US embassy cable - 05GENEVA1238

UNCLAS SECTION 01 OF 04 GENEVA 001238 
 
SIPDIS 
 
SENSITIVE 
 
PASS USTR FOR BLISS/HOOKER 
DOC FOR SHAGIGH, LMARRINACCIO, EALFORD, RBOLL 
DOT FOR DMARVICH, SHATLEY 
DOE FOR HASAMOAH 
 
E.O. 12958:  N/A 
TAGS: ETRD, ECON, WTO, Trade 
SUBJECT:  WTO SERVICES NEGOTIATIONS - FEBRUARY 7-25, 2005 
 
This cable is Sensitive but Unclassified.  Please handle 
accordingly.  Not for internet retransmission. 
 
1.  (U)  Summary:  The WTO services three week "mega cluster" 
took place in Geneva, February 7- 25, 2005.  The meetings focused 
on preparations for revised offers indicatively due May 2005 with 
many "friends" groups presenting sector-specific proposals aimed 
at eliciting market access commitments in these areas.  Chairman 
Jara repeated the same concerns he raised at the TNC about the 
poor state of play for services negotiations.  Jara expressed 
concern that much work had to be done between now and Hong Kong. 
The U.S. and other developed countries encouraged members to 
submit initial offers and stressed the importance of meeting the 
May 2005 deadline for submission of revised offers.  The U.S. met 
bilaterally with 34 Members (see para 13) and participated in 
multiple friends groups (see para 14) to advance market access 
negotiations. Members doggedly stressed the importance of Mode 4 
(movement of natural persons) and emphasized that without 
additional Mode 4 market access from the U.S., the negotiations 
will not move forward.  A half-day informal session devoted to 
Mode 4.  The Council for Trade in Services' (CTS) MFN Exemption 
Review continued.  The U.S. tabled a well-received proposal on 
horizontal transparency disciplines in the Working Party on 
Domestic Regulations.  Other working parties, including Working 
Party on GATS Rules, Committee on Specific Commitments, and the 
Committee on Trade in Financial Services also met.  The Special 
Session Chair proposed benchmarks to assess progress in the 
services negotiations and considered for the December WTO Hong 
Kong Ministerial.  The next cluster will not convene until late 
June to allow time to prepare revise offers by the May deadline. 
End Summary. 
 
COUNCIL FOR TRADE IN SERVICES SPECIAL SESSION (CTSSS) 
 
2.  (SBU)  Assessment:  Members responded to the WTO 
Secretariat's presentation on services assessment based on their 
 
SIPDIS 
recent trade report.  The report underscored the benefits of 
liberalizing infrastructure services, such as transportation, 
telecommunications and financial services.  Developing countries 
such as Pakistan, Uganda, Senegal and Nigeria noted the benefits 
they have reaped from telecommunications liberalization. 
Responding to some members, including South Africa and the 
Philippines', continued insistence that they need a methodology 
for assessment in order to prepare an initial offer, the Chair 
reminded members that much assessment work has to be done on a 
case-by-case basis and that this has been done.  Hong Kong, the 
EC and others urged members to apply what they have learned about 
the benefits of services liberalization to develop initial 
offers. 
 
3.  (SBU)  State of Play:  Chairman Jara repeated the same 
concerns he raised at the TNC about the poor state of play for 
services negotiations.  He expressed concern that much work had 
to be done between now and Hong Kong.  Namely, he said more 
initial offers had to be tabled; May revised offers had to 
demonstrate improvements; the importance of services trade 
commitments must be raised at all levels with Ministers, 
including mini-Ministerials; and, that some work had to be done 
on how to organize, including parallel work on rules and domestic 
regulations.  Indonesia, Barbados and Uganda announced that they 
would be tabling offers in the coming days.  (Comment:  Shortly 
after the cluster, Guyana and Grenada also tabled initial offers. 
End Comment).  The Chairman also recognized that while rules work 
required further examination, proposals tabled on domestic 
regulations revealed that a package could emerge that would yield 
some promising results by Hong Kong.  He said that his plan for 
the next cluster was to hold a session for LDCs to enable them to 
voice their interests and discuss how to enhance their 
participation in the request/offer process.  He applauded the 
informal Mode 4 discussions and he may decide to hold further 
Mode 4 consultations as well as consultations on other issues, 
such as cross border supply - Mode 1.  The Chair, noting several 
Members' interest in informal intersessional meetings to advance 
Domestic Regulation work, coordinate inputs from friends groups, 
and move market access proposals, suspended meetings until April 
27, rather than closing the Special Session.  Ambassadors for the 
U.S., India, Hong Kong, EC, Mexico, Uganda, Zambia, Peru, and 
Singapore made strong statements of support for the negotiations. 
 
4.  (SBU)  Chairman Jara informally introduced the Secretariat's 
thinking on how to examine offers.  The Secretariat presentation 
examined offers in the context of Uruguay Round commitments, 
highlighting the developed countries' already extensive 
commitments compared to developing countries very limited 
commitments.  The paper then continued to examine where Members 
should be with regard to existing liberalization and possible 
thinking on a benchmark to measure improvements. 
 
5.  (SBU)  Several negotiating proposals and friends group 
statements were tabled and preliminarily discussed in the Special 
Session. On telecommunications, the EC tabled a paper without 
notice to Telecom Friends, which appeared to undermine the U.S. 
position to preserve coverage of value added telecommunications 
services.  Consequently, the U.S. introduced its own paper.  Many 
other Friends groups, including Express Delivery Friends, 
Financial Services Friends, and Environmental Friends, introduced 
and/or discussed negotiating proposals.  Some developing 
countries stressed the need for construction services 
commitments. 
 
6.  (SBU)  Mode 4 (Temporary Entry):  A special informal session 
of the Council for Trade in Services was devoted to discussion of 
Mode 4 issues.  The Mode 4 discussions took a very polarizing 
tone, as Mode 4 demandeurs began to express their requests in the 
form of an ultimatum to developed countries, particularly to the 
U.S.  The EC tabled a paper on Mode 4 common categories (co- 
sponsored by Canada, Bulgaria and Romania) and India tabled a 
competing paper (co-sponsored by Argentina, Chile, Colombia, 
Mexico, Peru, Philippines, Pakistan, Thailand and Uruguay) that 
went beyond categorization to stress specific market access 
elements.  Chile, Colombia and Peru argued that while 
transparency for Mode 4, including common categories and 
definitions, was useful, market access was of higher importance. 
Indonesia, South Africa, Mexico, Brazil and China also stressed 
the importance of mode 4 for development.  The EC ventured to say 
that the GATS was not limited by a particular skill level and 
that it shared the view that transparency was just a stepping 
stone to more mode 4 market access commitments.  Developing 
countries focused on access for contract service providers and 
independent professionals (both without a wage parity 
requirement).  Interventions from Australia, New Zealand and 
Korea cautioned Members that domestic immigration regimes had to 
be taken into account.  Switzerland stressed the need for wage 
parity.  The U.S. intervened to support the basic principles of 
transparency and uniformity in scheduling of Mode 4 commitments, 
but did not directly address market access issues. 
 
7.  (SBU)  Least Developed Countries, including Uganda's 
Ambassador, stressed their need for commitments for unskilled 
workers.  Uganda's Ambassador also said that developed countries' 
visa process was burdensome and too expensive and suggested that 
developed countries' return visa application fees when visas are 
denied.  The New Zealand responded that unskilled and low-skilled 
labor was not within the GATS scope.  Various developing 
countries stated that commitments in these areas would be the 
appropriate response to the development aspect of the 
negotiations. 
 
MFN REVIEW 
 
8.  (SBU)  The MFN exemption review mandate requires examination 
of whether the circumstances still exist for maintenance of each 
exemption and a determination of the date for the next review. 
Hong Kong China, China, Korea, Japan, Mexico and Chinese Taipei 
demanded that all MFN exemptions be eliminated and complained 
that not all of their questions from the last cluster had been 
addressed.  These members also urged that the review continue to 
the next cluster. (Comment: Some of these proponents are 
targeting U.S. maritime related exemptions and seek to engage in 
protracted questions. End Comment.)  The Chair decided to leave 
the items on the agenda for the next meeting and hold 
consultations on the question of outstanding responses and the 
last part of the mandate to determine the date for the next 
review. 
 
SUBSIDIARY BODIES 
 
9.  (SBU)  Working Party on Domestic Regulation (WPDR):  Members 
further discussed Colombia's paper concerning alleged burdensome 
visa procedures.  This paper is particularly controversial 
because it asserts that countries' immigration regimes, i.e. 
visas, are within the GATS scope and subject to GATS disciplines. 
Some developed countries, such as the U.S., EC, and Australia 
believe that visas are not included in the GATS scope.  Mexico 
gave a detailed power point presentation on its domestic 
experience in administering general technical standards 
disciplines.  Also, the U.S. and two groups of developing 
countries introduced papers and entertained preliminary 
reactions.  The U.S. paper proposed horizontal regulatory 
disciplines on transparency; the India, Chile, Mexico and 
Thailand paper addressed horizontal disciplines on qualification 
requirements and procedures; and, the Philippines, Colombia, 
Brazil, Dominican Republic and Peru paper introduced a 
comprehensive proposal for disciplines.  The U.S. transparency 
proposal was well received and many delegations raised 
constructive questions including Brazil, India, and Colombia. 
(Comment:  Horizontal transparency disciplines are a key U.S. 
objective for the DDA.  The U.S. proposal covers all sectors and 
modes of supply, with the exception of specific concerns about 
entry authorizations (visas).  End Comment). 
 
10.  (SBU)  Working Party on GATS Rules (WPGR):  The WPGR 
commenced with a constructive discussion of the U.S. paper on an 
information exchange on subsidies by sector.  The U.S. stressed 
that the purpose of the paper was to provide some focus to the 
subsidies discussion rather than seek consensus on approach. 
While delegations had different views on where to begin the 
information exchange, most delegations welcomed the U.S. idea to 
focus on a few sectors at a time.  Members continued to raise 
concerns with an EC government procurement proposal that suggests 
that market access and national treatment disciplines apply to 
GATS Art. XIII (government procurement).  India, Malaysia and 
others argued that Art. XIII explicitly excludes market access 
and national treatment and if any area were covered, it would be 
transparency. However, India and Egypt suggested that since the 
Singapore Issue of Transparency in Government Procurement was 
"dropped" from the overall DDA, it seemed the same was the case 
for the Services mandate.  The U.S. noted that it did not share 
India and Egypt's interpretation that transparency had dropped 
from the Services procurement mandate.  Delegations further 
discussed an emergency safeguard mechanism (ESM), though no 
resolution surfaced.  ESM opponents assert that there is 
insufficient data in services to make the necessary causal link 
to injury.  Hong Kong China drew a comparison between Economic 
Needs Tests (ENTs) and ESMs and suggested that Members were being 
hypocritical in their ESM opposition.  The U.S. disagreed with 
Hong Kong China that all ENTs served as ESMs and said that it was 
up to ESM proponents (ASEANS minus Singapore) to demonstrate how 
a multilateral emergency mechanism could be employed and 
enforced. 
 
11.  (SBU)  Committee on Specific Commitments (CSC):  Under the 
standing item on "scheduling issues," the Committee continued 
discussing Hong Kong China's and Chinese Taipei's general 
questions on ENTs and other areas.  In informal mode, the 
Committee also discussed how to proceed on Brazil's request to 
discuss "technical" questions on offers in a multilateral forum. 
The EC suggested that it would hold an open-ended bilateral with 
all interested Members to answer all questions on their offer. 
The U.S. reiterated that it would continue to address questions 
on its offer bilaterally but that it was open to answering 
strictly "technical" questions about its offer in the CSC in 
informal mode.  This way, developing countries with capacity 
constraints could come to the regularly scheduled CSC and take 
advantage of hearing responses to "technical" questions, 
determined as such by the U.S., in informal mode without 
frustrating the confidential nature of the request/offer process. 
The Chair will continue consulting on this matter. 
 
12.  (SBU)  Council on Trade in Financial Services (CTFS): The 
CTFS highlight was the Friends of Financial Services presentation 
of the liberalization statement.   The friends signaled that co- 
sponsors would be sought for the version to be tabled in the 
Special Session.  Morocco, Antigua and Barbuda, and others spoke 
in general support of the concepts but stressed consideration of 
developing countries' special regulatory needs.  The CTFS also 
noted that Brazil, Jamaica and the Philippines have not yet to 
accept the Fifth Protocol.  Jamaica and Brazil explained that the 
delay was due to their domestic processes. 
 
BILATERALS AND PLURILATERALS 
 
13.  (SBU)  Bilaterals:  The U.S. participated in over 34 
bilaterals, meeting with all U.S. priority markets, except 
Venezuela.  Bilateral meetings included: Argentina, Australia, 
China, Egypt, India, Israel, Nigeria, Uruguay, Tunisia, Pakistan, 
Sri Lanka, EC, Brazil, Korea, Japan, the African Group and LDCs, 
Kenya, South Africa,  Switzerland, Norway, Malaysia, Indonesia, 
Philippines, New Zealand, Canada, Hong Kong, Turkey, Jamaica, 
Thailand, Mexico, and a Group of Gulf Countries (Oman, Bahrain, 
Kuwait, and UAE).  Bilateral engagement had a higher level of 
focus on specific market access interests.  In all bilaterals, 
the U.S. focused its market access request on the following key 
sectors: energy services, financial services, telecommunications, 
express delivery, environmental services, computer-related 
services and audiovisual services.  The most disappointing 
bilateral was with the EC, which accused the U.S. of backtracking 
from its existing commitments and attacked the U.S. for not 
including Mode 4 in its initial offer.  Hong Kong China expressed 
its interest in maritime and the elimination of MFN exemptions. 
South Africa and the Philippines still could not reassure the 
U.S. that they would soon table their much-sought initial offers, 
though they indicated that they had already prepared the offers. 
 
14.  (SBU)  Friends Groups:  The U.S. participated in 
approximately 10 friends group meetings.  Friends group 
engagement was more refined and focused, responding to 
suggestions that the Friends groups should mobilize to advance 
the negotiations.  Under U.S. leadership, Financial Services 
friends (Canada, EC, Japan, Switzerland, Singapore, Norway, 
Australia, Bahrain, Panama, Oman and Chinese Taipei) succeeded in 
presenting a joint statement to promote the sector.  Similar 
statements on logistics, legal, computer and related, telecom, 
postal/courier, and environmental services were also tabled.  The 
U.S. also tabled a telecom classification proposal to counter an 
EC telecom classification paper.  In addition, the U.S., Canada 
and Japan co-sponsored an Air Annex statement to counter an 
Australia, EC, Chile, New Zealand, Norway and Switzerland 
proposal that invited Members to schedule ground handling 
services commitments, which is outside the GATS' scope.  Brazil 
and South Africa supported the U.S. position against the 
inclusion of ground handling services.  Friends groups also 
organized seminars promoting liberalization in financial, 
maritime, and education services. 
 
15.  (SBU)  LDC/Africa Group meeting:  The U.S. met jointly with 
the African Group and LDCs. The U.S. highlighted the benefits of 
liberalizing infrastructure services, such as telecommunications, 
financial services, and energy services, and linked services 
liberalization to countries' various development goals.  Drawing 
upon available data on trends in developing countries, the U.S. 
proposed ideas for requests and offers.  Nigeria indicated that 
it was preparing an initial offer, which would include energy 
services and that it would like more technical assistance. 
Rwanda asked how the U.S. intended to address Mode 4, 
underscoring that many LDCs do not have resources to request 
anything beyond Mode 4.  The U.S. responded by highlighting our 
current Mode 4 commitments, which are largely unmatched by most 
other countries and reminded the group of our political 
sensitivities.  The U.S. also suggested that our transparency 
disciplines proposal attempted to respond to some developing 
country concerns in that it covers all modes of supply.  The U.S. 
highlighted technical assistance work with the International 
Trade Centre, the WTO Secretariat and bilateral programs. 
 
16.  (SBU)  APEC Caucus:  Hong Kong China hosted an APEC Caucus 
meeting to discuss how to foster the GATS negotiations.  Various 
members suggested that the Caucus do more in the area of 
assessment and transparency and Chile prompted Thailand to 
suggest work on licensing and qualification requirements.   It 
was also suggested that that the chair, Hong Kong, pursue APEC 
statements that maintain the importance of services negotiations 
in the Round. 
 
17.  (SBU)  Quad-Jara meeting:  Chairman Jara indicated that he 
had mixed views on the form of the "first approximation", though 
he believes that it will be important for Members to assess 
revised offers' for Hong Kong.  The EC fears that Jara's talk of 
broad benchmarks might encourage Members to hold tabling their 
revised offers in May until a consensus is reached on a general 
benchmark.  The U.S. shares the EC's concern, but supports Jara 
undertaking consultations in small groups to avoid services 
getting too behind the curve.  Deily