Negotiating Services Agreements

1. Negotiating Services Agreements Geza Feketekuty

2. Negotiations on Services • Regulation of International Services • Bilateral Agreements (Civil Aviation) • International Agreements(ITU, IPU) • Solving Bilateral Trade & Investment Problems • Enterprise to Host Government Negotiations • Bilateral Negotiations Between Home and Host Government • Negotiating Trade Agreements • Free Trade Agreements – (NAFTA, Mercosur) • WTO/GATS • Dispute Settlement • Bilateral Consultations Preceding Dispute Settlement Process • Consultations on Implementation of Dispute Settlement Outcomes

3. Negotiations on Regulatory Issues • Establishment of Regulatory Framework for International Services was Traditional Venue and Objective of Negotiations on Services • Trade-Oriented Negotiations on Services are Aimed at Facilitating and Liberalizing Trade • Negotiations in a Regulatory Framework and in a Trade Framework can overlap, so require coordination between regulatory and trade agencies

4. Rationale and Venue for Problem Solving Negotiations • Trade Problems can arise as result of • Inadequate Information • Misunderstanding of regulation by a firm or of proposed activity by regulator • Regulation/Law is more Trade Restrictive than Necessary to accomplish Objective • Mutual efforts to address issues in a problem-solving context can benefit both sides • Periodic bilateral meetings between trade officials provide opportunity to address bilateral issues

5. Examples of Problems • Regulation of International Transactions by Central American owned banks • Visas for Training Assignments associated with outsourcing • Screen quotas and discriminatory tax treatment of foreign advertising copy • Regulations related to ground handling of aircraft operated by foreign airlines • Use of leased lines to transmit data originating from a distributed network

6. Problem Solving Interests of Developing Countries • Problems solving negotiations by Developing Countries in the past have usually involved trade-offs between goods and services, this may change • Growth of outsourcing is likely to increase importance of solving problems related to exports of services by Developing Countries

7. Steps in Addressing Issues in Problem Solving Negotiations • Consultations between Enterprise and Host Government • Consultations Between Home Government and Host Government at Increasingly Higher Levels • Consultations in Multilateral Forum (If one exists for issue and issue is generic) • Use of Formal Negotiating Mechanisms or Dispute Settlement Procedures (Choice Depends on Nature of Issue, Options)

8. Observations on the Process • Most Problems that arise in trade are resolved through a Mutual Problem Solving Approach • Only Problems that cannot be resolved between Enterprises and Foreign Governments Should go to Government to Government Level • Multilateral Forum Provides Basis for testing Scope of Issue, Potential Allies • Involving Trade Officials Can Facilitate Resolution, but also Increase Resistance of Regulatory Officials

9. Making the Case • Clarify Information • Correct any Misunderstandings • Clarifying objective of Regulation • Pinpoint Unintended Consequences of Regulation • Set out any Violations of International Rules, Commitments, or Generally Accepted Practices • Explain how Regulatory Reform could promote economic growth, preserve desired Social Goal • Identify Reciprocal Help, Consequence of Failure to Solve Problem

10. Negotiations Under GATS • Doha Round • Request & Offer Process • Negotiation of Rules • Other Negotiating Approaches Used in Past • Sectoral Agreement • Model Schedule • Rules for Sector • Functional Agreement • Other Possible Approaches • Sectoral and Other Targets • Negotiating Guidelines • Agreement Organized Around Customer Needs

11. Request-Offer Negotiations • Involve requests and offers for specific changes in national regulations/laws • Based on bilateral negotiations, multilateral assessment, MFN treatment • Dialogue surrounding negotiations is likely to revolve around commercial impact and regulatory purpose of measures viewed as trade barriers

12. Negotiation of Rules • Usually initiated by national papers outlining need for rule and substance of rule • National papers often supplemented by Secretariat paper summarizing negotiating proposals • Negotiations revolve around common needs of member countries, best regulatory practices, and fairness of rule

13. Steps in any Negotiation • Analysis of the Issues • Consultation with Stakeholders • Framing the Issue for Negotiations • Building Public Support • Bargaining • Selling the Results to Home Constituencies

14. Analysis of the Issue • Impact on Commercial Interests • Domestic Policy Issues • Stakeholder Politics • National and International Legal Provisions • Macroeconomic Effect • Institutional Considerations • Public Opinion and the Media

15. Who Are the Stakeholders Who Should be Consulted? • Affected Central Government Ministries and sub-central authorities • Affected Enterprises and Industry Associations • Labor Unions • Non-Governmental Organizations with a Policy Stake • Academic Experts

16. Stakeholders May be Affected in terms of • The Commercial Impact • The Policy Outcome • Bureaucratic Turf • Political Consequences • Legal Precedents • Macroeconomic Consequences

17. Consultation with Domestic Stakeholders • Can yield critical information on commercial, policy and legal issues at home and abroad • Serves to identify their interests and to manage their involvement in the domestic political process related to trade negotiating decisions • Offers insights into the interests and views of their counterparts abroad, and informal communication channels with their counterparts abroad

18. Why Consult Foreign Stakeholders • Provides insight into foreign decision-making process • Provides opportunities to help shape the views and strengthen role of foreign stakeholders with compatible interests • Provides broader insights into possible win-win solutions

19. Elements of a Negotiating Strategy • Framing the Issue for Negotiation • Identification of win/win solutions • Identification of Potential Supporters among Domestic and Foreign Stakeholders • Message to Potential Supporters • Written and Oral Communications to Build Support (White Paper, Press Release, Speeches) • Identification of Opposing Stakeholders • Means for Reducing or Deflecting Opposition • Methods for demonstrating utility, legitimacy and fairness of proposed outcome

20. Framing the Issue • Careful framing of the issue at both the national and international level is critical to Negotiations • At National Level Statement of Issue Should • Highlight the key commercial and policy issues • Provide a basis for domestic coalition building • At International Level Statement of Issue Should • Identify Common Policy Objective and Economic Rationale • Provide basis for international coalition building • Allow for win/win solutions

21. Framing the Issues - Examples • Framing Typical Regulatory Issue • ATM Machines and US/Israeli FTA • Framing Issue for GATS Telecom Annex • Framing Negotiation Between US and India on services

22. Building Support • Coalition building is the key to Negotiations • Out of Minorities Majorities are Built • Coalitions have to be built around common interests • For Rule-Making Negotiations support of Epistemic Community is important • International coalitions of private stakeholders can be an important asset • For regulatory issues, support also has to be built among regulators, who have their independent channels of communications with each other

23. Building Support - Examples • Building Support for GATS Among Services Stakeholders Across Countries • Building Support for Telecom Reform and Liberalization Among Stakeholders • The Aborted Tourism Agreement • Building Support for GATS by Epistemic Community

24. Strategies for Request/Offer Negotiations • Mercantilist Strategy • Aimed at Maximizing Imports • Aimed at Minimizing Imports • Regulatory Reform Strategy • Aimed at Reducing Cost of Achieving Regulatory Objectives • Aimed at Increasing Domestic Competition • Aimed at Increasing International Competition • Political Strategy • Deflect Pressure on Politically Sensitive Policies • Take Advantage of Foreign Pressure on Politically difficult but desirable policy reforms

25. Strategies for Formulation of Requests • Offensive – Maximize Export Opportunities • Identify list of foreign regulatory changes that would increase exports • Identify which of these requests other countries will pursue (free rider opportunity) • Defensive – Minimize Import Opportunities • Make few requests, to signal limited interest • Request changes difficult for other countries to implement to deflect foreign pressure

26. Strategies for Formulation of Offers • Domestic Reform Strategy • What regulatory reforms/removal of import barriers can we offer that serves domestic regulatory reform objectives? • Mercantilist-Reciprocity Strategy: • How much do we have to offer now so the other country will take our requests seriously? • What is our opportunity for being a free rider? • What will we have to offer to obtain commitments on issues where we are a principal demandeur?

27. Interest-Based VsCompetitive Negotiations • Positions Vs. Interests • Personalities Vs Group Interests • Zero-Sum Vs Positive Sum Approaches • Hiding Vs Sharing Information • Judgmental Vs Pragmatic Advocacy

28. How To Build Negotiating Momentum • Build success by establishing areas of common ground, even on procedural issues • Pick the easier issues first and continue to build common ground • Record areas of agreement in writing as you you make progress • Periodically review progress by going over areas of agreement and outstanding issues. • Seek Potential Allies

29. Interpreting What is Said: Identify • Beliefs • Positions • Interests • Arguments

30. Negotiating Success Depends on • Economic Power of Coalition • Commonly Shared Ideas of Legitimacy • Utility of Agreement to Business • Sound and Comprehensive Analysis • Identifying Reasons Why Other Party Can Gain from Negotiating Proposal • Creativity in Identifying Win/Win Solutions • Achievement of Mutually Beneficial Outcomes

31. Negotiating Resources • Technical assistance programs of World Bank, WTO, UNCTAD, ITC, OAS, other Regional Organizations • WTO Trade Policy Course and WTO training Course • WTO/OECD Doha Development Agenda Trade Capacity Building Database • Briefing notes, workshops and training seminars offered by AITIC in Geneva • Resources on ITCD’s website, www.comercial diplomacy.org