Negotiating Services Agreements Geza Feketekuty

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

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

Rationale and Venue for Problem Solving Negotiations l 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 l Mutual efforts to address issues in a problem- solving context can benefit both sides l Periodic bilateral meetings between trade officials provide opportunity to address bilateral issues

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Framing the Issue l Careful framing of the issue at both the national and international level is critical to Negotiations l At National Level Statement of Issue Should –Highlight the key commercial and policy issues –Provide a basis for domestic coalition building l 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

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

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

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

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

Strategies for Formulation of Requests l 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) l Defensive – Minimize Import Opportunities –Make few requests, to signal limited interest –Request changes difficult for other countries to implement to deflect foreign pressure

Strategies for Formulation of Offers l Domestic Reform Strategy –What regulatory reforms/removal of import barriers can we offer that serves domestic regulatory reform objectives? l 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?

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

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

Interpreting What is Said: Identify l Beliefs l Positions l Interests l Arguments

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

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