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Ideas, interests, and institutionalization: “trade in services” and the Uruguay Round

  • William J. Drake and Kalypso Nicolaïdis

After much deliberation, member governments of the General Agreement on Tariffs and Trade (GATT) agreed to pursue a new regime for international trade in services as part of the Uruguay Round negotiations begun in 1986. The talks have produced a draft agreement—the General Agreement on Trade in Services (GATS)—which, if ratified, could have important implications for the world economy. But when the question of trade in services first arose, most governments did not understand the issues or know whether a multilateral agreement would be to their advantage. If anything, their existing national interests and institutions seemed contrary to the goal of liberalizing trade in services. This article argues that an epistemic community of services experts played a crucial role in clarifying and framing the complex issue of trade in services and placing it on the global agenda. Through their analyses of the services issues and their interactions with policymakers, the epistemic community members were able to convince governments that international services transactions had common trade properties and that the liberalization of services through removal of nontariff barriers was potentially advantageous to developing as well as developed countries. In addition to fostering international negotiations within the GATT forum and helping states redefine their interests, the community members were instrumental in specifying a range of policy options to be considered. However, once governments understood their interests and domestic constituencies were mobilized, their policy choices were influenced more by power and bargaining dynamics than by continuing, direct epistemic community influence.

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For their comments on earlier drafts of our article, we thank our fellow contributors to this volume, especially Peter Haas and M. J. Peterson, as well as Julian Arkell, Peter Cowhey, Geza Feketekuty, Jeffry Frieden, Murray Gibbs, Michiko Hayashi, Stephen Krasner, Friedrich Kratochwil, Bruno Lanvin, John Richardson, Dorothy Riddle, Frank Tannery, and R. Brian Woodrow. For her research assistance, we are grateful to Lisa Tanaka.

1. The imprecision of these figures is due in part to cross-national disparities in both the categorization of certain transactions and the ability to compile accurate statistics. But it is also due to the fact that services often move across national frontiers in ways not captured by existing measures. Experts on the statistical arcana point out that the widely used $700 billion figure may not fully cover many types of services transactions, especially those embodied in traded goods or delivered via establishment, and that the inclusion of these might move the total figure into the trillions.

2. The phrase is usually attributed to The Economist. It is cited, for example, by Kakabadse, Mario A. in International Trade in Services: Prospects for Liberalization in the 1990s (London: Croom Helm, 1987), p. 5. Kakabadse is a key first-tier member working in the GATT Secretariat.

3. Hill, T. P., “On Goods and Services,” Review of Income and Wealth 23 (12 1977), p. 318.

4. Payments need not be involved, since governments and other entities provide free services. However, the focus of this article, like the debate itself, is on commercially rendered services.

5. For example, Adam Smith made the following argument: “The labour force of some of the most respectable orders in the society is, like that of menial servants, unproductive of any value, and does not fix or realize itself in any permanent subject, or vendible commodity, which endures after that labour is past, and for which an equal quantity of labour could afterwards be procured. … In the same class must be ranked, some both of the gravest and most important, and some of the most frivolous professions: churchmen, lawyers, physicians, men of letters of all kinds; players, buffoons, musicians, opera singers, opera dancers.… Like the declamation of the actor, the harangue of the orator, or the tune of the musician, the work of all of them perishes in the very instant of its production.… Both productive and unproductive labourers, and those who do not labour at all, are all equally maintained by the annual produce of the land and labour of the country.” See Smith, Adam, The Wealth of Nations (New York: Random House, 1937), p. 315. Focusing narrowly on material production and labor, Karl Marx was even more dismissive of the importance of services. Perhaps in consequence, the Soviet Union historically excluded almost all services from its national accounts.

6. For early discussions of services as part of the tertiary sector, see Fisher, Alan, The Clash of Progress and Security (London: Kelley, 1935); Clark, Colin, The Conditions of Economic Progress (London: Macmillan, 1940); and Rostow, W. W., The Stages of Economic Growth (Cambridge: Cambridge University Press, 1960).

7. See Grubel, Herbert G., “All Traded Services Are Embodied in Materials or People,” The World Economy 10 (09 1987), pp. 319–30.

8. See OECD, Code of Liberalization of Current Invisible Operations (Paris: OECD, 1961); OECD, Code of Liberalization of Capital Movements (Paris: OECD, 1976); and OECD, Declaration of National Treatment (Paris: OECD, 1976). These instruments allowed for many national reservations and derogations, and they contained no enforcement mechanisms. The OECD agreed in 1989 to expand the strength and scope of the instruments in light of the new thinking about trade in services.

9. See EC, Treaties Establishing the European Communities (Luxembourg: EC, 1987), especially Part II, Title III, Chapter 3 on “Services” (Articles 59–66).

10. For an early argument that services should no longer be treated simply as “tertiary” activities, see Fuchs, Victor R., Production and Productivity in the Services Industries (New York: Columbia University Press, 1969).

11. OECD, Report by the High Level Group on Trade and Related Problems (Paris: OECD, 1973), p. 63.

12. Feketekuty, Geza, International Trade in Services: An Overview and Blueprint for Negotiations (Cambridge, Mass.: Ballinger, 1988), p. 297.

13. See Griffiths, Brian, Invisible Barriers to Invisible Trade (London: Macmillan, 1975). In the years to follow, the Trade Policy Research Centre became a major intellectual force in the trade in services debate, especially through the dozens of services articles published in its journal, The World Economy.

14. See Bell, Daniel, The Coming of Post-Industrial Society: A Venture in Social Forecasting (New York: Basic Books, 1973). While Bell is usually credited with coining the term “post-industrial society” and related concepts, he drew heavily on unattributed works by French social theorists such as Touraine. See Touraine, Alain, The Post-Industrial Society (New York: Random House, 1969).

15. The idea was misconceived. The issue is not that services replace goods but, rather, that their growth complements manufacturing. See Cohen, Stephen S. and Zysman, John, Manufacturing Matters: The Myth of the Post-Industrial Economy (New York: Basic Books, 1987).

16. In International Trade in Services, p. 299, Feketekuty states that “it is not entirely clear which company first came up with the idea of using the trade bill to advance the international commercial interests of the services industries, though the recollections seem to point to Pan American Airways,” which wanted the right to carry mail to foreign countries.

17. The GATT Government Procurement Code contained language calling for states to move toward open tenders in transportation and insurance services. The Standards Code had language on recognizing test results from foreign laboratories, while the Subsidies Code stated that services used to export goods cannot be subsidized. Many members did not sign the codes, but partisans of liberalization later cited them as establishing the GATT's competence in services. On the codes, see Winham, Gilbert R., International Trade and the Tokyo Round Negotiations (Princeton, N.J.: Princeton University Press, 1986).

18. See Drake, William J., “Territoriality and Intangibility: Transborder Data Flows and National Sovereignty,” in Nordenstreng, Kaarle and Schiller, Herbert I., eds., National Sovereignty and International Communication, 2d ed. (Norwood, N.J.: Ablex, forthcoming).

19. See Barfield, Claude E. and Benko, Robert, “International Communications and Information Systems: The Impact on Trade,” AEI Foreign Policy and Defense Review, vol. 5, no. 4, 1985, pp. 1119; Feketekuty, Geza and Hauser, Kathryn, “The Impact of Information Technology on Trade in Services,” Transnational Data and Communications Report, vol. 8, 1985, pp. 220–24;Krommenacker, Raymond J., “The Impact of Information Technology on Trade Interdependence,” Journal of World Trade Law 20 (0708 1986), pp. 381400; and Krommenacker, Raymond J., “Services and Space Technology: The Emergence of Space Generated, Highly Integrated Goods and Services (IGS),” in Giarini, Orio, ed., The Emerging Service Economy (New York: Pergamon, 1987), pp. 173–92.

20. See Shelp, Ronald K., Beyond Industrialization: Ascendency of the Global Service Economy (New York: Praeger, 1981). See also Shelp, Ronald K., “Trade in Services,” Foreign Policy 65 (Winter 19861987), pp. 6483. Through his many writings and conference presentations, Shelp became one of the leading first-tier business intellectuals in the international discussion.

21. See Aronson, Jonathan, “Negotiating to Launch Negotiations: Getting Trade in Services on the GATT Agenda,” Pew Program in Case Teaching and Writing in International Affairs, Pittsburgh, 1988. Feketekuty highlights perhaps better than anyone our point about the independent influence of first-tier members. A counselor to the USTR, Feketekuty was essentially the government's “house intellectual” on services, and his analyses were considered abroad to be of descriptive and explanatory merit regardless of his bureaucratic affiliation.

22. For early and influential discussions of these and related issues, see Krommenacker, Raymond J., “Trade-Related Services and the GATT,” Journal of World Trade Law 13 (11-12 1979), pp. 510–22;Sapir, Andre and Lutz, E., “Trade in Services: Economic Determinants and Development-Related Issues,” World Bank staff working paper no. 480, Washington, D.C., 1981; Sapir, Andre, “Trade in Services: Policy Issues for the Eighties,” Columbia Journal of World Business 17 (Fall 1982), pp. 7783; and Cohen, Michael and Morante, Thomas, “Elimination of Nontariff Barriers to Trade in Services: Recommendations for Future Negotiations,” Law and Policy in International Business, vol. 13, 1981, pp. 495519.

23. Feketekuty, , International Trade in Services, p. 316.

24. Also important was a compromise on the scope of the project. Some delegations wanted an industry-by-industry study because of the varying types of regulations, domestic social concerns, and policy objectives in each. The United States, which feared this would facilitate arguments that some industries should be excluded from liberalization, insisted on a study of barriers across industries on the premise that their commonalities (from a corporate viewpoint) were greater than their differences (from a regulatory viewpoint). A dual-track approach was adopted so that each side had its way, but the pan-industry intellectual overlay favored by the Americans ensured that research focused on the generalizability of trade principles and barriers across cases. International commercial criteria thereby became a new yardstick for examining domestic regulations designed with other, often social policy criteria in mind.

25. Other new issues included “high-technology” goods, trade-related intellectual property rights, and trade-related investment measures for both goods and services.

26. Interview with a delegate from Brazil, , member of the Group on Negotiations on Services (GNS), GATT, Geneva, 06 1987.

27. For example, the second tier elaborated on the views set forth by the USTR, Brock, William E., in his article entitled “A Simple Plan for Negotiating on Trade in Services,” The World Economy 5 (11 1982), pp. 229–40. The chief EC delegate in the Jaramillo Group was John Richardson, who also chaired the EC Commission's task force. Like Geza Feketekuty of the USTR staff, Richardson was regarded, despite his bureaucratic affiliation, as a leading international authority on services concepts. For a particularly influential example of his work, see Richardson, John, “A Sub-Sectoral Approach to Services' Trade Theory,” in Giarini, The Emerging Service Economy, pp. 5982.

28. U.S. Government, U.S. National Study on Trade in Services: A Submission by the United States Government to the General Agreement on Tariffs and Trade (Washington, D.C.: Government Printing Office, 1984).

29. In addition to the national studies, see Oulton, Nicholas, International Trade in Services Industries: Comparative Advantage of European Community Countries (Brussels: EC Commission, November 1982).

30. Interview with Richardson, John, EC delegate to the GNS, GATT, Geneva, 06 1987.

31. The U.S.-Israel free trade pact of 1985 contained a nonbinding declaration of intent to liberalize a number of services industries. The first legally binding, broad agreement on trade in services was the U.S.-Canada Free Trade Agreement, which came into effect in 1989.

32. Interview with a delegate from Brazil, member of the GNS, GATT, Geneva, 06 1987.

33. See UNCTAD, Services and the Development Process, TB/B/1008/Rev.1 (Geneva: UNCTAD, 1984).

34. See UNCTAD, International Trade in Goods and Services: Protectionism and Structural Adjustment, TD/B/1008 (Geneva: UNCTAD, 1985).

35. See Clairmonte, Frederick F. and Cavanagh, John H., “Transnational Corporations and Services: The Final Frontier,” Trade and Development, no. 5, 1984, pp. 215–75.

36. See, for example, Benz, S., “Trade Liberalization and the Global Service Economy,” Journal of World Trade Law 19 (0304 1985), pp. 95120; Canton, I. D., “Learning to Love the Service Economy,” Harvard Business Review 62 (06 1984), pp. 8997; Gray, H. Peter, “A Negotiating Strategy for Trade in Services,” Journal of World Trade Law 17 (09-10 1983), pp. 377–88;Hindley, Brian and Smith, Alasdair, “Comparative Advantage and Trade in Services,” The World Economy 7 (12 1984), pp. 369–90;Malmgren, Harald B., “Negotiating International Rules for Trade in Services,” The World Economy 8 (03 1985), pp. 1126; Schott, Jeffrey J., “Protectionist Threat to Trade and Investment in Services,” The World Economy 6 (06 1983), pp. 195214; and Schultz, S., “Trade in Services: Its Treatment in International Forums and the Problems Ahead,” Intereconomics, 11-12 1984, pp. 267–73.

37. Since finance and telecommunications were thought to be the most important industries at stake, these received early attention. See, for example, Aronson, Jonathan D. and Feketekuty, Geza, “Meeting the Challenges of the World Information Economy,” The World Economy 7 (03 1984), pp. 6386; Beer, Barbro, “Informatics in International Trade,” Journal of World Trade Law 19 (1112 1985), pp. 570–78;Dizard, Wilson P., “U.S. Competitiveness in International Information Trade,” The Information Society, vol. 2, nos. 3 and 4, 1984, pp. 179216; Feketekuty, Geza and Hauser, Kathryn, “A Trade Perspective on International Telecommunications Issues,” Telematics and Informatics, vol. 1, no. 4, 1984, pp. 359–69;Gavin, Brigid, “A GATT for International Banking?Journal of World Trade Law 19 (03-04 1985), pp. 121–35; and Walter, Ingo, Barriers to Trade in Banking and Financial Services (London: Trade Policy Research Centre, 1985).

38. See Albrecht, K. and Zemke, R., Service America: Doing Business in the New Economy (Homewood, lll.: Dow Jones Irwin, 1985); Aronson, Jonathan D. and Cowhey, Peter F., Trade in Services: The Case for Open Markets (Washington, D.C.: American Enterprise Institute, 1984); Bannon, M. and Blair, S., Services Activities, the Information Economy and the Role of the Regional Center (Dublin: University College, 01 1985); Coffield, Shirley A., “International Services-Trade Issues and the GATT,” in Rubin, Seymour J. and Graham, Thomas R., eds., Managing Trade Relations in the 1980s: Issues Involved in the GATT Ministerial Meeting of 1982 (Ottawa, N.J.: Rowman & Allanheld, 1983), pp. 69108; Deardorff, A. V., “Comparative Advantage and International Trade and Investment in Services,” paper presented at the Research Seminar on International Economics, University of Michigan, Ann Arbor, 1984; Diebold, William Jr, and Stalson, H., “Negotiating Issues in International Service Transactions,” in Cline, William R., ed., Trade Policy for the 1990s (Washington, D.C.: Institute for International Economics, 1983), pp. 581610; Inman, Robert P., ed., Managing the Service Economy: Prospects and Problems (Cambridge: Cambridge University Press, 1985); Krommenacker, Raymond J., World-Traded Services: The Challenge for the Eighties (Dedham, Mass.: Artech House, 1984); Nusbaumer, Jacques, Les services: Nouvelle donne de l'economie (Paris: Economica, 1984), later published in English as The Services Economy: Lever to Growth (Hingham, Mass.: Kluwer, 1987); and Stern, Robert M., “Global Dimensions and Determinants of International Trade and Investment in Services,” paper presented at the Research Seminar on International Economics, University of Michigan, Ann Arbor, 1984.

39. After several years of highly interactive consultations between first- and second-tier members, the OECD Trade Committee's product was released in March 1987 and entitled “Elements of a Conceptual Framework for Trade in Services.” Some of the framework's concepts were carried into the multilateral negotiations by national delegates.

40. Orio Giarini later coauthored, with Stahel, Walter R., The Limits to Certainty: Facing Risks in the New Service Economy (Hingham, Mass.: Kluwer, 1990).

41. The purpose of the Services World Forum was to build direct links between key conceptual innovators from the first and second tiers. Orio Giarini served as president. Geza Feketekuty of the USTR staff was a vice president, as was Jacques Nusbaumer, who was the head of services activities in the GATT Secretariat. Among other noted analysts active in the Services World Forum were Claude Barfield of the American Enterprise Institute, who later organized a book series on trade in services; Albert Bressand, who in 1985 formed Prométhée, a research group that has sponsored many meetings and publications on services; Murray Gibbs and Bruno Lanvin, who were the chief researchers on services in the UNCTAD Secretariat; Mario Kakabadse and Raymond Krommenacker of the GATT Secretariat; Pipe, G. Russel, publisher of Transnational Data and Communications Report; Juan Rada, Director of IMEDE, based in Lausanne; and John Richardson, head of services in the EC Commission. All wrote prominent works cited elsewhere in this article. In the latter half of the decade, the Services World Forum played an additional important role by convening conferences that focused on services markets in Eastern Europe and helped extend the epistemic community into that region. The forum has published two books so far: Giarini, , ed., The Emerging Service Economy; and Bressand, Albert and Nicolaïdis, Kalypso, eds., Strategic Trends in Services: An Inquiry into the Global Services Economy (New York: Harper & Row, 1989).

42. Feketekuty, , International Trade in Services, p. 310.

43. Hindley and Smith, “Comparative Advantage and Trade in Services.”

44. See Djajic, Slobodan and Kierzkowski, Henryk, “Goods, Services and Trade,” mimeograph, Graduate Institute of International Relations, Geneva, 01 1986.

45. One extremely influential article attempted to set criteria distinguishing between “pure” trade and investment: Sampson, Gary P. and Snape's, Richard H.Identifying the Issues in Trade in Services,” The World Economy 8 (06 1985), pp. 171–82. Sampson, an analyst at UNCTAD at the time the article was written, later became head of services activities in the GATT Secretariat.

46. For an excellent discussion that received widespread attention in the Third World, see Rada, Juan F., “Advanced Technologies and Development: Are Conventional Ideas About Comparative Advantage Obsolete?Trade and Development, no. 5, 1984, pp. 275–96.

47. As Gold argued, “The services code would need an independent legal structure parallel to the GATT, with its provisions drafted to meet the special circumstances of trade in services. The fundamental principles of the GATT could be incorporated therein.” See Gold, Philip, “Legal Problems in Expanding the Scope of GATT to Include Trade in Services,” International Trade Law Journal 7 (Winter 19821983), p. 303. See also Gold, Philip, “Liberalization of International Trade in the Service Sector: Threshold Problems and a Proposed Framework Under the GATT,” Fordham International Law Journal 5 (Winter 19811982), pp. 371409; Roessler, Frieder, “The Scope, Limits and Function of the GATT Legal System,” The World Economy 8 (09 1985), pp. 287–98; and Whitford, Elaine M., “A Rainy Day for the GATT Umbrella: Trade Negotiations on Services,” North Carolina Journal of International Law and Commercial Regulation, vol. 14, 1989, pp. 121–33.

48. Interview with Filipe Jaramillo, head of the GNS, GATT, Geneva, 06 1987.

49. Especially important was the support of Jagdish Bhagwati, a Columbia University professor who has had high standing in the Third World and is now adviser to the GATT Secretary General. See the following works of Bhagwati: Splintering and Disembodiment of Services and Developing Countries,” The World Economy 7 (06 1984), pp. 133–44;Why Are Services Cheaper in the Poor Countries?Economic Journal 94 (06 1984), pp. 279–86; and GATT and Trade in Services: How We Can Resolve the North-South Debate,” Financial Times, 27 11 1985. Also influential was the work of Juan Rada, a Chilean who is director of IMEDE, Europe's largest management school. See Rada, “Advanced Technologies and Development.” For additional works concerning services and development, see Ewing, A. F., “Why Freer Trade in Services Is in the Interest of Developing Countries,” Journal of World Trade Law 19 (03-04 1985), pp. 147–69;Atinc, Tamar et al. , “International Transactions in Services and Economic Development,” Trade and Development, no. 5, 1984, pp. 141214; Gibbs, Murray, “Continuing the International Debate on Services,” Journal of World Trade Law 19 (05-06 1985), pp. 199218; Sapir, Andre, “North-South Issues in Trade in Services,” The World Economy 8 (03 1985), pp. 2742; Schott, Jeffrey J. and Mazza, Jacqueline, “Trade in Services and Developing Countries,” Journal of World Trade Law 20 (05-06 1986), pp. 253–73;Shelp, Ronald et al. , Service Industries and Economic Development: Case Studies in Technology (New York: Praeger, 1984); Riddle, Dorothy I., Services-Led Growth: The Role of the Service Sector in World Development (New York: Praeger, 1987); and OECD, Trade in Services and Developing Countries (Paris: OECD, 1989).

51. GATT, “Ministerial Declaration on the Uruguay Round,” Geneva, 25 09 1986, pp. 1112.

52. For example, the GNS met twenty-seven times for three to five days each between November 1986 and January 1990. Delegations submitted over eighty contributions dealing with a wide range of topics, including general principles, their application in specific sectors, and the relevance of existing multilateral disciplines.

53. Even the OECD, normally a bastion of free trade thinking, admitted this was a problem. In its 1987 framework document, which was an influential input for the GNS, it noted the following: “Domestic regulation is … an important aspect of the proper functioning of some service industries. The need for countries opening their markets to each other's industries to obtain certain guarantees in this area may justify attaching an element of conditionality to nondiscrimination.” See OECD Trade Committee, “Elements of a Conceptual Framework for Trade in Services,” p. 8.

54. See Balasubramanyam, V. N., “International Trade in Services: The Issue of Market Presence and Right of Establishment,” in Robinson, Peter, Sauvant, Karl P., and Govitrikar, Vishwas P., eds., Electronic Highways for World Trade: Issues in Telecommunications and Data Services (Boulder, Colo.: Westview Press, 1989). This work is part of a book series published by the Atwater Institute in Montreal. As with the conferences of the Services World Forum, the conferences of the Atwater Institute became important locales for first- and second-tier interaction.

55. See Nicolaïdis, Kalypso, “Contractors vs. Contactors: Towards an Integrated Definition of Trade in Services,” Prométhée Working Papers, no. 37, prepared for UNCTAD (Paris: Prométhée, 1987).

56. See Bhagwati, “Splintering and Disembodiment of Services and Developing Countries.’

57. See Fong, Pan Eng and Low, Linda, “Labour Mobility, Trade in Services and the Uruguay Round: The Perspective of ASEAN Countries,” in UNCTAD, Services in Asia and the Pacific: Selected Papers, vol. 1 (New York: United Nations, 1990), pp. 141–75.

58. SeeRada, Juan F., “Information Technology and Services,” in Giarini, The Emerging Service Economy, pp. 127–71.

59. See UNCTAD, Trade and Development Report, 1988—Part Two: Services in the World Economy, TDR/8 (Geneva: UNCTAD, 1989).

60. For a discussion of these access issues in the TDF context, see Sauvant, Karl P., International Transactions in Services: The Politics of Transborder Data Flows (Boulder, Colo.: Westview Press, 1986).

61. The well-noted books were often edited volumes around which authors worked closely together. These included the following: Giarini, Orio and Roulet, Jean Remy, eds., L'Europe face à la nouvelle economie des services (Europe and the new service economy) (Paris: Presse Universitaire de France, 1987); Lanvin, Bruno, ed., Global Trade: The Revolution Beyond the Communication Revolution (Montpellier: IDATE, 1989); Pauli, Gunter, Les services: Nouveaux moteur de notre economie (Services: The new engine of our economy) (Paris: Duculot Perspectives, 1987); Messerlin, Patrick A. and Sauvant, Karl P., eds., The Uruguay Round: Services in the World Economy (Washington, D.C.: World Bank, 1990); Giarini, , ed., The Emerging Service Economy; and Bressand, and Nicolaïdis, , eds., Strategic Trends in Services. See also Delaunay, Jean Claude and Gadrey, Jean, Les enjeux de l'economie de services (The stakes of a service economy) (Paris: Presses de la Fondation Nationale des Sciences Politiques, 1987); Nicolaides, Phedon, Liberalizing Service Trade: Strategies for Success (London: Royal Institute of International Affairs, 1989); and Nusbaumer, Jacques, Services in the Global Market (Hingham, Mass.: Kluwer, 1987). Articles and chapters included the following: Bhagwati, Jagdish N., “International Trade in Services and Its Relevance for Economic Development,” in Giarini, The Emerging Service Economy, pp. 334; Hirsch, Seev, “A Service or Not a Service: Defining the Question by Its Terms,” The World Economy 11 (12 1988), pp. 565–67;Hoekman, Bernard M., “Services as the Quid Pro Quo for a Safeguards Code,” The World Economy 11 (06 1988), pp. 203–16;Nayyar, Deepak, “Some Reflections on the Uruguay Round and Trade in Services,” Journal of World Trade Law 22 (0102 1988), pp. 3548; Stalton, H., “U.S. Trade Policy and International Service Transactions,” in Inman, Managing the Service Economy, pp. 161–78; and Stern, Robert M. and Hoekman, Bernard M., “Issues and Data Needs for GATT Negotiations on Services,” The World Economy 10 (03 1987), pp. 3960.

62. In addition to the Services World Forum, the following were especially active as sponsors of meetings and studies during the second half of the 1980s: the Center for the Study of International Negotiations and the Applied Services Economics Center, both in Geneva; Prométhée, the Paris-based group that established a newsletter, organized meetings, and founded the Thinknet Commission, an international commission on networked services markets; the Lyon-based Centre d'Etude de l'Economie des Services (CEDES), which set up a French foundation for services research; and the International Service Institute in Tempe, which produced a bulletin. Other groups with services activities included the Berkeley Roundtable on International Economics, the Nederlands Economisch Instituut, the Canadian Institute for Research on Public Policy, the Pacific Trade and Development Conferences, and the Institute for World Economics of the Hungarian Academy of Science. In 1987, the EC Commission established Réseau Européen de Documentation et d'Information sur les Marchés de Services (REDIS), a data network that interconnected European research programs on services.

63. The series was published in 1988 by Ballinger Press of Cambridge, Mass., and consisted of the following titles: Feketekuty, , International Trade in Services;Aronson, Jonathan and Cowhey, Peter, When Countries Talk: International Trade in Telecommunications Services;Kasper, Daniel, Deregulation and Globalization: Liberalizing Trade in Air Services;Lee, James and Walter, David, International Trade in Construction Design and Engineering Services;Noyelle, Thierry and Dutka, Anna, International Trade in Business Services: Accounting, Advertising, Law and Management Consulting;Walter, Ingo, Global Competition in Financial Services: Market Structure, Protection, and Trade Liberalization;White, Lawrence, International Trade in Ocean Shipping Services: The United States and the World; and Wildman, Steven S. and Siwek, Stephen E., International Trade in Films and Television Programs. The purpose of the series was to analyze international competition in each sector and then “formulate and assess policy approaches for opening services markets through an umbrella services agreement and subsequent individual sector agreements in GATT.”

64. As a GNS delegate from Australia stated in a June 1988 interview in Geneva, “The people who we need are people close to the GATT, who understand that concepts work in tandem, people who are both visionaries and practitioners of trade law.” Not surprisingly, those who were often mentioned were GNS members or were those providing support to the GNS. The second-tier member most consistently cited by negotiators as influential was John Jackson. One of the world's leading experts on GATT law, Jackson authored a widely noted piece on the institutional framework within which general principles and sectoral rules could be devised; see Constructing a Constitution for Trade in Services,” The World Economy 11 (06 1988), pp. 187202. For a broader treatment of the constitutional issues, See also Jackson's, Restructuring the GATT System (London: Francis Pinter, 1990).

65. U.S. Office of Technology Assistance, International Competition in Services: Banking, Building, Software, Know-How … (Washington, D.C.: Government Printing Office, 07 1987). Skepticism was also expressed about banking and finance, the sectors in which Japanese firms had grown rapidly in size and competitiveness. See McCulloch, Rachel, “International Competition in Services,” working paper no. 2235, National Bureau of Economic Research, Cambridge, 1989.

66. For an optimistic report prepared by the main corporate lobby for EC services firms, see European Community Services Group (ECSG), Report on Trade in Services (Brussels: ECSG, 04 1987). See also Peat Marwick and Company, A Typology of Trade Barriers to International Services Industries (Brussels: EC Commission, 12 1986).

67. For example, a GATT study indicated that the top five services exporters in 1987 were the United States, with an 11.2 percent share of world services trade; France, with 10.6 percent; Britain, with 8.6 percent; West Germany, with 8.6 percent; and Italy, with 6.5 percent. Japan, a former laggard, had leaped rapidly to the sixth position with 5.5 percent. Figures were cited by Montagnon, Peter in “Project to Unravel the Numbers for Trade in Services,” Financial Times, 29 09 1989.

68. See, for example, U.S. Government, “Concepts for a Framework Agreement on Trade in Services,” MTN.GNS/W/24, GATT, Geneva, 10 1987; and EC Commission, “A Possible Conceptual Structure for a Framework Agreement,” MTN.GNS/W/29, GATT, Geneva, 12 1987.

69. UNCTAD, “Developments in the Uruguay Round Negotiations on Trade in Services: Discussion Paper,” prepared during a high-level brainstorming session on trade in services, Cairo, 18–23 05 1991, p. 3.

70. These analyses were later published in a book series. See, for example, Gibbs, Murray and Hayashi, Michiko, “Sectoral Issues and the Multilateral Framework for Trade in Services: An Overview,” in UNCTAD, Trade in Services: Sectoral Issues (New York: United Nations, 1989), pp. 148; and Brusick, Philippe, Gibbs, Murray, and Mashayekhi, Mina, “Anti-Competitive Practices in the Services Sector,” in UNCTAD, Uruguay Round: Further Papers on Selected Issues (New York: United Nations, 1990), pp. 129–56.

71. See, for example, the following works of the United Nations Centre on Transnational Corporations: Transnational Corporations and the Growth of Services: Some Conceptual and Theoretical Issues (New York: United Nations, 1989); Foreign Direct Investment and Transnational Corporations in Services (New York: United Nations, 1989); and Transnational Corporations, Services and the Uruguay Round (New York: United Nations, 1990).

72. See Trade Negotiation Committee, “Mid-Term Meeting,” MTN.TNC/11, GATT, Geneva, 21 04 1989, p. 38. The principles mentioned included transparency, progressive liberalization, national treatment, MFN, market access, increasing participation of LDCs, safeguards and exceptions, and the right to introduce regulations consistent with the framework. The Montreal declaration did not say how these were to be formulated or implemented.

73. Trade Negotiation Committee, “Mid-Term Meeting,” p. 41.

74. Among the sectors analyzed by the OECD committees were insurance, banking, tourism, maritime transport, construction and engineering, management consulting, professional services, telecommunications, and computer and audiovisual services. For a brief review of the OECD analyses, see Devos, Serge A., “Services Trade and the OECD,” Journal of Japanese Trade and Industry, no. 4, 1984, pp. 1619.

75. See Nicoläidis, Kalypso, “Mutual Recognition: The New Frontier of Multilateralism?Project Prométhée Perspectives, no. 10, 06 1989, pp. 2134.

76. For discussions concerning telecommunications, see Cowhey, Peter F., “The International Telecommunications Regime: The Political Roots of Regimes for High Technology,” International Organization 44 (Spring 1990), pp. 169–99; and Drake, William J., “Asymmetric Deregulation and the Transformation of the International Telecommunications Regime,” in Noam, Eli M. and Pogorel, Gerard, eds., Asymmetric Deregulation: The Dynamics of Telecommunications Policy in Europe and the United States (Norwood, N.J.: Ablex, forthcoming).

77. Pipe, G. Russel, the publisher of Transnational Data and Communications Report, had been a central figure in getting TDF on the international agenda. He established the Telecommunications Services Trade Project and organized a series of “bridge-building” meetings that took place in Brussels and Geneva beginning in 02 1988. Pipe worked closely with the telecommunications working party, in particular by helping some LDCs prepare influential position papers, and was also a cofounder of the Applied Services Economy Center, which organized similar meetings including first- and second-tier members.

78. U.S. Government, “Communication from the United States: Agreement on Trade in Services,” MTN.GNS/W/75, GATT, Geneva, 17 10 1989.

79. GNS, “Elements for a Draft Which Would Permit Negotiations to Take Place for the Completion of All Parts of the Multilateral Framework,” MTN.GNS/28, GATT, Geneva, 18 12 1989.

80. Hills, Carla, cited by Peter Truell in “Trade Talks Are Key for Many U.S. Firms, but They're Worried,” Wall Street Journal, 3 12 1990, p. 16.

81. lercq, Willy De, cited by Mark M. Nelson and Tim Carrington in “If GATT Talks Fail, There's Likely to Be Plenty of Blame for All,” Wall Street Journal, 30 11 1990, p. 2.

82. See GNS, “Draft Text of a General Agreement on Trade in Services,” MTN.TNC/W/35, Rev.l, GATT, Geneva, 22 11 1990.

83. Ibid., p. 368.

84. Ibid., p. 341.

85. A remaining problem is what to do about the fourth quadrant, into which qualitative, nondiscriminatory measures would fall. This “gray area” includes a wide variety of “soft” measures that do not impede entry into a market but instead impede operations within a market. Examples are the diploma or qualification requirements applied nationally to most professions and the licensing requirements applied to financial services firms. Such requirements impose duplication costs to foreign providers, all the more so when they also vary within a given country, as is the case for the different bar exams administered to lawyers in the fifty American states. As discussed above, a clear remedy is to engage in harmonization or mutual recognition agreements as provided under Article VII. But what can be done in the absence of such agreements? Currently, the GNS is considering two options. The first is to define a list of the measures to be specified according to “objective” criteria. The second is simply to deal with the measures on a “bottom up” basis—that is, wait until a party complains about a limitation not mentioned in another's schedule and determine then whether it is contrary to the spirit of the GATS text. For further discussion, see GNS, “Notes on the Meeting of 24–28 June 1991,” MTN.GNS/43, GATT, Geneva, 15 07 1991, pp. 89.

86. Interview conducted at GATT in 07 1991.

87. The road transportation annex, for example, was included largely because Austria and Switzerland adamantly refused to have large foreign lorries on their roads.

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International Organization
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