In
general, the WTO's services agreement specifies that each member shall provide
non-discriminatory treatment to services and service suppliers of other WTO members. The
decision on a service waiver by council for trade in services in November 30, 2011;
however, makes an exception to this principle. The waiver would allow WTO
members to deviate from their most-favored nation (MFN) obligation, allowing
Members to undertake preferential market access commitments in favor of LDCs.
The
waiver recognizes that the special economic situation of LDCs, and their
development, trade and financial needs, amounts to an exceptional circumstance
that prevents LDCs from securing an adequate share in the growth of world trade
in services. These modalities were established in September 2003 also provided
guidance in this regard. This waiver would last for 15 years from the date of
adoption.
1.
Members may provide preferential treatment to services and service
suppliers of least-developed countries with respect to the application of
measures described to this waiver, than to like services and service suppliers
of other Members. Any such treatment shall be granted immediately and
unconditionally to like services and service suppliers of all least-developed
country Members. While preferential
treatment with respect to the application of measures is subject to approval by
the Council for Trade in Services in accordance with its procedures and will be
annexed to this waiver.
2.
Each Member granting preferential treatment
pursuant to this waiver shall, upon request, promptly enter into consultations
with any Member with respect to any difficulty or matter that may arise as a
result of such treatment. Where a Member considers that any benefit accruing to
it under the GATS may be or is being impaired unduly as a result of such
treatment, the consultations shall examine the possibility of action for a
satisfactory adjustment of the matter.
3.
Any preferential treatment accorded pursuant
to this Waiver shall be designed to promote the trade of least-developed
countries in those sectors and modes of supply that are of particular export
interest to the least-developed countries and not to raise barriers or create
undue difficulties for the trade of any other Member. Such preferential
treatment shall not constitute an impediment to the reduction or elimination of
market access barriers on a most-favoured-nation basis.
4.
In accordance with the provisions of paragraph
4 of Article IX of the WTO Agreement, the General Council shall review annually
whether the exceptional circumstances justifying the Waiver still exist and
whether the terms and conditions attached to the Waiver have been met.
5.
This Waiver shall terminate upon the
expiration of a period of 15 years from the date of its adoption.
6.
This Waiver shall apply to preferential
treatment granted to services and service suppliers of least-developed
countries designated as such by the United Nations. This Waiver shall terminate
with respect to the preferential treatment granted to services and service
suppliers of any particular least-developed country when graduation of that
country from the United Nations list of least-developed countries becomes
effective.
WTO-GATS
and Nepal
Nepal
entered WTO in 2004 as its 147th member. It has made commitments to liberalize
service sectors by ensuring National Treatment and Most Favored Nations
principles. Nepal is committed to open all twelve sectors listed in GATS.
As
rule-based trade regulating organization, WTO has offered many opportunities
and committed to provide incentives and assistance to developing countries.
However, WTO rules do not differentiate enterprises according to their size.
They provide a level playing field for all participants in international trade.
It is a big challenge to the developing countries like Nepal.
Modes of Trade in Services
The GATS
agreement covers four modes of supply for the delivery of services in
cross-border trade:
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Trade
in Services and its role in Nepalese Economy
Today
service sector has become one of the most important determinants of national
income and trade worldwide. On average, services account for more than 60
percent of the national income in industrial countries and 50 percent in
developing countries, and constitute 20 percent of the total world export.
Available
data also show that developing countries are highly specialized in exports of
services and have comparative advantage in many service sectors. This also
indicates that the importance of service in Nepal's economy has also been
increasing. Current scenario of Service trade in Nepal is as follows:
·
Service sector is emerging as a
robust precinct of the Nepalese economy in recent years. It accounts for around
half of the GDP and absorbs around 18 percent of total employment.
·
Trade in services accounted for
69.9 percent of total convertible foreign exchange earnings whereas merchandise
trade shared only 13.1percent in average during the period between 2004/05 and
2010/11.
·
The average income from remittance,
tourism and interest on investment abroad is recorded at 83.7 percent, 12.4
percent and 3.9 percent respectively of total service income of convertible
foreign exchange during the period 2004/05 - 2010/11.
·
The average ratio of remittance to
GDP during that period is 16.8 percent reaching 24.3 percent in 2011/12.
Similarly, the tourism earnings ratio to GDP is 2.5 percent on average, which
increased from 2.2 percent in 2004/05 to 2.8 percent in 2009/10.
·
As trade in services mostly does
not require transport and transit facilities, Nepal has more potentialities to
promote service trade than merchandise trade and get benefit from it. Nepal
could be highly competitive in service trade.
·
Besides, the availability of human resources
at low cost in almost all areas of service sector is an additional advantage to
Nepal to develop the service sector.
·
In the area of services, key issues
for Nepal are the temporary movement of people across border to supply services
(Mode 4 liberalization).
·
Additionally, travel related
activities constitute nearly two-thirds of Nepal's commercial export are also
important for Nepal.
The
most potential sectors/subsectors of service for Nepal are as follows:
Remittance
The
migrant worker sub-sector alone amounts to one fifth of GDP. At the moment,
remittance from migrant workers is contributing to stabilize the national
economy. The remittance has contributed to help reduce poverty significantly
all over the country. However, making foreign employment sector more secured,
systematic and decent is a big challenge to the Government as it involves many
factors. Promoting foreign employment in a systematic and productive manner and
utilizing remittance in productive sectors are still challenging tasks.
Tourism
Tourism
is a highly potential sector contributing to national economy in terms of
income, employment, foreign exchange and extending market for domestic
production of both commodities and services. Its average ratio to GDP is around
2.5 percent in the period between 2004/05 and 2010/11. It is the second largest
source of foreign exchange earning of the country. The development of tourism
sector is constrained mainly by political transition, weak infrastructure,
unbalanced regional development, inadequate and inefficient national flag
carrier, poor international airport facility, low investment, lack of
competitive human resources, limited developed tourist spots, weak coordination
among the various stakeholders including the local communities in formulating and
implementing long term tourism development plans and poor marketing.
Water
Resources/Hydroelectricity
Nepal
is one of the richest countries in water resources. According to an estimate,
it has the capacity of producing 83000 MW of electricity, of which 43000 MW is
technically viable. Despite huge hydro potentiality, Nepal is facing severe
energy crisis at present. There is increasing daily power outage mostly in dry
season due to both the low production and high demand. At the same time,
electricity has huge potentials in the abroad especially in India.
Information
and Communication Technology (ICT)
During
the last two decades, the ICT has made a turnaround to the extent never
experienced before, taking the world into a different arena of connectivity,
and the sector is emerging as the fastest growing industry in the world. If
properly developed, it has a potential to emerge as an important trading item.
Proper development of internet connectivity and telecommunications can create
immense opportunities in Nepal to benefit from competitive labor costs and time
differences. Nepal has already created a niche market in medical analysis and
reporting to meet the increasing needs of the global health industry. The
market, presently, is small. Yet the prospects are enormous and even the
ability to get a small share will go a long way towards fastening the pace of
economic development by creating conducive employment opportunities within the
country. In addition, initiatives taken by the private sector including
non-resident Nepalese (NRN) are encouraging. Ability to develop world class
human resources along with necessary infrastructure and establishing linkage
with the market will go a long way in promoting ICT based trade.
Education and Health
Nepal,
in view of its climatic condition and location, does have a potential to be
developed as an education/health centre. Development of the world class
educational and health institutions at appropriate locations will give the
feeling of difference while adding to comfort and ease to get there a prospect
of attracting students, health care seekers, aging population as well as
promoting education and health based tourism, some of which have already
started to emerge albeit at a small scale. Nepal’s advantages, in this respect,
lie in sound climatic condition, interesting and appealing physiographic
features, and abundant supply of caring human resources at low cost.
Development of world class educational institutions with appropriate image
should assist to position competitively not only in the South Asian market but
also in the world market. Similarly, world class hospitals, nursing homes,
aging homes and traditional learning, meditation and knowledge gaining/sharing
centers may have great appeal in the world market.
Health
services, initially targeted for Nepalese population, have made remarkable
progress with the involvement of the private sector and establishment of a
number of teaching hospitals. NTIS has rightly identified health sector as one
of the potential exportable services. In addition, the traditional Ayurvedic
system of healthcare has taken modern approach and a few hospitals are
providing healthcare service mainly to foreign patients. Despite these
developments, there is a need to bring out more favorable policies and even
place some incentive schemes or develop necessary infrastructure to encourage
investment and initiatives in a path breaking manner.
Conclusion
It
is argued that free trade in services enables countries to better enjoy the
benefit of globalization and improve economic efficiency just as freer trade in
goods does. It is said that it contributes to job creation, higher income, more
consumer choice, downward pressure on inflation and a better quality of life.
Further, the proponents of trade in services believe that imports of services
and foreign investment in services stimulate production and competition that
improves the efficiency of domestic service industries and contribute to
technological advancement.
However,
liberalization of trade in services has in fact led to job losses, increases in
prices of services, and discontinuation of service provisions to the poor where
suppliers chose to focus on the more profitable segments of society. This can
be especially contentious where public services such as water, electricity,
health services, and education are involved. Similarly, it is also argued that
many services should be regulated to ensure a certain level of quality, to
protect consumers or the environment, and in financial services sector, to
ensure a country's 'financial stability'. But such regulation whether for
economic or social purposes, can be designed, implemented, or enforced in more transparent
and efficient ways with positive overall effects.
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