Magazine article International Trade Forum

Business Aspects of the Uruguay Round Agreements

Magazine article International Trade Forum

Business Aspects of the Uruguay Round Agreements

Article excerpt

The Uruguay Round agreements on services and on intellectual property rights are important for business firms.

Trade in services is growing and currently accounts for over 20% of all international trade. The General Agreement on Trade in Services (GATS), which has been negotiated in the Uruguay Round, applies the basic rules on trade in goods to trade in services. However, the rules have been suitably modified to take into account the differences between goods and services and the four modes in which international trade in services takes place.

The GATS consists of:

* A framework of rules; and

* Liberalization commitments specific to the service sectors and subsectors listed in each country's schedule.

The framework of rules requires countries to apply MFN treatment by not discriminating between service products and service providers of different countries. However, it may be possible for a country to maintain for a transitional period of ten years measures that are not consistent with the MFN principle. The national treatment principle, as embodied in the framework of rules, visualizes that countries should not treat foreign services and service providers less favourably than their own service products and service providers. While the framework does not impose a binding obligation, it requires countries to indicate in their schedule of concessions the sectors in which and the conditions subject to which such national treatment is to be extended.

Among the other important provisions of the framework of rules are those which:

* Require member countries to ensure transparency in the regulations applicable to service industries and activities.

* Aim at ensuring the increasing participation of developing countries in trade in services.

Business implications:

The commitments which some developing countries have taken in the financial sector will lead to the establishment of more foreign banks, insurance companies and securities firms in these countries. The efficiency and competitiveness of manufacturing industries as well as of agricultural producers depend greatly on the availability of services (banking, insurance and other services) and the existence of a telecommunications system and information infrastructure. In most developing countries, the growth of the service industries has, however, lagged behind that of the manufacturing sector. Furthermore, because of the high level of protection extended to the service sector, its level of efficiency is low. The development of an efficient and thriving service sector is, therefore, a high priority for many countries.

In the circumstances, the commitments assumed by governments provide service industries in developing countries a new opportunity to collaborate with foreign service industries and to benefit from their technology. In negotiating collaborative arrangements, the industry can use as bargaining leverage the limitations imposed by their governments in their schedules of commitments. These, inter alia, specify that approval will be granted only if foreign service suppliers agree to bring in the most up-to-date technologies and to train local employees in their use.

One of the major handicaps which service industries in developing countries suffer when entering into collaborative arrangements is their lack of knowledge of the commercial and technical aspects of the services and technologies they want to obtain. The GATS therefore provides for the establishment by developed countries of contact points from which such information can be obtained by interested service industries in developing countries. These contact points are to be set up before the end of 1996.

On the export side, developing countries are generally considered to have a comparative advantage in service sectors that are either labour intensive or require highly skilled technical personnel.

The sectors or subsectors in which it may be possible for these countries to develop trade, taking into account the above two factors, are listed below:

* Business services, including management consultancy services, computer services, professional services, R & D services, rental services. …

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