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I. The problem in context back to top
Uruguay is a small South American country
lying between Brazil and Argentina. In relation to the rest of the
continent, it is a small country with a land surface of approximately
176,000 sq km; it is also small in demographic terms — its population
is only 3 million — and in economic terms — gross domestic product (GDP)
in 1998 was around US$23 billion. However, Uruguayan society enjoys high
social integration and low levels of inequality.
As in other countries, the services sector
represents two-thirds of employment and about 60% of GDP. During the
1990s the sector was an engine for national exports and its share in the
total volume of exports increased threefold. Uruguay is a net exporter
of commercial services (travel, transport and ‘other commercial
services’),(1)
which account for 34% of global exports (the average for
Latin American countries is 20%). Those classified under ‘other
services’, including communications, construction, financial
intermediation, business services, information-technology-related
services, as well as royalties and property rights, have been the most
dynamic.
The international expansion of the services
sector seems to be a promising alternative to the exploitation of the
country’s natural resources. Yet the small size of its domestic market
poses a challenge to efforts to liberalize the sector. Deregulation
should be followed by re-regulation in order to ensure the effective
operation of competition in the domestic market. The decision-making
process needs to be founded on a sound basis (with good regulatory
frameworks and appropriate institutions), with appropriate evaluations
of risks and opportunities.
From this perspective it is important to
ensure that policies and strategies are being co-ordinated and supported
by the major players; this would help trade negotiations to become
effective in empowering the country’s international presence. Ideally,
the actors involved should include policy-makers from the trade and
services sector; firms from the services sector, professional
associations, trade unions and civil society organizations.
During the first round of the GATS
negotiations — the Uruguay Round (1986-94) — Uruguay, along with other
developing countries, did not have a clearly defined strategy. This
partly explains why their interests were barely reflected in the results
emerging from that process. During negotiations Uruguayan negotiators
claimed to have taken a defensive attitude; in the Doha Round (opened in
2001), local negotiators claim to have adopted a more assertive and
liberalizing negotiating position.
This gives rise to the need to address the
following questions:
-
How have the actual strategy-building and
decision-making processes been designed in the light of the new
round of services negotiations?
-
What lessons can be learnt from the first
round of negotiations on the General Agreement on Trade in Services
(GATS)?
At first glance, the level of interest shown
in the GATS appears to have grown, as compared with the situation during
the first round. Hence government actors have shown themselves to be
eager to interest the general public and the private sector. They point
to the fact that their central challenge lies in making the range of
players aware of the ‘commercial nature’ of services.
Services firms are not completely aware of the
GATS, its relevance and potential. Those firms that have been engaged in
selling their goods abroad have done so by pursuing informal channels
(such as personal contacts) rather than using institutional backups.
Actors from civil society more acquainted with
the trade agreements alert the public about the scant information on the
negotiations, on the confidentiality of the decision-making process at
the government level and the need to open up the debate.
II. The strategy-building and
decision-making process back to top
The players and their roles
The government institutions directly involved
in the trade policy design process as well as in the negotiations
themselves are the Ministry of Foreign Affairs (MFA), the Planning and
Budgeting Bureau (OPP — Spanish abbreviation)(2) and the Ministry of
Economics and Finance (MEF). Depending on the nature of the issues under
negotiation, these bodies ask for the participation of sectoral bodies
related to the activities under discussion. The MFA is responsible for
the negotiations and the decision-making process at the WTO, and it
therefore provides the Uruguayan delegation in Geneva with directives
and co-ordinates the participation of the different national actors.
Uruguay’s positions vis-à-vis WTO
negotiations are discussed in a body known as the ‘National Section on
the WTO’; this body groups representatives from the ministries, the
OPP, regulatory agencies and the Central Bank of Uruguay. As
multilateral negotiating strategies are discussed there, the position on
GATS is also part of the agenda.
Within this general structure the OPP played a
particular role in the GATS negotiations, as it was in charge of
preparing the requests and offers to be presented to the other members
of the WTO.
Multilateral negotiations have, to date,
focused on financial and telecommunications services; this has meant
that the Central Bank of Uruguay (CBU) and the Communication Services
Regulatory Agency (URSEC)(3) have been frequently consulted on a variety of
issues. The Ministries of Tourism, Transport and Education have also
been asked to assist in elaborating issues to be discussed. The latter,
in turn, consulted public and private tertiary education institutions to
know their positions.
There is no single institutional channel to
communicate with the private sector, such as entrepreneurs, trade unions
and civil society. This is equally true for general WTO negotiations as
for specific ones such as GATS.
As described above, those responsible for
elaborating requests and offers have principally consulted government
bodies. M. A. Peña, head of the integration and trade policies
department at the OPP, has pointed out that if there is a ‘macro
policy’ designed by the government in certain areas, it is taken as
the ‘rule’ and there is no need to make further contacts. In other
cases, the government tries to consult with the private sector.
Hence in May 2002 the MFA and the OPP co-ordinated
various rounds of contacts between public- and private-sector
representatives involved in a range of service activities. The objective
was to disseminate information about the ongoing negotiations and gather
any demands that might be made and data needed to support the
preparation of requests and offers. The meetings were attended by
representatives of the Uruguayan Chamber of Information Technologies (CUTI,
a strong exporter of software and related services), members of maritime
transport associations, the Chamber of Construction, the Association of
Private Promoters of Construction, professional associations and
delegates from the country’s universities.
In the view of the MFA’s representatives,
private-sector firms needed to be exporting already in order to show
interest. They affirmed that ‘if firms are not exporting, they don’t
feel any need to participate’. But probably the lack of awareness
about GATS and its possible implications has been the main cause.
The firms interviewed for this case study
represent the main players in the newly emerging services export sector;
examples of these companies include an advertising agency, an
audiovisual producer and a consulting engineering company, all of which
said that they had never been contacted by the MFA. On the other hand,
CUTI, a pillar of Uruguay’s services export sector, acknowledges that
it has developed better communications with the MFA, although ‘we are
not informed about the negotiating process and the decisions adopted’.
Professional consultants (in architecture,
engineering, medicine and construction management) involved with
Mercosur’s negotiations through the CIAM,(4) have taken different
approaches to the GATS negotiations. Health professionals did not
participate in a systematic manner in the consultations, even though
they eventually exchanged information with government representatives.
The construction management firm was invited to participate in some of
the consultations, but did not consider that the matter was important to
them. The architects’ association was questioned by the MFA but did
not provide any answers because their members felt very detached from
the negotiations and claimed not to have been informed about its
progress. Finally, representatives of the engineers’ association
attended all the meetings they were invited to but pointed out that they
had not received any further information on the progress of the
negotiations, and asked for an ongoing exchange of information.
Trade unionists(5) were only invited to
participate in a seminar which took place before the WTO Ministerial
Conference in Cancún. The government presented the current state of
play in the negotiations and the general contours of the national
strategy. The union’s reaction with regard to the talks is summed up
by one its representatives, J. Silva: ‘That mechanism would only serve
government to legitimize its actions with the civil society.’
Non-governmental organizations (NGO) neither
participated nor were consulted on the negotiations. They demanded more
‘space’ since ‘the MFA has never paid attention to our claims and
proposals’.(6) Conversely, the contact between NGOs and the Congress is
more fluid, thanks to personal connections and informal exchanges of
information. NGOs and workers’ representatives maintained that new
trade-related issues (such as services) are not usually discussed at the
legislature, ‘not even in the congressional international affairs
commission’, revealing the existence of information gaps. In fact, the
Congress has not participated in any of the decision-making processes
related to WTO negotiations. This would take place only if some foreign
entity presented a demand or claim that justified the call for the
Minister of Foreign Affairs to give an explanation to Congress members.
Government actors working at the elaboration
of the national strategy and the decision-making process on services are
the same for all the different levels of integration. This has
contributed to the co-ordination of negotiations, but also to the
accumulation of experience. The Mercosur negotiations have provided a
good background for the negotiations on GATS. Its institutional
mechanisms have been successfully used to integrate the different actors
(trade unions, firms and civil society) in negotiations, promote
awareness and engage various concerned parties with the matters
discussed.
Relevant features of the
strategy-building process back to top
The MFA’s authorities have said that up to
now trade in services was not a tough issue to negotiate: ‘most of the
countries are hardly consolidating their status quo’, ‘the present
negotiations are at the stage of bilateral exchanges, and…. their
progress is very slow, because it is mainly determined by progress in
the agriculture negotiations’. However, Julio Lacarte Muró, a former
Uruguayan economic and commercial advisor in Geneva, said, ‘we are
being encouraged to use the services liberalization to obtain the
agriculture liberalization’.
The need for a strategy for participating in the
negotiating process has now been accepted by the actors involved.
Ernesto Medina (from the MEF) said, ‘at first, there was a defensive
attitude, as it was assumed that the WTO was a “rich countries’
club” created to further their interests. Afterwards, in government
circles this image was altered, and a change was made towards taking a
more pro-active and positive attitude that extended into other trade
negotiations. Currently, a more active stance is being pursued.’
Carlos Pérez del Castillo, special advisor on
international trade negotiations to the president of Uruguay, stressed
the shift towards a more aggressive and liberalizing position as
reflected in the attitude of the Uruguayan delegation in the Doha
negotiations compared with the Uruguay Round: ‘Our country was the
first developing economy to submit the initial offers. It means that we
have important advantages compared with the rest of Latin American
countries.’ Hugo Cayrús, a negotiator in Geneva and the person behind
this change, has remarked that this was the best way to gain a better
negotiating position.
All government actors have highlighted that this
attitude was not reflected in any similar changes in domestic
institutions or regulations. In fact, according to comments from MFA
officials, ‘all that we have submitted is already subject to
liberalization and it is only an initial offer that does not imply many
changes in relation to the Uruguay Round commitments’. They also added
that ‘for the time being, nobody is thinking of consolidating the
liberalization beyond the status quo’. However, this sort of statement
co-exists with clear difficulties for the government in assessing the
current regulatory framework for the services sectors and modes of
supply covered by GATS.
Up to now Uruguayan offers have included some
competitive services which are already exporting and are liberalized
domestically (e.g. software and tourism-related activities such as
hotels, restaurants), and those where protection against foreign
competition is not regarded as relevant (e.g. real estate services,
designers). M. A. Peña argues that the rationale is that ‘if it is
the case of a competitive sector or a sector in which Uruguay has not a
specific qualification, there is no need to be protectionist’.
The government’s survey of the demands formulated
by the private sector showed that professional associations were
concerned about the harmonization of basic curricula at the regional
level and, mostly, about the need to create an agency or institution
responsible for the recognition of local qualifications abroad. This
would be considered under Mode IV, traditionally regarded as the most
interesting one for developing countries. They were also interested in
knowing which discriminatory rules were already included in existing
regulatory frameworks.
In relation to companies, the government was aware
that their reaction, where information was not easily available and the
situation therefore uncertain, was generally cautious. Entrepreneurs
have suggested to negotiators that ‘in case of doubt, it is preferable
not to offer any commitment’. Finally, the MFA’s officials pointed
out that firms exhibit ‘great difficulty in considering strategies of
access to extra-regional markets’. Meanwhile, as M. A. Peña has
pointed out, ‘Uruguayan requests were generally focused on developed
countries’.
Some of the interviewed entrepreneurs who had
developed an export-oriented strategy were in favour of liberalization
and aware of the possibility of developing services exports because of
their good quality and low costs. They were interested in greater
openness because they felt confident about their chances to compete, and
are likely to make a contribution to the offers put forward by Uruguay
in the course of negotiations. They also stated that up to the present,
asking for government support or establishing direct contact with
official authorities was not part of their business strategy. For
instance, the director of the advertising agency said that their export
strategy was built on personal and informal contacts and considered that
these sorts of network really worked. The same applied to executives or
consultants working in the audiovisual, engineering and construction
sectors.
In the case of software exporters, the government
stated that these firms act autonomously: ‘they know what they want
and they move in the fields they know in order to get it’. However,
CUTI’s representatives expressed it differently: ‘we have a rather
discontinuous relationship with ministries. We have received some calls
from time to time, but after we answered their questions we were not
told about the steps that have been taken’. They mentioned that the
government had contacted them to find out about the opportunities and
barriers that they had faced in the bilateral exchanges.
III. Challenges faced and
the outcome back to top
The non-tradable nature of services, the lack
of experience in assessing the effects of trade policy and the
non-existence of an institutional machinery to construct links between
the different actors are but some of the challenges faced by Uruguay. M.
A. Peña said that ‘it is hard to deal with this subject, because the
tradable nature of services has not been assumed yet. It has not been
integrated into the popular wisdom…. Developed countries have a wider
experience in this approach as regards to regulations and opportunities.
But developing countries tend to look at the matter with certain apathy.’
Despite the
political shift brought about by the government’s decision to comply
with the GATS schedule, more was needed to keep the process on track. To
devise a trade policy agenda aimed at finding out the advantages and
costs of the process means that as many players as possible need to be
considered. Uruguayan policy-makers have attempted to address this
matter through the implementation of some rounds of consultations.
However, their outcome was rather limited (in both the government’s
and the firm’s view). Whether the mechanisms chosen for consulting the
private sector were not the best ones or the policy-maker’s conviction
about the benefits of a wider participation was not strong enough, the
result is that the construction of an inclusive commercial strategy is
still far from being achieved.
Private-sector agents and civil society
representatives have expressed their willingness to improve
communication channels with government negotiators. They pointed to the
convenience of setting up an information flow with government agencies
to exchange ideas and suggestions. They claimed that effective
participation in the decision-making process not only requires asking
about the expected effects or benefits of certain measures, or the
detection of particular problems; it really needs to involve social and
business entities in the daily strategic decision-making process. A more
fluid contact between all the actors would ease the dialogue by
translating trade policy rules and technical foundations of WTO
agreements into a more comprehensible and attainable language.
From this perspective private-sector and government
representatives held contrasting views of the mechanisms to
institutionalize consultation and participation. The former stated that
government demands for information are too specific and are not followed
by any lesson-learning or inclusive-exchange process. The latter
admitted the need to facilitate closer collaboration and partnership
with other actors. However, apart from recognition that the situation
existed, the interviewed policy-makers did not refer to any concrete
measure that might be taken to enhance and promote joint activities with
other important players.
Roberto Bissio(7) considered that the most critical
challenge is to acknowledge the core significance of the subject,
something which the government has not completely embraced. He held that
‘Trade in services possesses characteristics that make it different
from goods and requires careful deliberation and attention in the
liberalization process because it entails irrevocable changes in
national legislation…. Consequently, the debate about these questions
must not remain secret.’ He stated that ‘keeping the trade issues in
the shadow is part of a deliberate strategy’. The ‘secret’ avoids
debate on the strategies, which could complicate the course of the
negotiation: ‘Less awareness imposes less pressure.’
Lacarte Muró emphasized another aspect of the same
point. For him, the most serious difficulty the country had to overcome
was ‘the disregarding attitude of the government’, related to the
prevailing ignorance on the real relevance of these negotiations for
Uruguay. He said that it was necessary to identify the sectors involved
in this trade and hear their messages. Besides, he considered that ‘communication
channels at the government level frequently do not work properly and the
decision-making processes are less structured than was envisaged’. So
the negotiating team in Geneva was deemed to be rather ‘isolated’
from local bodies.
The absence of a clearly designed strategy-building
and decision-making structure usually left the communication channels
subject to the personal qualities of the actors. In the view of both the
private sector and the government, the changes in personnel in leading
positions affected progress.
Different civil society, private-sector and
government actors agreed that the country’s trade strategy has no
clear direction. Asked about this, government officials said that ‘Discussions
about trade in services are framed in the absence of sectoral policies.
The country does not have any long-term agreed development policies.’
All those interviewed highlighted the excellent
qualifications of the Uruguayan delegation, as well as its long and rich
experience in multilateral negotiating for a such as the WTO. But this
expertise needed to be complemented with a well-prepared strategy. The
substantive content and the outcome of the country’s trade strategy
are affected by the lack of a distinct ‘macro-economic policy
orientation’. This might affect the final negotiating positions in
reflecting personal ideas and convictions independently of the interests
of the majority of actors involved. Hence while the MFA’s
representatives adopted a cautious position, other government actors
considered that liberalization ‘is always good and favourable’. On
the other hand, Lacarte Muró observed, ‘unbridled trade
liberalization is not wise. Countries must develop and retain the
ability to make strategic choices.’
Furthermore, he pointed out that none of the local
actors really knew about Uruguay’s domestic regulations: ‘The United
States and the European Union [EU] have a deep knowledge about their
regulatory frameworks and seek to adapt WTO’s norms to those already
applied in their countries in order to avoid introducing changes to
their local rules. While the United States and EU negotiate in full
awareness about their legislation, in our case international commitments
are automatically integrated as national law.’
The lack of human and material resources undermines
the evaluation of the potential risks and gains of liberalization and
the compliance of domestic regulations. In Lacarte Muró’s words, ‘that
is why Uruguay finds it so difficult to identify where the real
advantages lie’, and ‘our ignorance about the local and
international regulations leaves us very little leeway to negotiate’.
Indeed, some government officials have observed that ‘the lack of
clear regulations on competence and consumer protection makes the
situation worse and should inhibit the benefits of liberalization as new
practices could affect rights which were not considered up to that
moment. It damages our negotiating position before countries with clear
and consolidated regulations.’
The multiple negotiating fronts at bilateral,
regional and multilateral levels and the diversity of issues under
discussion bring new complexities. In particular, in the case of
services, building a strategy implies a full understanding of the rules,
disciplines and commitments included in the different modes of supply by
each sector, and a good command of the sectoral classification list used
in the negotiations.
The targeted markets have not been the same for
policy-makers and for the private sector. Until now, professional
consultants and firms have oriented their business strategy towards
regional or developing countries. While government actors have been
concerned in putting forward offers to developed countries, the private
sector sees that as complex and restrictive. Ultimately, during the 2004
International Trade Centre Conference,(8) Cayrús pointed out that ‘current
negotiations should not be seen as a North-South, or developing versus
developed countries issue. They must be seen as an excellent opportunity
for developing countries to negotiate commitments in sectors and modes
of supply, of their interests in order to contribute with their national
realities.’
Uruguay’s services negotiating position is subject
to what is gained in agriculture. Nevertheless, the real impacts and
effects of this posture have never been truly analyzed. Here inertia is
again present: the country seems to ‘go with the flow’. No resources
are systematically devoted to the collection and examination of data to
assess the comparative effects in terms of employment and added value of
trade in services against trade in agriculture. Therefore there is no
evidence to support the present strategy, or discussion about the
effective competitive advantages for the country.
Government actors have said that WTO negotiations
progress at the speed imposed by developed countries. ‘Developed
countries push the process. If they don’t make requests, the rest of
the countries don’t move forward…. So our countries act as a reflex
of that push.’ In this sense, officials declared that it was hard to
follow a fixed line of action, as ‘we have to act in response to
pressures, because we are a little and poor country’.(9)
According to some of those interviewed, if Uruguay
has not been a target of international pressures it is because its
position has been generally in line with what was ‘expected’.
IV. Lessons for others back to top
The supposed change in the country’s negotiating
posture appears as a response to its inaction during the Uruguay Round.
It is intertwined with knowledge gained about managing the services
negotiations, what the rights and obligations of the countries are, and
the government’s capacity to implement the provisions of the
Agreement. Government delegates suggested that the advantages of such a
shift have not been appreciated by most developing countries.
The ‘offers’ and ‘requests’ were carefully
elaborated. In contrast to the Uruguay Round, this time the interests of
the services sector were considered. It was further noted that the
expertise derived from the practice at Mercosur’s negotiations on the
subject contributed to an improvement in the government’s relationship
with firms. This suggested that Uruguay was abandoning its earlier
dismissive attitude, evident in the inclusion of ‘the fewest sectors
possible’ during the Uruguay Round, for a more considered one, more
concerned to accommodate the country’s interests.
However, the ‘new strategy’ alleged by the
government did not seem to be noticed by the rest of the consulted
actors. The still limited contact between policy-makers and other
players involved in the process (mainly service sector firms and civil
society) might result in the government’s engagement in defending
interests far from what the private sector has identified as relevant.
If this is not realized before liberalization intensifies, the
performance and development of the liberalized services sectors will be
prejudiced.
Despite the fact that government and private-sector
actors recognize the need to bridge the information gaps and to use
surveys and assessments to determine the exact nature of the ongoing
regulation as well as the potential effects of modifications of trade
measures, no actions or resources have been devoted to meet these needs
effectively. This is especially evident in the absence of any review of
the regulatory framework in Uruguay, in contrast to what has taken place
in Argentina and Brazil, for example.
In this sense, the services negotiation by negative
list agreed with Mexico implies the identification of those sectors to
be excluded. This seems to be inconsistent with the unclear regulatory
norms and national interests.
Given the absence of open debate on trade in services
and the lack of information on the progress of negotiations, it is
difficult to expect entrepreneurs ‘spontaneously’ to gather together
and claim a space for participation. Those who are already participating
are those who have clearly identified advantages in international trade
and are interested in being considered in the negotiations. Thus the
ongoing mechanism of consultation with private actors seems to have
reached only those firms that government has recognized as potential
exporters, while it has left the rest ‘invisible’.
The option to establish an institutional mechanism in
local trade policy formulation and implementation which would involve
entrepreneurs and civil society could be successful, as in the case of
Mercosur. For instance, the professionals taking part in CIAM have had
the opportunity to exchange ideas and analyze the potential advantages
and disadvantages of regional integration, which has successfully
involved them in the negotiating process.
One critical aspect is related to the role of
stakeholders in determining negotiation mandates and monitoring the
process. General opinion has been that the local delegation is well
prepared. However, the research has shown that local agents need to be
trained not only to improve the scope of their political interventions
but also to widen and deepen inter-agency collaboration and civil
society involvement. Several players referred to the experience of joint
participation of government actors, entrepreneurs and civil society in
the case of Brazil and Chile as a pattern to be followed.
In the words of Pérez del Castillo, ‘trade in services is the
negotiation of the future’. However, there is no sign that any future
opportunities to promote research, to look for access to new markets or
even to build a solid and distinguishable strategy will be taken. No
long-term strategies are being constructed, despite the shared
conviction that there is need of them.
Bibliography
back to top
Cayrús, H. (2004), ‘Trade in Services
Negotiations at the WTO’, speech at ‘Business for Development’,
International Trade Centre (ITC) UNCTAD/WTO, Latin America and the
Caribbean Regional Conference, Rio de Janeiro, 8-9 June
De Brun, J. (1994), ‘Assessment of the Effects of Liberalization on
Regional Trade in Services at the Mercosur: The Uruguayan Case’,
report for the Inter-American Development Bank, November
Direction of International Economic Organisms, Ministry of Foreign
Affairs (2004), Report on Services Negotiations at the WTO
Vaillant, M. (1998), ‘Trade Policy on a Country Basis and the Uruguay
Round: The Case of Uruguay’, mimeo
World
Trade Organization, Trade Topics, Services, Sector by Sector
Hoekman, B., A. Mattoo, and P. English, eds. (2002), Development,
Trade and the WTO: A Handbook, Washington, DC: World Bank
NOTES:
1.- The available figures of trade in services
from the balance of payments underestimate the true extent of the fields
covered by the General Agreement on Trade in Services (GATS). back to text
2.- The OPP is an advisory organ operating under
the auspices of the President’s Board. back to text
3.- The URSEC regulates and controls the
telecommunication and postal services. back to text
4.- Commission for the Integration of
Surveying, Agronomy, Architecture, Geology and Engineering of Mercosur (Comisión
para la Integración de la Agrimensura, Agronomía, Arquitectura,
Geología e Ingeniería del Mercosur). back to text
5.- There is a single umbrella organization
(PIT-CNT), formed by the different sectoral unions (from both the public
and the private sector). back to text
6.- Eduardo Gudynas, director, Latin American
Centre of Social Ecology (CLAES). back to text
7.- Director, Third World Institute (ITEM),
Uruguay. back to text
8.- International Trade Centre (ITC) UNCTAD/WTO,
Latin America and the Caribbean Regional Conference, ‘Business for
Development’, Rio de Janeiro, Brazil, 8-9 June 2004. back to text
9.- These ideas were expressed by various
trade officials. back to text
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