Negotiating Services AgreementsNegotiating Services Agreements

Geza Feketekuty

Negotiations on ServicesNegotiations on Services Regulation of International Services

– Bilateral Agreements (Civil Aviation)– International Agreements(ITU, IPU)

Solving Bilateral Trade & Investment Problems– Enterprise to Host Government Negotiations– Bilateral Negotiations Between Home and Host Government

Negotiating Trade Agreements– Free Trade Agreements – (NAFTA, Mercosur)– WTO/GATS

Dispute Settlement– Bilateral Consultations Preceding Dispute Settlement Process– Consultations on Implementation of Dispute Settlement Outcomes

Negotiations on Regulatory Negotiations on Regulatory IssuesIssues

Establishment of Regulatory Framework for International Services was Traditional Venue and Objective of Negotiations on Services

Trade-Oriented Negotiations on Services are Aimed at Facilitating and Liberalizing Trade

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 Rationale and Venue for Problem Solving NegotiationsNegotiations

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

Mutual efforts to address issues in a problem-solving context can benefit both sides

Periodic bilateral meetings between trade officials provide opportunity to address bilateral issues

Examples of ProblemsExamples of Problems

Regulation of International Transactions by Central American owned banks

Visas for Training Assignments associated with outsourcing

Screen quotas and discriminatory tax treatment of foreign advertising copy

Regulations related to ground handling of aircraft operated by foreign airlines

Use of leased lines to transmit data originating from a distributed network

Problem Solving Interests of Problem Solving Interests of Developing CountriesDeveloping Countries

Problems solving negotiations by Developing Countries in the past have usually involved trade-offs between goods and services, this may change

Growth of outsourcing is likely to increase importance of solving problems related to exports of services by Developing Countries

Steps in Addressing Issues in Steps in Addressing Issues in Problem Solving NegotiationsProblem Solving Negotiations

Consultations between Enterprise and Host Government

Consultations Between Home Government and Host Government at Increasingly Higher Levels

Consultations in Multilateral Forum (If one exists for issue and issue is generic)

Use of Formal Negotiating Mechanisms or Dispute Settlement Procedures (Choice Depends on Nature of Issue, Options)

Observations on the ProcessObservations on the Process

Most Problems that arise in trade are resolved through a Mutual Problem Solving Approach

Only Problems that cannot be resolved between Enterprises and Foreign Governments Should go to Government to Government Level

Multilateral Forum Provides Basis for testing Scope of Issue, Potential Allies

Involving Trade Officials Can Facilitate Resolution, but also Increase Resistance of Regulatory Officials

Making the CaseMaking the Case Clarify Information Correct any Misunderstandings Clarifying objective of Regulation Pinpoint Unintended Consequences of Regulation Set out any Violations of International Rules,

Commitments, or Generally Accepted Practices Explain how Regulatory Reform could promote

economic growth, preserve desired Social Goal Identify Reciprocal Help, Consequence of Failure

to Solve Problem

Negotiations Under GATSNegotiations Under GATS Doha Round

– Request & Offer Process– Negotiation of Rules

Other Negotiating Approaches Used in Past– Sectoral Agreement

Model Schedule Rules for Sector

– Functional Agreement Other Possible Approaches

– Sectoral and Other Targets– Negotiating Guidelines– Agreement Organized Around Customer Needs

Request-Offer NegotiationsRequest-Offer Negotiations

Involve requests and offers for specific changes in national regulations/laws

Based on bilateral negotiations, multilateral assessment, MFN treatment

Dialogue surrounding negotiations is likely to revolve around commercial impact and regulatory purpose of measures viewed as trade barriers

Negotiation of RulesNegotiation of Rules

Usually initiated by national papers outlining need for rule and substance of rule

National papers often supplemented by Secretariat paper summarizing negotiating proposals

Negotiations revolve around common needs of member countries, best regulatory practices, and fairness of rule

Steps in any NegotiationSteps in any Negotiation

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

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

Who Are the Stakeholders Who Are the Stakeholders Who Should be Consulted?Who Should be Consulted?

Affected Central Government Ministries and sub-central authorities

Affected Enterprises and Industry Associations

Labor Unions Non-Governmental Organizations with a

Policy Stake Academic Experts

Stakeholders May be Affected Stakeholders May be Affected in terms ofin terms of

The Commercial Impact The Policy Outcome Bureaucratic Turf Political Consequences Legal Precedents Macroeconomic Consequences

Consultation with Domestic Consultation with Domestic Stakeholders Stakeholders

Can yield critical information on commercial, policy and legal issues at home and abroad

Serves to identify their interests and to manage their involvement in the domestic political process related to trade negotiating decisions

Offers insights into the interests and views of their counterparts abroad, and informal communication channels with their counterparts abroad

Why Consult Foreign Why Consult Foreign StakeholdersStakeholders

Provides insight into foreign decision-making process

Provides opportunities to help shape the views and strengthen role of foreign stakeholders with compatible interests

Provides broader insights into possible win-win solutions

Elements of a Negotiating StrategyElements of a Negotiating Strategy

Framing the Issue for Negotiation Identification of win/win solutions Identification of Potential Supporters among

Domestic and Foreign Stakeholders Message to Potential Supporters Written and Oral Communications to Build

Support (White Paper, Press Release, Speeches) Identification of Opposing Stakeholders Means for Reducing or Deflecting Opposition Methods for demonstrating utility, legitimacy and

fairness of proposed outcome

Framing the IssueFraming the Issue

Careful framing of the issue at both the national and international level is critical to Negotiations

At National Level Statement of Issue Should– Highlight the key commercial and policy issues – Provide a basis for domestic coalition building

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 - ExamplesFraming the Issues - Examples

Framing Typical Regulatory Issue ATM Machines and US/Israeli FTA Framing Issue for GATS Telecom Annex Framing Negotiation Between US and India

on services

Building SupportBuilding Support Coalition building is the key to Negotiations

– Out of Minorities Majorities are Built Coalitions have to be built around common

interests For Rule-Making Negotiations support of

Epistemic Community is important International coalitions of private stakeholders can

be an important asset For regulatory issues, support also has to be built

among regulators, who have their independent channels of communications with each other

Building Support - ExamplesBuilding Support - Examples

Building Support for GATS Among Services Stakeholders Across Countries

Building Support for Telecom Reform and Liberalization Among Stakeholders

The Aborted Tourism Agreement Building Support for GATS by Epistemic

Community

Strategies for Request/Offer Strategies for Request/Offer NegotiationsNegotiations

Mercantilist Strategy– Aimed at Maximizing Imports– Aimed at Minimizing Imports

Regulatory Reform Strategy– Aimed at Reducing Cost of Achieving Regulatory

Objectives– Aimed at Increasing Domestic Competition– Aimed at Increasing International Competition

Political Strategy– Deflect Pressure on Politically Sensitive Policies– Take Advantage of Foreign Pressure on Politically

difficult but desirable policy reforms

Strategies for Formulation of Strategies for Formulation of RequestsRequests

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) 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 OffersStrategies for Formulation of Offers Domestic Reform Strategy

– What regulatory reforms/removal of import barriers can we offer that serves domestic regulatory reform objectives?

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 VsInterest-Based VsCompetitive NegotiationsCompetitive Negotiations

Positions Vs. Interests Personalities Vs Group Interests Zero-Sum Vs Positive Sum Approaches Hiding Vs Sharing Information Judgmental Vs Pragmatic Advocacy

How To Build Negotiating How To Build Negotiating MomentumMomentum

Build success by establishing areas of common ground, even on procedural issues

Pick the easier issues first and continue to build common ground

Record areas of agreement in writing as you you make progress

Periodically review progress by going over areas of agreement and outstanding issues.

Seek Potential Allies

Interpreting What is Said: Interpreting What is Said: IdentifyIdentify

Beliefs Positions Interests Arguments

Negotiating Success Depends onNegotiating Success Depends on

Economic Power of Coalition Commonly Shared Ideas of Legitimacy Utility of Agreement to Business Sound and Comprehensive Analysis Identifying Reasons Why Other Party Can Gain

from Negotiating Proposal Creativity in Identifying Win/Win Solutions Achievement of Mutually Beneficial Outcomes

Negotiating ResourcesNegotiating Resources Technical assistance programs of World Bank,

WTO, UNCTAD, ITC, OAS, other Regional Organizations

WTO Trade Policy Course and WTO training Course

WTO/OECD Doha Development Agenda Trade Capacity Building Database

Briefing notes, workshops and training seminars offered by AITIC in Geneva

Resources on ITCD’s website, www.comercial diplomacy.org