments on March 31, 2003, at the
deadline set in the Doha Ministerial Declaration. It submitted a revised offer on May 31, 2005,
meeting the deadline set in the July 2004 Framework.
The U.S. initial and revised offers would “bind” or commit the United States to maintain national
treatment and market access to foreign service providers that are already in place, including
improvements that have been made since the Uruguay Round agreements were enacted. In other
words, the United States would commit to refrain from reducing its current level of trade ²⁰
liberalization.
The United States defends its offers arguing that its services markets are already quite open, and
that it looks for WTO members to meet U.S. standards. To a large degree this is an accurate
statement. Many U.S. services industries are very competitive and, therefore, can withstand
foreign competition. Nations logically open their markets in the areas in which they are
competitive while protecting sectors that are not competitive. Nevertheless, as will be noted later,
not all U.S. WTO-trading partners have been so sanguine about the U.S. offers.
The U.S. offers include horizontal commitments, that is commitments that apply to all sectors and
subsectors that are listed in the U.S. schedule of commitments. The horizontal commitments
include the following areas:
• Temporary entry of personnel (Mode-4): The United States categorically
makes no commitments regarding the temporary entry of personnel other than for
specific groups of personnel most of whom would be working for foreign firms
with affiliates in the United States. These include services sales persons, who sell
within the company but not to the U.S. public and who are in the United States
no longer than 90-days; inter-corporate transferees (managers, executives, and
specialists) for up to three years with the possibility for extension for up to an
additional two years; and personnel engaged in the establishment of a business
entity in the United States. The United States also allows temporary entry for
fashion models and service providers in other speciality occupations.
• Acquisition of land: The United States permits the temporary entry of personnel
engaged in the acquisition of land in the scheduled services sectors and
subsectors. The U.S. proposal notes, however, that the initial acquisition of
federally-owned land is restricted to U.S. citizens.
• Taxation measures: Foreigners engaged in providing scheduled services are
taxed the same as U.S. residents with a few exceptions.

²⁰^Inte^rna^tio^nal^Tra^d^e^Re^p^o^rte^r^.^M^a^r^c^{h 27,}²⁰⁰³^.^p.⁵⁴^2.

Besides the horizontal commitments, the United States has offered scheduled commitments in a
number of sectors and subsectors: business services, including professional services, accounting
and bookkeeping, taxation services, and architectural and engineering services. The format for
scheduling commitments requires WTO members to identify any national treatment and market
access exceptions for each of the four delivery modes for each of the scheduled sectors and
subsectors. In the case of the business services most of the exceptions relate to state restrictions or
requirements on foreign service providers.
In addition to business services, the United States has offered to make commitments in services
related to market research and public opinion polling; management consulting; computer and
related services; real estate services (that is, services provided to the ownership or leasing of
property); services incidental to agriculture, hunting, forestry, and fishing; express delivery and
other delivery services; telecommunication services (with the national treatment exception that
foreigners cannot own common carrier or radio licenses); wholesale and retail trade services and
franchising; higher education; environmental services; financial services; health related and social
services; travel and tourism; recreational, cultural and specialty services; transportation services
(except maritime services); energy services; and construction and related services.
Developing countries have criticized the United States for not offering broader commitments,
arguing that the sectors in which the United States has offered commitments, such as express ²¹
delivery and energy services, are not ones that would be useful to them. The European Union
has criticized the United States for not offering to open maritime services and postal services to ²²
foreign competition. Developing countries and some developed countries have focused most of
their criticism on U.S. commitments and offers under the mode-4 category of delivery, for
example, that U.S. offers are restricted to business executives and other personnel and with close
ties to foreign companies having a commercial presence in the United States. India argues that it
would need access for software specialists, computer experts, and information technology ²³
engineers who would not be directly affiliated to an Indian-owned firm in the United States.
(Mode-4 has proved to be one of the most contentious issues in the DDA and is discussed in more
detail later.)
The original goal of completing the negotiations by January 1, 2005, has long past, and deadlines
accomplishing procedural steps, such as initial and revised offers, have had to be rescheduled.
The complexity of the negotiations may go a long way in explaining the retarded pace, but reports
by trade negotiators and discussions with experts suggest several underlying challenges.
Some negotiators and other observers have suggested that the “request-offer” negotiating format
might be stalling the process. The United States and the EU separately proposed that negotiators
establish “benchmarks” of certain targeted sectors on which WTO members would agree to make
commitments. U.S. officials argued for commitments in six core sectors—financial services,

²¹^Iⁿ^sⁱ^de^U^.^S.^Tr^ade^.^M^a^y³⁰^,²⁰⁰³^.
²²^Inte^rna^tio^nal^Tra^d^e^Re^p^o^rte^r^.^M^a^y^{1, 20}⁰³^{. p}^.⁷⁴³^.
²³^W^a^s^hⁱⁿ^gtoⁿ^Tr^ade^D^a^ily^.^J^u^ne²^,²⁰^05.

telecommunications, energy, express delivery, computer and other information-related services,
and audio-visual services. The EU argued for a smaller list and would allow members to choose
to make commitments from a certain percentage of the core sectors for all four delivery modes.
The proposals came as a result of Chairman Jara’s request that members develop ways to expedite
the process.
The “benchmark” proposals met with strong opposition from many developing countries who
asserted that it was too late in the negotiation to use a different negotiating format and that the
established mandate for the DDA negotiations specifically requires the “request-offer” format to
be used. (Proponents of “benchmarks” responded that they would be used as a supplement to the
“request-offer” approach and not as a substitute.) Some developing countries also argued that
benchmarks would probably focus on those sectors that the developed countries favored since ²⁴
they wield the most influence. The U.S. services business community voiced concern that
focusing on benchmarks might divert the attention of negotiators and cause additional delays in ²⁵
the process.
The positive list approach (whereby members list only the sectors and subsectors that are to be
covered) to market access commitments has also been criticized. The primary criticism has been
that it could be a disincentive to market access liberalization: the default in the negotiations is that
sectors and subsectors are not covered by WTO rules unless specifically identified and the
schedules of commitments would not cover new sectors and subsectors that emerge in between
rounds of negotiations.
On the other hand, this approach is also viewed as a more conducive way to get reluctant
members, particularly developing countries to participate in the negotiations. The United States
prefers the “negative list” approach and has used it in free trade agreements.
Mode-4 delivery, temporary entry of supply personnel, has become one of the most controversial
issues at this stage of the negotiations in services. It has divided many developed countries and
developing countries, although differing positions have emerged among members of each
category. Much of developing country criticism of the United States has been regarding mode-4.
It has also created some tension between the U.S. business community and the U.S. government.
All of this criticism is despite the fact that mode-4 accounts for less that 1% of world trade in ²⁶
services.
The controversy arises in part because the issue of mode-4 delivery is closely related to
immigration policy in the United States and some other countries, and comes at a time when the
United States has tightened restrictions in response to the attacks of September 11, 2001.

²⁴^EU^T^a^ble^s^Iⁿ^f^o^r^m^a^l^P^r^o^pos^a^l^f^o^r^Se^r^v^ic^e^s^B^e^nc^h^m^a^r^ks^{in D}^oha^R^oun^d.^Iⁿ^sⁱ^de^U^.^S.^Tr^a^d^e^.^J^u^ly^1,²⁰⁰⁵^{. a}ⁿ^d
^De^v^e^loping^Couⁿ^trie^s^V^o^ic^e^Op^p^o^sitio^{n t}^o^“^B^eⁿ^c^h^m^a^rk^ing^”^{in WTO Se}^rv^ic^e^s^.^Inte^rnatio^na^{l Tra}^d^e^R^e^porte^r.^Ju^ly⁷^,
²⁰⁰^{5. p. 11}^09-¹¹¹⁰^.
²⁵^In^du^st^ry^V^oⁱ^{ces Co}ⁿ^cern^s^A^b^ou^t^“Ben^ch^marks^”^A^p^p^r^o^achⁱⁿ^S^e^rvi^{ces T}^a^l^k^s.^Inte^rnatio^na^{l Tra}^d^e^Re^porte^rs.^J^u^ne³⁰^,
²⁰⁰^{5. p. 10}⁵⁸^.
²⁶^W^o^rl^d^T^r^ad^{e Organ}ⁱ^zatⁱ^oⁿ^.^T^r^{ade Di}^rect^o^r^at^e.^T^r^ad^{e Co}^mmi^t^t^ee.^W^o^rkiⁿ^{g P}^a^rt^y^o^f^t^h^{e T}^r^ad^{e Co}^mmⁱ^t^t^ee.^Se^r^v^ice
^Pr^ov^ide^r^s^on^the^M^o^v^e^:^Ec^o^nomⁱ^c^I^m^pac^{t o}^f^M^ode^4.^T^D^/T^C^/^W^P⁽²⁰⁰²⁾^12/Fⁱ^na^{l. A}^v^a^ila^ble^a^t^htt^p^:/^/w^w^w^.^w^to.or^g^{. p.}
^12.

Article I -1(d) defines mode-4 as pertaining to the supply of a service, “by a service supplier of
one [WTO] Member, through presence of natural persons of a Member in the territory of any
other Member.” An annex to the GATS on mode-4 further states that the GATS, “shall not apply
to measures affecting natural persons seeking access to the employment market of a Member, nor
shall it apply to measures regarding citizenship, residence or employment on a permanent basis.”
Several developing countries have criticized the United States for not offering more on mode-4
commitments. India has criticized the visa restrictions placed on temporary workers entering the
United States, particularly workers not directly affiliated with companies located in the United
States and has also called for greater transparency of U.S. immigration regulations pertaining to ²⁷
the temporary entry of personnel.
The mode-4 issue has also manifested itself as an issue of congressional authority. In July 2003,
during congressional consideration of the implementing bills for the U.S.-Chile and U.S.-
Singapore free trade agreements, members of the Senate Judiciary Committee and the House
Judiciary Committee objected to the inclusion of changes in U.S. visa policies to allow increases
in the quotas of workers entering the United States. They argued that changes in visa rules must
be separate from trade legislation that is considered by Congress under expedited (fast-track)
procedures. Compromises were reached to allow the two bills to be voted on, but not without
bipartisan warnings from both committees that changes in visa policy should no longer be part of ²⁸
bilateral or multilateral trade agreements.
In a May 19, 2005, letter to newly-installed USTR Rob Portman, Representative F. James
Sensenbrenner, Jr. and Representative John Conyers, Jr., the Chairman and Ranking Member,
respectively, of the House Judiciary Committee, asked for his pledge, “not to negotiate
immigration .... provisions in bilateral or multilateral trade agreements that require changes in
United States law.” The two Members argued that the U.S. Constitution (Article I, section 8,
clause 4) gives the Congress exclusive power over immigration policy and that power is usurped
when the executive branch negotiates changes in immigration laws in trade agreements that ²⁹
cannot be amended and receive limited debate under trade promotion authority. In a
presentation at a public forum, George Fishman, then-Chief Counsel, House Judiciary
Subcommittee on Immigration, Border Security, and Claims, reiterated that position. He stated
that Members of Congress would welcome alternatives, but any changes in U.S. immigration ³⁰
policy would have to be implemented “through the normal legislative process.”
The U.S. business community has maintained that the United States needs to be more flexible in
its mode-4 offers, arguing that failure to do so stalls the negotiations and prevents United States
from obtaining useful commitments from developing countries. Business groups have proposed ³¹
alternative mode-4 options to move the negotiations forward.

²⁷^Mo^de^I^V^D^e^m^a^nds^E^m^e^r^ge^{in G}^A^T^{S Ta}^lk^s^.^W^a^s^h^ingt^{on Tr}^ade^D^a^ily^.^Se^pte^m^be^r^30,²⁰^04.^Se^e^a^l^s^o^Por^t^m^a^{n T}^e^lls
^In^dⁱ^{a New}^Coⁿ^cessi^oⁿ^s^on^W^T^{O S}^e^rvi^ces^A^r^{e Di}^ffⁱ^c^u^l^t^.^Iⁿ^si^d^e^U.S.^T^r^ad^e.^A^u^g^u^s^t^5,²⁰⁰⁵^.
²⁸^For^m^o^r^e^inf^o^r^m^a^{tion o}ⁿ^im^mⁱ^g^r^a^{tion is}^s^u^e^s^a^{nd tr}^a^d^e^a^g^r^e^em^eⁿ^ts^,^s^e^e^C^R^S^R^e^por^{t R}^L³²⁹⁸^2,^I^m^mⁱ^gr^ati^{on I}^s^s^u^e^sⁱⁿ
^T^r^a^d^e^A^g^reemen^t^s^{, by}^{Ruth El}^leⁿ^W^a^s^e^m^.
²⁹^T^h^e^le^tte^{r is a}^v^a^ila^bleⁱⁿ^Iⁿ^sⁱ^de^U^.^S.^Tr^ade^.^M^a^y²⁷^,²⁰⁰⁵^.
³⁰^{U.S. C}^ong^re^{ss Still O}^p^p^o^se^{s T}^r^a^d^e^P^a^c^t^{s A}^llowⁱ^ng^T^e^m^pora^r^y^Entry^o^f^Fore^ig^{n W}^o^rk^e^r^s.^Iⁿ^te^r^nati^ona^{l Tr}^a^d^e
^Re^por^te^r^.^J^u^ne^2,²⁰⁰⁵^.^p.⁸⁸^9.
³¹^U.^S^.^Iⁿ^du^st^ry^S^{ees P}^r^o^g^{ress i}ⁿ^Mo^d^e^{4 as Key}^t^o^S^u^{ccess i}ⁿ^Overal^l^W^T^O^T^a^l^k^s.^Iⁿ^te^r^nati^oⁿ^a^{l Tr}^ad^e^Re^por^te^r^.
^Fe^br^ua^r^y^{10, 2}⁰⁰⁵^.^p.²¹^2.^Se^e^a^l^s^o^{, N}^a^tio^na^{l F}^o^r^e^ig^{n T}^r^a^d^e^C^o^uⁿ^c^il.^T^h^{e Do}^ha^Devel^o^p^m^en^t^A^g^eⁿ^da^an^d^G^A^T^S
^M^ode^{-4: Re}^c^o^mme^nd^ati^ons^{for I}^m^prov^e^d^Ru^le^{s on}^Te^mpor^ary^Gl^oba^{l M}^o^b^ility^.^M^a^r^c^h²⁰⁰⁵^.

Not much has been accomplished regarding establishing rules on subsidies and emergency
safeguard measures for services. Developing countries, especially East Asian developing
countries, consider these issues a high priority. However, the negotiators have not been able to
resolve basic questions, such as, what would constitute a countervailable subsidy, how would it
be measured and how to measure import surges to which a WTO member could apply safeguards ³²
measures. Negotiations on government procurement have also proceeded slowly.

The prospects of the negotiations were set back when WTO Director-General Pascal Lamy
suspended the DDA, including the services negotiations, indefinitely on July 24, 2006, after a
meeting of the G-6 WTO members, consisting of the United States, the European Union, Japan,
Australia, Brazil, and India, failed to agree on the basic conditions or modalities, for conducting
the agriculture and NAMA negotiations. Although the negotiations resumed in 2007, progress on
the services negotiations remains sluggish at best.
Even before the suspension, the services negotiations had not been going well. The services
negotiations have been going on for more than five years; by most accounts, the participants have
made little progress. At the December 2005 biennial Ministerial meeting in Hong Kong WTO
negotiators were supposed to have a good indication of what final agreements will look like if the
Doha round is to be completed by the end of 2006. Participants have expressed widespread
disappointment with the offers that have been made.
Several possible reasons can be cited for the lack of progress. One is the division between
developed countries that have advanced services sectors employing highly-skilled labor and the
developing countries with less-developed services industries. The former group seeks market
opportunities for its services providers and is more willing to open its markets to competition.
The latter group is more protective of its domestic services providers.
The halting progress in the agriculture and NAMA negotiations in the DDA has also affected the
services negotiations. Some developing countries have asserted that they will not improve their
offers until the United States and the European Union commit to reduce their agriculture
subsidies.
A third reason could be the complexity of the agenda of the services negotiations and the number
of players involved. “Services” includes a broad range of economic activities many with few
characteristics in common except that they are not goods. The trade barriers exporters face differ
across services sectors making the formulation of trade rules a significant challenge. Furthermore,
services negotiations include many participants. In addition to trade ministers, they include
representatives of regulatory agencies many of whom do not consider trade liberalization a
primary part of their mission.

³²^W^o^rl^d^T^r^ad^{e Organ}ⁱ^zatⁱ^oⁿ^.^C^o^unci^l^f^o^{r T}^r^ad^{e i}ⁿ^S^e^rvi^ces.^Rep^o^r^t^by^t^h^{e Ch}^ai^r^m^an^t^o^t^h^{e T}^r^ad^{e Nego}^tⁱ^a^tⁱ^oⁿ^s
^Com^m^itte^e^.^{11 July}²⁰⁰^{5. T}^N^/S/2^{0 a}^v^a^ila^ble^a^t^htt^p^://w^ww^.^w^to^.org^{. A}^l^{so inf}^o^rm^a^{tion w}^a^{s obta}ⁱ^ne^{d i}ⁿ^a^m^e^e^ting^w^ith
^J^ohn^G^o^y^e^r^,^Vic^e^-^P^r^e^sⁱ^d^eⁿ^{t f}^o^r^Iⁿ^te^rⁿ^a^tiona^l^T^r^a^d^e^N^e^g^o^tia^tions^aⁿ^{d I}ⁿ^v^e^s^t^m^e^{nt, U}^.^{S. C}^o^a^lit^io^{n of}^S^e^r^v^ic^e^s^I^ndus^tr^ie^s^.

The prospects for the negotiations are difficult to evaluate at this point. It is not unusual for
negotiations to lag as participants wait to place their best negotiating positions on the table until
just before crucial deadlines are reached.
Several factors will determine if and when the services negotiations will be completed. One factor
is the political will the WTO members can muster to overcome the obstacles that plague the
negotiations. Another factor is the extent the various participants are willing to compromise on
goals in order to reach agreements. And a third factor is how quickly the issues in agriculture and
non-agriculture market access are resolved; the sooner they are resolved the sooner negotiators
can devote their full attention to the services negotiations.
From December 13-18, 2005 WTO trade ministers held the sixth WTO Ministerial in Hong Kong.
The trade ministers were expected to emerge from meeting with modalities that would accelerate
the DDA negotiations to their conclusion by the end of 2006. In the Hong Kong Ministerial
Declaration, WTO members reaffirmed their commitment to complete the services negotiations
with special consideration given to the needs of developing and the least developed countries.
Annex C to the Declaration provides modalities and parameters for completing the negotiations.
In September 2007, the chairman of the trade in services negotiations began a process to develop
a draft text of an agreement and called on member-country negotiators to submit contributions.
However, by the end of 2007, it was clear that the countries were still sharply divided on basic
objectives. Developed countries, including the United States, have argued for member-countries
at a minimum to commit to binding their current practices on trade in services. Developing
countries, including Argentina, argued against such benchmarks and resisted making additional
commitments until developed countries commit to greater reductions of subsidies for ³³
agriculture.
^W^illia^m^{H. C}^ooper
^Specialis^{t i}ⁿ^In^terⁿ^ation^a^{l T}^r^{ade an}^{d Fin}^aⁿ^ce
^w^c^ooper@^crs^.^l^o^c.g^o^v^,^7-⁷⁷⁴⁹

³³^W^a^s^hⁱⁿ^gtoⁿ^Tr^ade^D^a^ily^.^Decemb^e^{r 1}⁷^,²⁰⁰⁷^.^p^.⁴^.