Results of

SERVICES 2000

A Conference and Dialogue on Global Policy Developments and U.S. Business

Friday October 16, 1998

at the U.S. Department of Commerce

International Trade Administration

14th Street and Constitution Avenue, NW, Auditorium

Washington, D.C. 20230

Prepared by the Office of Service Industries

January 1999

The Services 2000 Conference, cosponsored by the Department of Commerce and the Coalition of Service Industries, brought together a broad spectrum of service industry representatives from many sectors and U.S. Government officials to move forward the process of developing the U.S. approach to the services negotiations that are mandated by the General Agreement on Trade in Services (GATS) and scheduled to begin in 2000. The participants looked at broad range strategies for the services negotiations as a whole, how they would relate to full range of WTO work, and the objectives of numerous individual service industries in opening foreign markets and the challenges opening U.S. markets to foreign service providers.

This report briefly summarizes the perspectives and positions discussed in the individual roundtable sessions. This report does not necessarily reflect the opinion of the U.S. Department of Commerce.

SUMMARY

More than 350 participants, including over 175 business representatives, met Friday, October 16 at the Commerce Department to address key issues in the services trade. Sponsored by Commerce’s Service Industries and Finance unit and the U.S. Coalition of Service Industries, the Conference reviewed the current status of the General Agreement on Trade in Services (GATS) and considered the range of important issues for U.S. service industries in shaping an agenda for the new negotiations which will begin in earnest in January of 2000. This included very extensive discussion of negotiating strategies and objectives to accomplish substantive commitments in services trade. Challenges were identified with respect to multilateral and regional negotiations, the GATS architecture, and crosscutting issues such as movement of people, electronic commerce, government procurement, regulatory reform, and current global economic problems. The day-long event also included roundtable discussions on specific services sectors: professional, healthcare, energy, environmental, distribution (retailing, wholesaling, and franchising), express shipping, education and training, financial, telecommunications, and audio visual. Additional roundtable discussions focused on cross-cutting issues, including movement of people, electronic commerce, and services trade statistics.

There was strong support for services negotiations in the WTO (World Trade Organization) for most of the sectors discussed, with a strong preference for a top down approach (commitments for sectors with explicit reservations) compared to the bottom up approach (making specific commitments with reservations) which was used in the last Round. A major conclusion was general recognition that service sectors differ and that the various sectors need to be approached and treated differently. While there was agreement that revising the GATS architecture may not be achievable, there was a recognition that many sectors need better definitions which would enhance the negotiations. There was recognition of the fact that national regulatory regimes often act as trade barriers to the export of services and that any reservations based on regulations should be explicit and transparent. It was recognized that concerns over the global financial crises would have the potential to affect a country’s willingness to make substantive commitments. Electronic commerce was seen as a cross cutting issue for most services and that it should be kept free of unnecessary regulation and taxation that would impede trade and create barriers to services. While not a requirement to hold Services 2000 negotiations which are mandated in the GATS, there was recognition of the need for fast track authority.

The dominant role that services play throughout the U.S. economy translates into leadership in technology advancement, growth in skilled jobs, and global competitiveness. Since 1987, U.S. services exports have more than doubled, reaching $239 billion last year. In 1997, U.S. services exports exceeded imports by $84 billion--offsetting 42 percent of the merchandise trade deficit.

CONTENTS

OPENING REMARKS

Michael J. Copps, Assistant Secretary for Trade Development, U.S. Department of Commerce

Everette James, Deputy Assistant Secretary for Service Industries and Finance, U.S. Department of Commerce

KEYNOTE: A FRAMEWORK FOR GLOBAL TRADE IN SERVICES

Dr. Geza Feketekuty, Graduate School of International Policy, Monterrey Institute of International Studies

ROUNDTABLE DISCUSSIONS

STRATEGIES & OBJECTIVES ROUNDTABLE

MODERATOR: J. Robert Vastine, President, U.S. Coalition of Service Industries

DIRECTIONS AND PRIORITIES ROUNDTABLE

MODERATOR: Everett Ehrlich, President, ESC Company

INDUSTRY-SPECIFIC ROUNDTABLES

CROSS-CUTTING ROUNDTABLES

Electronic Commerce, Movement of Personnel, Services Statistics

On behalf of Secretary Daley, I want to extend my appreciation to all of you for attending today's important conference focused on the future of services trade in the world economy.

The services sector is the largest component of the U.S. economy, accounting for 79 percent of private sector output and 81 percent of private non-farm employment, over 83 million jobs in 1997. The United States presently accounts for about 16 percent of all services exported worldwide. U.S. private services exports totaled $239 billion in 1997, up 8 percent. If you look at services export growth over the last 10 years, it more than doubled, increasing $152 billion since 1987. In 1997, U.S. services exports exceeded imports by $84 billion, offsetting 42 percent of the deficit in merchandise trade.

Through the initiatives of the Administration’s National Export Strategy, the U.S. government provides a direct link between services firms engaged in international commerce and resources within the government. We are approaching the third anniversary of the Services Initiative which has produced numerous achievements. Service providers have found a wealth of information and assistance through partnerships formed with the Department.

In addition to fostering public-private partnerships, the U.S. government will return to the negotiating table with more than 130 countries in the year 2000 to continue the work begun in the GATS. We will renew efforts to strengthen framework rules and national commitments on market access for services. We look forward to working with you to develop ideas and approaches for us to take as we prepare for this new round of GATS negotiations. We will be seeking recommendations on the U.S. position for the Services 2000 Round and your advice as we begin these vital negotiations with our trading partners.

I know that you and the various government representatives scheduled to speak today have much to offer. So let me now turn the program over to Everette James, Deputy Assistant Secretary for Service Industries and Finance.

Everette James, Deputy Assistant Secretary for Service Industries and Finance, U.S. Department of Commerce

Good morning. I am delighted to welcome you to the Services 2000 conference. It is exciting to see so many businesspeople and government officials gathered here today. As I look over the names of the various panelists who will speak to you and to whom you can address questions, I am very impressed. We have some of the foremost experts in the field. We should leave here today with a much better understanding of the challenges facing the services sector in the next millenium.

The public-private sector cooperation you are witnessing here today has been several months in the making. While the Department of Commerce and the U.S. Coalition of Service Industries have worked "side-by-side" for some time, this is the first opportunity we have had to work "hand-in-hand" and this should bring even greater benefits to you.

With U.S. exports now a vital source of job creation and economic growth, the U.S. Government must continue to support the efforts of American business to take competitive advantage in foreign market. Our objectives are to make American exporters more effective competitors and to create jobs for American workers. Today’s conference is another step in our ongoing effort to help services firms seek trade opportunities.

I invite you to reflect on several issues relating to the new GATS round.

1. What are the U.S. business practices that need protection under a trade agreement --setting up a subsidiary in a foreign market, licensing a local supplier, entering into joint ventures?

2. Have panelists found that their services sector is highly regulated in foreign markets? Do these regulations often act as barriers to foreign suppliers? Would a short list of regulatory (or competitive) principles to which countries could agree help reaching agreement? If so, what would these basic competitive principles say?

3. How do foreign countries restrict U.S. business from investment in those countries? To enter foreign markets, do foreign rules require forming a joint venture with local companies? Is removing such restrictions important to your companies?

4. Is temporary entry of skilled personnel essential to the foreign supply of this service, so that liberal rules on temporary entry are an important negotiating target?

5. Is electronic commerce an important means for delivering this service, and how should a trade agreement in services take account of electronic commerce?

Today, our economy, thanks to many of you, is generating jobs, higher incomes, investment and growth. Our economy will continue to move forward through exports and innovation. Our ability in the government to help U.S. business create opportunities for themselves and the workers they employ depends on how well we respond to the challenge.

This Administration is committed to cooperation and communication with the business community. Successful private sector-public sector partnerships can produce economic expansion that is far-reaching, broad-based and prosperous. We intend to continue to lend active, positive support to U.S. companies. We are committed to helping U.S. business expand in the global marketplace and by so doing, their growth and competitiveness here at home.

I am delighted to introduce our keynote speaker. Dr. Geza Feketekuty will address the framework for global trade in services. His successes at the Monterey Institute of International Studies and the Office of the U.S. Trade Representative, where for 21 years he held various senior trade policy leadership positions, have given him the experience to lead the effort for U.S. services firms. He brings a broad background to the challenge of understanding services trade and I know he has much to offer.

It is a pleasure and an honor to give the warm-up speech at this important conference, to this distinguished audience. I am certain that many years hence we will look back to this conference as one of the critical events leading up to major accomplishments in the next major round of liberalization in trade in services. Those of us who were part of what used to be called the services trade mafia often look back with nostalgia to some of the memorable meetings on the road to the General Agreement on Trade in Services. This conference has all the promise to be one of the key energizing events for the next round of negotiations.

I want to congratulate the Department of Commerce, and the team that put this conference together, for their leadership and initiative. The next round of negotiations needs U.S. leadership, and leadership requires a vision, a set of goals and objectives, and an agenda. It requires a solid consensus between the government and industry on how U.S. interests can be advanced through new negotiations. In short, if we are going to get anywhere, the United States will need to get its act together, and this conference promises to get the process rolling.

It is not yet clear whether there is going to be a Millenium Round, but we do know that there is international agreement to kick off a round of negotiations in services in the year 2000. Whatever comprehensive negotiating framework emerges in the early years of the next decade, the negotiations on services are going to be at the core of those broader negotiations. They will be central to the ability of the WTO to meet the challenges of the next millenium. There are several reasons for the central role of services.

First, services have become the driving force in economic activity, and therefore any effort that serves to improve the economic efficiency and dynamism of the services sector will be crucial to our economic growth, and to global economic growth.

Second, the negotiations in the area of services will provide the key opportunity to meet the regulatory reform challenges facing the world economy. Regulatory reform has become one of the keys to reviving the high growth rates of the recent past in many countries. If it is presented properly, the next round of negotiations on trade in services in the WTO could facilitate the pursuit of national reforms, and these reforms in turn could give the liberalization of services a big push.

Third, regulatory conflicts have increasingly become the major source of trade disputes, and a large part of these regulatory conflicts concern services. We need an improved framework for reconciling what are often incompatible national regulatory regimes in services.

Let me expand on each of these points in greater detail.

The new industrial revolution and the globalization of production systems have put services at the center of all economic activity, and have made innovation and efficiency in the production of services crucial to economic growth. Services have become crucial to economic growth and prosperity not only because services jobs makes up the bulk of the jobs in the new economy, but more importantly because services inputs have become the critical factor to competitive success in manufacturing and in economic activity overall. The key to success in the new manufacturing economy is innovative product design and engineering, innovative advances in production processes, innovative marketing and distribution, innovative customization, and innovative outsourcing and globalization strategies - all services activities.

Second, telecommunications, transportation, finance, insurance, distribution and information services are the central activities that underpin all forms of international trade and all aspects of global economic activity. It is advances in services that supported the remarkable growth of trade and spurred the high level economic growth in recent years.

Electronic Commerce now promises to revolutionize world trade by making world markets accessible to small businesses. The expanded use of Electronic Commerce promises to unleash a new wave of entrepreneurial activity worldwide, with the United States in the lead.

Next, let me turn to the importance of addressing the regulatory challenges facing the world economy. Recent economic history has made two things very clear. First, countries that have reformed their regulatory systems by removing outdated, or excessively restrictive and intrusive forms of regulation have outperformed countries that have failed to reform their regulations. Second, countries that have continued to base their regulatory systems on discretionary licensing systems with their intrusive and corruptible bureaucracies have been much less successful in achieving desired regulatory goals, than have countries that base their regulatory systems on transparent and objective performance criteria,

Many countries around the world have yet to recognize the full implication of these fundamental economic facts, as evidenced by their failure to free competition in services from the fetters of excessive and excessively burdensome, restrictive, and intrusive regulation. Of course no country has been immune to populist rhetoric about hamburger flippers. One of the key challenges therefore will be to prepare the ground for negotiations through an educational process that is linked but not directly tied to the negotiations themselves. The utility of such a process was well borne out by the respective experiences in the sectoral negotiations in telecommunications and financial services.

Aside from the national regulatory reform agenda, the globalization process confronts the world economy with the challenge of removing conflicts between incompatible national regulatory systems, without creating a new, global regulatory bureaucracy. Corporations with global operations can’t efficiently manage their operation if they have to meet different and incompatible regulatory requirements in each country where they do business. Such conflicts inevitably lead to trade disputes. Deeper economic integration, along with the reduced significance of tariffs and other border controls, will thus inevitably shift the focus of global trade negotiations and the work of the WTO to regulatory issues.

The next round of global negotiations on trade in services can make a major contribution by putting in place the right kind of templates for dealing with the regulatory issues of an integrating world economy. What we need is a framework that allows maximum competition within a market-oriented framework, while enabling governments and private actors to work cooperatively to achieve important social objectives. There is the need for a flexible process within which governments can work out a global consensus on key regulatory principles, while leaving national governments considerable flexibility in meeting national and local needs. At the same time, the private sector needs to be given considerable leeway in developing globally compatible technical standards that meet public regulatory goals.

Some may consider this a tall order. It is a worthy challenge, but not one that cannot be achieved. The recent agreement on basic telecommunications sets an excellent precedent. It shifted the regulatory paradigm from one of bureaucratic control and limited competition to market-based competition. The regulatory principles embodied in the reference paper have already had an important influence in reshaping national regulatory systems in a number of countries towards a more market-oriented approach.

The liberalization of trade in services has always been an issue of changing national regulations, since barriers on trade in services are embedded in national regulations, rather than in border controls. The question, and the challenge for this conference, is to shape the best approaches for removing these regulatory barriers. What we need is the ideas and concepts, the operational goals and means, around which a global consensus can be built for moving the liberalization process forward.

I don’t want to get into too many of the details of a negotiating agenda. After all, that is what you will accomplish collectively through this conference. Let me just offer a few pointers.

The GATS agreement provides a solid framework for making progress. Whatever weaknesses exist will be largely self-correcting as the national schedules get filled out, and as further sectoral agreements along the lines of the telecommunications agreement are included. I would therefore not waste too much time in renegotiating the framework that has been put in place in the form of the GATS provisions.

What the GATS lacks is substantive commitments. A major thrust of the new Round in services has to be the negotiation of national treatment and market access commitments in as many sectors as possible, with the objective of achieving as close to universal coverage as possible. At the same time, the schedules in place already will have to be refined, to provide greater clarity, more effective discipline, and better information to prospective exporters. The problem with the current schedules is not only that they lack a certain amount of consistency in the treatment of commitments, but also more importantly that countries have used the meat ax approach to carving out exceptions. In sectors where countries have scheduled they are obligated to provide national treatment and market access, unless they list exceptions. Their approach has been to list all their current laws that contain restrictive provisions as exceptions, without any precision as to the nature of the exception.

In addition to the detailed work on the national schedules, the negotiations should focus on the negotiation of sectoral agreements, such as the agreement on basic telecommunications.

There is a need for a pro-competitive regulatory framework in transportation services.

There is the need for an agreement in professional services that will facilitate mutual recognition of professional qualifications and licensing.

There is the need for an agreement in financial services that will facilitate greater liberalization through increased international cooperation on prudential supervision.

There is the need for an agreement on electronic commerce that will allow such commerce to flourish without being burdened by conflicting and restrictive national regulations.

There is the need for an agreement on competition in distribution services that will not only open new opportunities for international trade in retail services, but also help assure that competitive access to foreign markets is not hampered by anti-competitive vertical restraints on distribution.

On a more generic level, it would be useful to strengthen Article VI of the GATS on regulation. In general, such principles could encourage countries to:

--use market-oriented solutions where that is practical,

--provide greater transparency with respect to regulatory objectives and processes,

--adopt objective, performance based criteria as the basis for regulation,

--minimize the scope and detail of regulations to the minimum necessary to accomplish regulatory objectives,

--prevent abuse of delegated regulatory powers, and

--give private sector groups the leeway to find solutions on the basis of self-regulation and voluntary codes.

These are only a few nuggets to stimulate your thinking. I am sure that your discussions here will provide a much fuller picture of what needs to be done to meet the important challenges that lie ahead. The opportunities are tremendous, and that is what promises to make this an exciting enterprise. I wish you all the best.

In order to identify strategies and objectives for the new services negotiations this roundtable addressed and discussed the subject by seeking to answer these key questions:

1. Is the WTO or another forum the best forum for pursuing liberalization of trade in services?

2. Which is better, comprehensive trade negotiations, or one focussed on services?

3. Should negotiators seek to reform or revise the GATS, and if so how?

4. How do we get improved substantive commitments?

5. How do we negotiate regulatory reform?

6. What are the services trade issues in electronic commerce? Do we need a broad agreement?

Conclusions and Discussion Points

1. The roundtable reached a consensus that the WTO is the best forum to negotiate liberalized services commitments. An important reason was that the WTO’s dispute settlement procedure offers reasonably prompt decisions, which are enforceable. Yet the dispute settlement mechanism is not particularly designed for services. Only one dispute settlement case has dealt with services under GATS: "the banana case" between the United States and the EU, which involves distribution services.

In addition, regional services trade agreements do not undermine the WTO, and can contribute to liberalized services trade. They help encourage liberalization and build a foundation for further liberalization advances in the WTO. Parallel efforts act as a laboratory which can be helpful to the WTO. However, our negotiating the GATS and regional bilateral agreements simultaneously will require some juggling.

2. The roundtable participants thought that a millennium round of trade negotiations in which all sectors of the Uruguay Round would be negotiated might lead to a long and arduous process that might not be in the best interest of services liberalization. Thus the panel favored following the mandate in Article XIX of the GATS for new negotiations under the GATS, without expanding negotiations to include other sectors.

3. The roundtable thought generally that a major revision of the GATS architecture would be difficult and time consuming, even though improvements could be beneficial. One such benefit should be the use of a negative list approach, whereby all service sectors are covered and countries would declare exceptions, as opposed to a positive list approach, used in the Uruguay Round, whereby countries declare those sectors which they wish to include in the agreement. This change would benefit transparency, but would surely be difficult to attain.

4. GATS-Plus was another approach which was discussed through which we may be able to get additional countries to agree to additional commitments . The roundtable noted the value in the Uruguay Round of the "Single undertaking" in inducing countries to accept agreements on services and intellectual property, which countries would have avoided if allowed to choose those agreements they wanted to adhere to. Perhaps this principle offers a method for proceeding in the new GATS negotiations as well.

In any case a strategy to get more countries to commit and to commit to a broader range of services is a good idea and should be approached strategically. Sector commitments also should be more specific, especially any MFN reservations. Instead of making exceptions by merely stating a general law, countries should be required to specify which part of the law is excluded from GATS coverage.

There was some expression of concern for the current world economic crisis and what effect this might have on accomplishing real liberalization in services. The crisis may cause a step back from the concept of the free flow of capital around the world.

The roundtable participants agreed that services play a crucial role in the world economy. Trade in services has made remarkable advances in the last twenty years, primarily due to technology development. More than ever we have true global services providers in all industries. And, there has been an economic recomposition in the face of technological development. Services are a growing part of all production upon which all modern commercial activity now rests.

5. On regulatory reform, one panelist asked the audience participants to consider what they would like negotiators to concentrate on: gaining more liberalized access to foreign services markets, or reforming regulatory systems. According to this panelist, it is also important to encourage countries to describe the regulatory restrictions, rather than simply list laws. The greater detailed reporting benefits transparency, but should have practical value for business people.

6. The roundtable concluded that electronic commerce is important to all services sectors, and that the negotiating objective should be to obtain commitments to allow trade using electronic commerce to move freely, with minimal regulation by governments.

The panelists generally agreed on all major points. The agreed that trade in audio visual industries has problems different from those of other industries because of the widespread view outside the United States that movies and television programming are essentially cultural, not commercial, activities, and so worthy of special protection.

The panelists also agreed on three areas where they would like to see progress in the new round of GATS negotiations.

(1) According to definitions presently used in the GATS, audio visual services include motion picture and video tape production and distribution services, motion picture projection services, radio and television services, radio and television transmission services, and sound recording. All panelists would like to see market access and national treatment commitments from far more countries than made commitments in the Uruguay Round. In the Uruguay Round only 13 countries made commitments on audio visual services, and a number took MFN exemptions for audio visual services.

A corollary to the panelists’ conclusion is that countries that filed MFN reservations should be encouraged to withdraw them. Under the MFN reservation, a country can discriminate against other signatory countries. Since in principle, countries should maintain an MFN exemption for no more than ten years, the five-year point is a good time to begin reestablishing the MFN principle throughout the audio visual sector.

(2) All the panelists would like to see the commitments be as broad in scope and liberalizing as possible. The panelists noted a number of typical barriers to trade in audio visual works where they would like to see liberalizing commitments in the new round. Quotas, whether screen, broadcast or import, whether implemented for cultural or commercial motives, are high on the list of measures that U.S. companies would like to see liberalized. Censorship of audio visual works brought into foreign markets can also serve as a barrier that needs to be addressed.

Taxes on audio visual products, especially when they impose a heavier burden on foreign audio visual works than on domestic ones, are also a problem that U.S. companies. Finally, restrictions on investment of cinema theaters are a problem for U.S. companies.

(3) The panelists would like to see the negotiations take account of the implications of new technologies that have become available in the audio visual area. New technologies cover a range of activities related to the audio visual sector, including satellite delivery of programs, the Internet, digital film projection, and computer-generated ticketing.

Note that piracy remains a major trade barrier for the audio visual sector. Piracy issues are addressed, however, in the negotiating group on TRIPS Trade Related Intellectual Property Measures), rather than the GATS.

Without distribution services (which includes retailing, franchising, and wholesaling) product inventories would soar, food items would rot at the loading docks, consumers would be forced to pay higher prices for goods. No economy can be truly modern and efficient if it imposes regulations that unnecessarily impede or slow the movement of goods between and among suppliers, manufacturers, wholesalers, retailers and the consuming public.

In general, the schedules of commitments for developing countries tend to be more restrictive as they are protecting local ownership and employment. Developed countries and regions including Canada, Mexico, and the European Union, have some access limitations, but generally permit market access and national treatment for U.S. distribution firms that establish a commercial presence. The primary barriers to trade in distribution services include: limitations on the purchase of real estate, restrictions on equity holdings, exclusions of products or services due to state monopolies or national interest, nationality quotas, residency requirements, and limitations on the length of stay of foreign nationals.

Retail and Wholesaling Services

The retail and wholesaling sectors are extremely important for the U.S. economy. This sector generates millions of jobs and trillions in revenues. One out of five workers in the United States is employed in retail services. WalMart was the #1 employer in the United States in 1997. These sectors are the last link in the supply chain for getting products to the consumers.

Many U.S. retailers have received worldwide recognition for providing good quality products and services. While some U.S. retailers already have established a commercial presence abroad, there are still too many obstacles. For example, in Japan and Brazil, retailers have been restricted by size of establishment and location requirements. In Canada, cultural protection has precluded some U.S. companies from entering this market. In China (not a WTO member), laws to operate retail businesses are not transparent and are changed without notice or opportunity to comment.

Representatives from the retail sector are encouraging U.S. negotiators to obtain commitments for market access and national treatment and to press each member to limit exceptions. (As background, the United States negotiators had argued for this approach in the Uruguay Round. In the end, the approach adopted was for members to decide whether or not to list a sector and to determine the scope of its commitment.) The GATS 2000 discussions should go beyond commitments to the "status quo" and push for reductions in restrictive measures.

Franchising Services

Similar to retailing, franchising stimulates tremendous growth in the U.S. economy. The International Franchise Association estimates that 35-40% of retail sales are generated through franchising (either through a business format franchise such as McDonald’s or a product distribution format such as autos). There is a growing trend for U.S. franchises to expand overseas. Currently, more than 400 U.S. franchisors are operating overseas. Franchising has become an excellent vehicle for transferring know-how from developed countries to developing countries.

Franchisors are experiencing a number of impediments to operating units overseas and would encourage the U.S. negotiators to consider the following suggestions.

There is a proliferation of laws and regulations in many countries that burden franchisors to provide certain information for pre-sale disclosure. Although franchisors understand the importance of providing certain pre-sale information, these national laws vary between nations and make it difficult for franchisors to comply with all the different regulations. It may be useful for the WTO members to create a more uniform system of laws relating to pre-sale disclosure.

Franchisors experience poor trademark protection in various countries. Currently, there are no worldwide trademark protections or automatic/blanket trademark registration rights. Since each country has its own trademark protection laws, this protection is limited in scope to the territory where the trademark is registered. Thus, it may be useful to harmonize trademark law protections among all WTO members.

Some countries have enacted technology transfer laws to regulate the transfer of technologies into their country from abroad. Such national technology transfer laws define technology very broadly to include trade names, know-how, trademarks, patents, and industrial secrets. These laws often impose restrictions on intellectual property and often include one or more of the following: the requirement that the technology transfer or license agreements be filed, approved, and registered with a governmental body; royalty limitations; maximum or minimum terms for such agreements; prohibitions on post-term confidentiality provisions and use restrictions; and prohibitions on post-term non competition arrangements. These laws go well beyond disclosure and approval, altering the substance of the relationship of the franchise agreement.

Currency controls limit access or expansion. Certain countries, particularly in Asia and the African Subcontinent, limit the repatriation of profits in the form of royalties and other fees. This is particularly true in countries which have a shortage of hard currency and require franchisors to reinvest these profits within its country.

National antitrust laws also have restricted franchisors’ access. Where non-price vertical restraints in the United States are considered by many economists and attorneys as pro competitive (such as territorial restrictions, customer restrictions, and other supply restrictions that are imposed by upstream suppliers and franchisors on their downstream purchasers, dealers, or franchisees), many officials from other countries do not share these views. Besides economists in the United States, many economists throughout the world have determined that these non-price restraint practices should be encouraged since they increase interbrand competition (competition between brands rather than between and among dealers of the same brand). In addition, maximum vertical price fixing (price ceilings imposed on downstream distributors or dealers by upstream suppliers) is permissible in the United States, and the European Union has recently proposed revisions to permit such price ceilings. Franchise representatives would urge the U.S. negotiators to encourage more WTO members to permit these restrictions.

Franchisors are sometimes restricted by the application of commercial agency laws which supersede franchise agreements. This makes it difficult to terminate franchise agreements without making large payments to the franchisee or dealer. Some call this practice a form of extortion or commercial bribery.

Finally, franchisors have experienced problems with several countries’ lack of acceptance of clauses in franchise agreements which designate the forum in which a dispute will be subject to arbitration.

GATS 2000 Strategy

During the Uruguay Round, distribution services were not fully addressed. The panelists stated that U.S. negotiators were not fully aware of distribution service restrictions since many sectoral companies did not voice concerns for this Round. However, the GATS 2000 Round may provide a good forum for raising distribution services-related barriers.

For the upcoming GATS discussions, before specific sectoral issues are raised, distribution services firms should ensure that the GATS schedule includes all relevant definitions of distribution services. Distribution firms would also benefit by allying themselves with groups which benefit substantially from their services. For example, major manufacturers or agricultural entities that need their products or services distributed to, and within, various markets. Distribution services firms need to make sure officials in Washington and Geneva understand their interests.

The Education and Training Roundtable was composed of representatives from the education and training segments of this services sector. The initial task was to delineate what is meant by education and training and how education and training relate to one another.

The Education Segment was defined as institutional providers of educational programs leading to degrees, diplomas, and certificates and the accumulation of accredited credits (academic, professional, or vocational) and included the associations and corporations that support this segment. Educational providers may be non-profit or for-profit.

By comparison, the Training Segment was defined as all of the providers (institutions, corporations, government agencies, organizations, consultants, etc.) of non-credit, non-degree, focused instruction of varying lengths and types that are designed to improve, transform, maintain, or establish job-related competencies or personal growth and development. Training may be employer-provided or independently provided by for-profit or non-profit providers.

It was agreed that the international commercial issues facing these segments overlap to some degree. Participants also believed that the segments are essentially distinct and that both are important to the United States and global economies. The roundtable noted that DOC/BEA statistics indicate that U.S. education exports alone, under a conservative definition, accounted for $8.3 billion in 1997 (imports were not defined for education). Participants felt that this underestimates the sector’s size because it does not reflect corporate training dollars, the proportion of other sector sales that were actually used in education and training activities, or the degree of foreign investment in this sector in the United States. Some independent estimates make the import and export of education and training the sixth largest enterprise in the U.S. economy.

Specialness of the Sector

This services sector, in order to operate, needs the same degree of transparency, transferabiliity and interchangeability, mutual recognition, and freedom from undue regulation or restraints and barriers that the United States acknowledges on behalf of other service industries. Because of the diversity of education and training activities, this sector is important in terms of all four Modes of Delivery recognized under GATS:

Cross-Border Supply (Mode I) is provided by education and training providers from the United States who provide services and service products (curricula, materials) all over the world via distance education, the Internet, and other modalities;

Consumption Abroad (Mode II) is provided by students and employees who come to the United States to learn and by Americans who study and train abroad;

Commercial Presence (Mode III) is provided by the many U.S. based education and training providers who operate facilities overseas where local employees or citizens receive instruction; and

Presence of Natural Persons (Mode IV) is provided by the staff of U.S. education and training providers who travel and locate abroad in order to deliver services, administer overseas operations, or inspect and monitor quality and standards.

Under no circumstances should Education and Training be viewed as a marginal or "throw-away" component of international commercial negotiations which can be sacrificed in order to achieve other objectives or to accommodate other countries. It is likely that other countries, especially members of and applicants for membership in the European Union, may take the view that education and training are noncommercial activities and therefore should be off the table during GATS negotiations. This position reflects their self-interest as competitors and the weight of traditional cultural attitudes on the part of their academic and civil service communities, but is not reflective of the facts. It should be resisted. 

The Education and Training Roundtable identified the above-stated broad policy position as the essential basis of support for this services sector. In addition, it urges that the following three points be considered in framing GATS and other commercial negotiations.

1. The free flow of technology, especially electronic information and communications delivery modes. Distance learning via electronic means (television, radio, fax, electronic mail, Internet) is the most rapidly growing method of education and training provision in the global economy. Free technological flow is also critical to nearly every other service sector. The special needs of education and training providers include the unfettered access of providers to national communications networks; the free access of local citizens, corporations, and organizations to the Internet and other electronic communications access points; and the absence of censorship or restrictions regarding the electronic transfer of instructional messages and materials.

2. Barriers and other restrictions that limit or prevent the provision of educational and training services across countries and internationally.  Examples include trade barriers that prevent providers from one country from offering services or getting licensed in another country; regional protectionist barriers of similar character that block off groups of countries; regulations limiting or preventing the movement of persons, either as providers or students; regulations preventing service providing faculty, trainers, instructors, administrators, or inspectors from being approved or licensed to practice under local laws; monopolistic policies requiring education and training to be provided only by national citizens or institutions or nationally approved entities (and then making it impossible for private, international, or foreign competitors to qualify); and restrictions on the intellectual property rights of the authors and producers of instructional materials and methods.

3. Barriers and other restrictions that prevent certification of the quality, acceptability, and transferability of educational and training credentials, such as degrees, diplomas, certificates, credits, continuing education units, and other measures of successful service delivery.

The global economy depends upon transparency for its functioning, and the education and training sector is no exception. Examples of barriers to transparency include restrictions on the recognition of credentials earned from private (non-government operated) providers, foreign-headquartered providers, or transnational providers; refusal to recognize the qualifications earned by graduates of educational and training programs other than nationally approved ones (this is usually directly connected to point 2 above); refusal to permit credential holders to be licensed or enter the local job market; and refusal or reluctance to develop mutually satisfactory and transparent equivalency determinations to assist in the international recognition of the products of the education and training service industry.

 

Energy services is among the most dramatically changing sectors within the international marketplace today. International energy activities are no longer just oil related, although oil development will continue to be significant. Today, and into the future, international energy services activities cut across multiple energy types (natural gas, electricity, renewables) and a growing array of service activities (exploration, production, processing, transmission, delivery).

Energy services is an area in which the changes in the international marketplace will create significant new private sector opportunities, for both domestic and international firms. The world needs to reexamine its energy markets. Many countries are looking at new policies and programs to manage the energy market to make energy efficient and available. The importance of the energy sector is not felt solely by the industry itself but in the fundamental impact that adequate supplies of cost-effective energy are on the local economy. The developing world must bridge the energy supply gap to increase the standard of living and to satisfy cost efficiency in providing energy products to its citizens. The U.S. industry is well positioned to benefit from these opportunities in view of its technological and financial leadership.

Energy services are not just one service activity but a continuum of service activities which, on the one hand are increasingly emerging as separate businesses (from resource exploration to delivery to the final consumer), but which are still intimately related to the overall openness of the energy services marketplace. Two forces are having a substantial impact on the energy services markets today: free market economies and advances in computer technology. These forces help create an extremely competitive industry which is becoming more segmented.

Among major objectives that negotiators of Energy Services in GATS should seek to achieve are:

--Predictability, reliability, and transparency in governmental decision-making affecting energy services activities. The need for guidelines in the development and operation of domestic regulations were highlighted.

--Liberalization and reduction of risk risks (such as political, exchange, repatriation of earnings, and regulatory changes) in all of the activities in the energy services area so as to create a climate for truly effective private sector competition.

The environmental services industry is a rapidly evolving industry influenced by governmental authority and regulation more than other industries due to health and infrastructure concerns. Services are becoming the largest segment of the total environmental equipment and service sector. Although U.S. firms are very competitive in this growing and evolving industry, they are not taking full advantage of international market opportunities. Environmental businesses appear to need much more U.S. government assistance in foreign markets compared with other sectors.

Defining the environmental services industry has been a problem in trade negotiations due to the lack of understanding or agreement on the full array of environmental services that do exist. Some countries are narrowing the scope of environmental as a sector. Environmental services are composed of many other service industries such as engineering, consulting, computer programing, and analysis. U.S. firms are changing how they sell their services by increasingly providing an integrated package of goods and services. There may be a trend for environmental companies to redefine their concept of environmental business and their marketing strategy, i.e., a progression of services delivered as a package. Some are making the transition from manufacturer to service provider.

The consensus was that the current definition of the environmental industry was thought to be inadequate. U.S. negotiators must wrestle with the pros and cons of expanding the technologies, products and services scope. A broad definition to capture most types of services within general functional categories (e.g., engineering, construction, consulting) will have the greatest commercial value. However, a narrow definition focused on environment-specific services only will likely have the most "political" appeal among our trade partners.

U.S. industry highlighted the following as impediments to trade in the environmental services industry, which trade negotiators must address: corruption, lack of transparency in the bidding process, standards (equipment and approaches to regulations), taxes, repatriation of profits, customs procedures, and professional licensing. In certain countries, structural impediments to environmental trade may best be countered by a strategy of working through existing international agreements. Some experienced environmental services firms believe that market conditions in foreign markets, not trade barriers, present more formidable obstacles to normal trade transactions.

In December of 1997 the Uruguay Round of financial services negotiations came to a conclusion. The 1997 agreement followed inconclusive efforts in 1993 and 1995 to reach agreement on financial services in the WTO. In reviewing the state of financial services in the WTO, the roundtable came to three general conclusions which are as follows:

The 1997 agreement, while far from perfect, was worthy of U.S. support, both by government and industry, that during the next round of negotiations on financial services in the WTO the need to address regulatory issues will become even more important, and that the environment for the negotiations, including financial services scheduled for the year 2000 is likely to be very be different from that which existed even in 1997.

Also noted was the fact that there was unevenness in the quality of commitments made across various financial services. Given this, and given the increasing range of activity across subsectors by many US financial services providers, it may be a useful negotiating strategy to attempt to leverage off of good commitments in one subsector in an effort to improve the commitments in the other subsectors in that market. For example, if a country made a good commitment in the banking sector, but did not do so in the insurance sector, during the next round of negotiations efforts could be made to strengthen that insurance commitment by highlighting the quality of the commitment in the banking sector.

Other points were raised regarding the need to deal with regulatory issues during the upcoming negotiations. One was that fact that local regulation may be thought to be neutral, when in fact its effect is discriminatory. Foreign firms may be more innovative and is therefore more constrained by the inflexible nature of the local regulatory structure.

It was also noted that in a number of agreements, particularly the bilateral agreement between the United States and Japan on financial services, that commitments had undertaken to address regulatory barriers. These regulation-oriented provisions can have the effect of creating new opportunities for American financial services providers within that market. Such deregulation commitments have been made on insurance in Japan's WTO as well as in the pending Taiwan WTO accession proposal.

Panelists suggested greater efforts need to be made to be creative about how to schedule regulatory reform issues within the WTO context. Panelists also discussed the potential for differentiating between different categories of business in encouraging adoption of pro-competitive regulation. For example, one might use a pro-competitive regulatory approach in securities to distinguish between wholesale products and retail products, where the need for excessive regulation is less in the wholesale context but greater in the retail context. Countries could accordingly schedule greater access and flexibility for foreign security firms in wholesale while retaining a greater degree of regulatory oversight in the retail sector. On insurance, commercial lines might be allowed greater access on a more flexible basis, since both sellers and buyers of these products are sophisticated consumers, and the need for tight regulation and oversight is less than would be the case in personal lines. Similar logic would hold regarding reinsurance.

On a structural note it was recommended that coordination between the WTO, the IMF, World Bank and other multilateral institutions should be enhanced since the objectives of these organizations are often similar. Accordingly, greater coordination can be used to as leverage to advance common objectives.

It was also agreed that in the next round of negotiations by other countries will be making greater demands for commitments by the United States change its own domestic regulations.

Lastly panelists urged that in these uncertain times the case in favor of liberalization should not be allowed to be mis-represented, that liberalization is not a cause of financial instability, but is in fact a contributor to the broadening and deepening of local financial markets. Therefore, increased access to developing countries markets for foreign financial services firms is a contributor to the stability and soundness of those regimes.

There was consensus that negotiation of substantial commitments to open markets in this industry across a wide spectrum would be difficult. In the United States, the presence of state and local regulatory and licensing requirements for the practice of healthcare clearly limit the ability of U.S. negotiators to commit to substantial market openings in healthcare and potentially limit U.S. ability to gain concessions to open markets in other member states. Panelists also noted that the ethical and human welfare dimensions of healthcare make it qualitatively distinct from most other industries and endow it with a high degree of political sensitivity. It was agreed that regions outside of the G-7 nations and Western Europe on the whole offer more promising business opportunities for U.S. healthcare service firms.

Particularly for those providing services relating to behavioral healthcare and substance abuse in a number of African countries, Africa can be seen as "the big emerging market" where U.S. healthcare providers can make profitable inroads because it is currently experiencing many of the problems U.S. medicine faced in the 1940s and 1950s. The panel emphasized the need for U.S. firms to provide "telecare" in Africa, linking the use of local physicians versed in the community's healthcare practices with satellite diagnosis of patients.

Participants noted that "there is less government interference in African healthcare than you imagine"--the regulatory and licensing barriers one confronts in Europe or North America are minimal. U.S. firms, he added, can best benefit by educating local businesses in these countries about the medical opportunities of which they may be unaware.

During the presentations, the conditions under which foreign hospitals must operate in China and the regulatory system in place were highlighted. At the same time that "healthcare is in rapid change in China," the country is only now permitting joint ventures with foreign entities. Hospitals are either under the control of state-owned enterprises or the military, or they are government hospitals. All, however, are tightly regulated by the central government. Panelists noted that, in the last four years, Chinese authorities have been moving in the direction of conforming hospital operations with market principles. The future potential for upgrading the large number of Chinese hospitals is therefore considerable.

The types of foreign joint ventures that are permissible fall into the categories of either shared equity or a "shell" arrangement where the foreign entity in reality controls most of the investment. It was observed that health insurance is not open to foreign involvement, despite the presence of several large U.S. insurers in the country, confining medical firms to the "private pay" market. Moreover, perhaps the most formidable barrier for a foreign healthcare service company is the risk-averse mentality of Chinese healthcare decision-makers, a focus on the dangers of new ventures rather than the potential for positive change.

Those firms active in telemedicine pay special attention to the issues of market access and medical licensing barriers. It became clear from the discussion that state-by-state medical licensing in the United States acts as a substantial barrier to foreign providers from seeking to enter the U.S. market or, to use one example, "a Virginia doctor attempting to set up a telemedicine practice in Maryland." The industry does not anticipate the licensing question changing within the next 5-10 years. In addition, the prevalence of legal and regulatory barriers makes the other G-7 nations an unpromising export destination for U.S. medical services, as in the case of a northern Virginia firm that has had considerable difficulty in obtaining licensure for its U.S.-based radiologists in the United Kingdom. Currently, the issue of ownership and management of healthcare facilities has been the one raised in GATS discussions.

Medical licensing in Asia, Africa and Latin America, like reimbursement for healthcare services, poses few problems. Moreover, telemedicine technology permits a healthcare provider to "bring services to the point of need" in developing regions "and facilitate their purchase."

Rather than engage in trade negotiations that focus on healthcare services, which would yield few benefits because of the U.S. licensing dilemma, panelists saw it as more efficacious for U.S. firms to make local physicians "stakeholders" in their healthcare investment. An important element of this strategy would be seeking out U.S.-trained physicians in the foreign market and granting them clinical faculty appointments. Such an approach can successfully meet local concerns that the U.S. provider is competing with local practitioners.

Panelists and representatives of other healthcare firms participating in the discussion agreed that it is vital for the U.S. Government to pursue policies that encourage the long-term liberalization and privatization in the healthcare service sector. The much greater openness of non-G-7 countries' healthcare service markets led to a response of "Why raise these matters (e.g., licensing, malpractice) as trade issues if they are not now problems?"

During the Uruguay Round of trade negotiations, more than 50 countries made commitments on market access and national treatment for accountancy, architecture, engineering, legal, and other professional services on all four modes of supply (cross-border, consumption abroad, local presence, and movement of persons). Generally, in the Uruguay Round, countries agreed not to increase restrictions in this area. This was basically a standstill agreement. It was not a bad start.

Currently, countries are engaged in negotiating a common text of regulatory principles in the Working Party on Professional Services. Many countries are reluctant to bind their regulators in this fashion. One of the difficulties for the United States is that regulation is at the State level and the Federal Government must work with the States to find a pragmatic approach.

There is a great deal of interest around the world to facilitate international practice of the professions and there are great opportunities for the United States. To meet the needs of U.S. professions at the GATS 2000 round, we need to know the precise private sector objectives for market access and national treatment.

Legal Services

U.S. lawyers face several problems when it comes to being able to provide services for their clients in foreign countries. These problems include licensing requirements and restrictions on associating with locally licensed lawyers in other countries.

Twenty-two states in the United States have provisions for permitting foreign legal consultants, to become licensed simply on their foreign credentials and good standing, and become associate members of the bar. No examination is required, generally no fee (or nominal fee) is required, and there is no expiration for the license. Foreign legal consultants may not appear in U.S. courts and may not advise on family matters (wills, divorces), but they are free to provide advice to clients on international business transactions, their home country law, and the law of any other jurisdiction in which they are licensed. This is the type of model that should lend itself to international negotiations.

In February 1998, the European Union adopted a directive that enables any EU lawyer to practice in another EU country (as long as he identifies his title appropriately) and after three years of practice, the lawyer may be admitted to the bar on the same footing as local lawyers. This also can be used as a model for international negotiations.

Architecture

In many countries, U.S. architects need to associate with local architects. U.S. architectural regulations are transparent, but not so in foreign countries. Government procurement is a problem in some countries, as for example, major projects in Japan: although a clear policy exists on paper, in practice it is difficult for American architects or engineers to become involved in certain projects. The Work Opportunity Act in the United States affected foreigners’ status here and would have affected the status of Americans abroad, but this legislation was amended recently.

Bribery and corruption are major problems abroad. The President of the American Institute of Architects has written to his counterparts in 33 countries, asking them to get involved in implementing the OECD Anti-bribery Convention.

Accounting

There were three main objectives for accountancy in the Uruguay Round: (1) get a common set of rules to enable accountants to move from country to country; (2) get rules to enable investment in other countries and improve the ability to get money out; and (3) obtain rules to minimize restrictive licensing and standards. The industry was pleased that the Uruguay Round addressed all the issues, but it didn’t solve them all.

Commitments on market access and national treatment cover 90-95 percent of the world market (based on generation of accounting fees) and a Working Party was set up to focus on rules for regulation, giving priority to accountancy. The development of these rules has been slow and disappointing. Progress, however, was made in developing guidelines for negotiating mutual recognition agreements. Also, on the development of international accounting standards, some progress was made in that the Ministerial Decision at Singapore in 1996 gave standing to the International Federation of Accountants (IFAC), International Accounting Standards Committee (IASC), and the International Organization of Securities Commissions (IOSCO) by officially recognizing that these are the international bodies responsible for developing the new "core set" of international accounting standards.

The Uruguay Round has not produced a great deal for the accountancy profession, but has been a good experiment and learning experience. For the Services 2000 negotiations, what’s needed is a practical approach that would: (1) complete the country coverage in specific commitments; (2) improve the commitments made so that barriers to international practice would be eliminated; (3) improve commitments on movement of personnel to enable firms to get their people to the right place at the right time; (4) look at the impact of electronic commerce, focusing specifically on how the profession uses electronic commerce; and (5) avoid giving a blessing to the current work on developing rules for domestic regulation, and come back to them in the next round, using the current work as a point of departure.

There is consensus regarding the importance of transparency in improving trade in the professional services, recognition of the value of mutual recognition agreements, and the need to reconcile differing systems of federal and sub-federal regulation of the professions.

The Telecommunications Services Roundtable discussed four general issues:

1. Assessment of the current WTO Agreement on Basic Telecommunications

Although the WTO Agreement on Basic Telecommunications Services has been in force for only eight months, panelists agreed it has resulted in specific benefits. While telecom liberalization had already been underway in many countries, the Agreement accelerated the process. More importantly, it laid out a detailed road map, with deadlines, and locked in commitments that provide certainty to investors. Commitments under the Agreement have led to concrete changes in specific countries where open licensing has been implemented and foreign ownership restrictions have been removed. Not only is business benefiting, but U.S. consumers are as well. For example, U.S. calling rates to many foreign countries continue to decline, largely as a result of introducing competition into the international telecom services marketplace.

Yet the panel also agreed that much more remains to be done to promote liberalization in the telecom sector. Some WTO member countries did not participate in the negotiations; some that did made weak commitments and/or did not assume obligations in all areas (e.g., did not cover all types of services or regulatory principles).

2. Actions the USG and private sector might take between now and the resumption of the next round

Two panelists offered suggestions regarding what the U.S. Government and private industry could do during the period leading up to the resumption of negotiations to help maintain momentum for increased liberalization. The U.S. Government was urged to take steps, as necessary, to see that our trading partners live up to their commitments and to seek enforcement of the Agreement at the WTO if necessary. Of course there are risks and costs involved in pushing a case to a WTO panel too quickly, or in failing to give the other country a reasonable period and a way to address our concerns. However, the U.S. Government remains committed to seeing that the Agreement "works" and currently is addressing several WTO-related telecom issues with foreign governments. It is very important to see that the current Agreement is implemented properly.

It also was suggested that the U.S. Government continue to encourage parties to the Agreement to expand or accelerate their process of liberalization, as several countries (e.g., Hong Kong, Ireland, Peru) have indicated they will do in specific areas. The private sector should join the Government in helping educate other WTO members, as well as countries in the process of joining the WTO, about the real world benefits of telecom liberalization, focusing on issues such as how telecommunications infrastructure can spur economic development and job creation, lead to better services and lower prices for consumers, etc.

3. General goals for new negotiations in telecommunications services

The roundtable addressed what some goals for new negotiations in telecom services should be. New offers should be sought from WTO countries that have not made commitments in telecom services (about 60 in all) or that are acceding to the WTO. Second, efforts must be made to improve the existing commitments, where possible, from current Agreement participants by removing currently scheduled limitations and moving up dates for unconditional market access liberalization. Finally, there was a call to try and achieve greater legal certainty that would make market access commitments more meaningful and provide greater assurance that those commitments could in fact be enforced in dispute settlements.

4. Areas in the existing Agreement where elaboration or greater specificity is needed

Increased clarity and legal certainty should be sought by standardizing schedules in this sector. While there is a great deal of commonality among many of the schedules, some countries placed unique language or terms in their schedules. A "chairman’s note" attempted to state the general consensus on a few key issues, but it would preferable to bring the greatest possible degree of conformity to the way in which countries complete their schedules of commitments.

Further work may be desirable in several critical areas affecting the provision of telecom services. These areas are dealt with to some extent in the current Agreement, but further elaboration and specificity may be necessary to ensure that members actually secure the rights they believe they are obtaining under the Agreement. The areas for further work (elaboration, clarity, specificity, etc.) include the need to expand licensing provisions, strengthen competitive safeguards, define terms relating to interconnection, and clarify the concept of independent regulator.

With the development and growing global economic significance of express shipping services, different parties have proposed to seek multilateral liberalization of these services through the forum of the upcoming General Agreement on Trade in Services (GATS) 2000 round of negotiations within the World Trade Organization (WTO). At the May 1998 celebration commemorating the 50th anniversary of the WTO's predecessor, the General Agreement on Tariffs and Trade (GATT), President Clinton advocated that express shipping be considered as one of a group of dynamic services to be placed on the negotiating agenda.

At the Services 2000 conference, some 35 participants attended a roundtable to discuss liberalization of express shipping services, including representatives from various U.S. Government agencies, express shipping companies, foreign embassies and organizations, and labor groups.

Overview

The roundtable discussion began with an overview by Assistant Secretary Hunnicutt, outlining five key points that should be considered by the U.S. Government and the private sector in formulating an U.S. express shipping policy position for GATS 2000. A/S Hunnicutt emphasized that the purpose of the roundtable was to share information and perspectives in a wide-ranging discussion of relevant issues.

First, A/S Hunnicutt cited continuing efforts by the USG to liberalize the world's air transport system, using the regime of bilateral air services agreements that originated in the Chicago Convention. When negotiating air services agreements, the USG seeks the greatest possible market access for air cargo, including express shipments. These efforts also should ensure that gains made through bilateral aviation agreements not be eroded or diluted should express shipping and/or other air transport services be placed on the table in a multilateral services negotiation, whether at the WTO or other fora. A/S Hunnicutt also noted that all 31 of the U.S. open skies bilateral air services agreements, as well as a number of other U.S. bilateral aviation accords, contain provisions that encompass the range of intermodal services necessary for an express shipping operation.

Second, A/S Hunnicutt pointed out that a common, widely agreed definition of what specifically constitutes "express shipping" does not yet exist. The terminology used to describe these services ranges from express shipping to courier services, express delivery and express integrated transport services (ExITS). An agreed definition would then permit negotiators and interested parties to consider what actually differentiates express shipping from other forms of shipping and air cargo, and therefore what the focus of multilateral liberalization should be.

The third point to consider, A/S Hunnicutt stated, is the perspective of individual countries, and how they might view a global liberalization of express shipping services and the potential impact it might have in their own domestic market. Opening markets to a complete international express shipping operation requires that several different component services, such as land transportation, be liberalized. He then explored the need to identify the reasons why a country would agree to open its domestic market to these component services, as well as the specific sensitivities countries may have related to one or more of those services, and whether countries would be more likely to open home markets when these services are a part express shipping than when these sectors are considered individually.

According to A/S Hunnicutt, international liberalization raises a fourth issue to discuss, that of how express shipping services are tied directly to the delivery of mail by national postal services. How express services by private companies, and the treatment of these companies, contrast with services provided by a government postal service, needs to be thought through.

Fifth, customs clearance procedures, which have a significant effect on the timeliness, cost and reliability of express shipping, should be reviewed. That review could look at markets where expedited customs clearance procedures are most favorable for express shipments, if those procedures differ for general air freight, and compare U.S. customs operations with others.

Mr. Campbell, the next speaker, focused on many of the same points raised by A/S Hunnicutt, narrowing the scope of his comments to the definition and relationship of postal services and freight services when considering express services, the differing fora in which liberalization could be undertaken, and customs clearance procedures. By looking first at the role express and postal services play in the economy, one could conclude that express shipping should not be viewed simply as a transport service, but rather a value-added physical network that collects and delivers. Mr. Campbell also drew a comparison between express shipping and telecommunications. Negotiations to liberalize telecom services within the WTO began with a narrow focus, Mr. Campbell pointed out, but expanded to encompass a wide range of differing, value-added telecommunications services when it became apparent that doing so was necessary for true, substantive liberalization.

Although transport services traditionally have not been a part of multilateral agreements, Mr. Campbell explained that postal services might serve as an example of an approach by which it would be possible to engage in multilateral discussions of express shipping. The concept of networks could then be applied, as it is with postal services. Liberalization through a multilateral forum such as the GATS would emphasize the value-added elements of express and postal services, recognizing that transport is only one element of the overall service provided.

Mr. Campbell concluded his remarks by noting that customs reform also would need to be undertaken as a part of a network services approach to express and postal services. The minimal customs procedures imposed on international postal shipments, as agreed through the multilateral Universal Postal Union, offers an example of how this might be accomplished.

Mr. Grubiak began by emphasizing that international business requires a global network for postal delivery. He compared the lack of barriers to the free shipment of goods across state lines, and how liberalization of international delivery services could benefit from similar treatment. Postal services, Mr. Grubiak continued, should be looked at as facilitating international business through 40,000 postal facilities nationwide. For example, firms using the global postal system for direct marketing, and therefore active in international business, constitute only a small portion of direct marketing companies in the United States. Postal services can help these businesses access markets and eliminate barriers, as well as assist with language and currency differences. Within the context of the Services 2000 negotiations, customs reform holds the greatest promise for providing the most benefits, and Mr. Grubiak stated that the U.S. Postal Service supports customs liberalization for all providers of delivery services, public and private.

Echoing themes from previous panelists, Mr. Frenzel made the case that the delivery of packages should be considered as a service that is more than simply transportation. The distinction of that service is that it is provided from a given point to another given point, just as passenger air service is not flying planes but moving people. Regulatory and other barriers can impact the entire service, not just the transportation part. Door-to-door express shipping needs a sound, flexible network operation. Bilateral open skies accords have benefited express shippers, Mr. Frenzel acknowledged, and that process should continue, and could be further enhanced.

Mr. Frenzel said that an express shipping operation could be distinguished from general cargo by the large volume of packages shipped, the costly network operation required, and the need for a simple, expedited customs clearance process, such as that enjoyed by postal services, to ensure timeliness. If express shipping services are to be liberalized, Mr. Frenzel opined, private providers of express shipping services need a level playing field to compete with postal services. The many modes of transportation used to connect an express shipping network makes the GATS a good forum to negotiate express shipping liberalization.

Discussion

As the moderator, A/S Hunnicutt began the discussion among the panelists by stating that it will be how express shipping services are defined, and therefore differentiated from general air cargo, which may decide who receives the benefits of liberalization in the Services 2000 negotiations. A/S Hunnicutt then asked whether express shipping should be defined in terms of the operations of integrated express shippers, in contrast with other commercial entities that offer only some of the services that constitute express shipping? Or, perhaps the definition should include the size and weight of the shipped package, for instance setting a limit at 70 pounds? And, should the time factor be part of the definition? Such definitions could discriminate against general cargo, a result that should be avoided.

Mr. Frenzel responded that liberalization should go as far as possible, and not just include integrated operators. Competition is the key factor. Beneficiaries of express shipping liberalization could be airlines, trucking companies, or other businesses willing to compete.

Mr. Grubiak stated that it would be acceptable to include, as part of the definition of express shipping, a weight limit of 70 pounds. Mr. Campbell then offered that the definition issue need not be abstract, and that it was similar to the antitrust exercise of defining the market, and could be accomplished in much the same way. He said that liberalization, as much as possible, could be extended to various service providers, perhaps even extending all the way to general cargo operations.

Q. & A.

The diversity of interests represented at the roundtable provided a wide range of questions. The first questioner asked whether the current bilateral system of air services agreements could achieve further liberalization, beyond that of the many open skies agreements the U.S. now has in place.

In response, A/S Hunnicutt noted that liberalization achieved by the U.S. through bilateral accords could be distorted without liberalization between other countries. Efficiencies provided by liberalization are impacted by the network, not just the bilateral market. If an open skies bilateral partner has restrictive bilateral agreements with other countries, this influences the functioning of the entire system.

This then leads back to the question of how, and in what forum, should the U.S. go forward? If, in a multilateral forum, a liberal, plurilateral consensus of like-minded economies could be obtained, should it then be adopted? The trade off would be that, although many countries would be left out, the result would be a more liberal system to which any country could sign on. What might be achievable, and what is most important to achieve, should be considered.

In further discussion of the potential benefits of a plurilateral system, Mr. Grubiak noted that the U.S. exports a very large percentage of its trade, some 65 percent, to relatively few countries, 15. A plurilateral agreement with those countries, therefore, would be important.

Next, a question from the audience was posed concerning the use of hub-and-spoke operations by U.S. air cargo carriers in foreign markets. Carriers such as UPS already have foreign-based hubs, and would view positively liberalization within the GATS forum that would allow greater flexibility in operating a hub system.

A/S Hunnicutt then posed the question of whether the need for the greatest liberalization possible would seem to argue against a full GATS accord. An agreement that sought to include all countries could potentially have the outcome of achieving only partial liberalization.

A discussion then followed of if, and how, a plurilateral arrangement would operate within the GATS framework. Although it might be difficult to accomplish, A/S Hunnicutt said, a plurilateral GATS accord is possible. Any country could join, as long as it agreed to all the rules, so all that join receive benefits. Rights existing in current bilateral agreements also could be preserved.

Mr. Campbell offered that certain trends argued that the potential for broad liberalization was greater than that being discussed. Technology and the privatization of postal services are having the effect of blurring of distinctions between national postal services and private express shippers.

Other countries needed to be convinced of the benefits of liberalizing transportation services, A/S Hunnicutt stated. Deregulation of transportation during the 1980s helped lift the U.S. economy at a time when the economy was stagnant.

A participant then raised the issue of uniqueness. Should the Services 2000 process look at other forms of transportation as well, such as maritime, which already has been discussed within the GATS framework, either in parallel with air transport and express shipping, or as part of a broad multimodal negotiation?

A/S Hunnicutt replied that the U.S. DOT was examining liberalization of many different forms of transportation services--express shipping, maritime, aviation--and many different fora--GATS, FTAA, APEC--but was not tying any together at this time. It was an important strategic question, however, one that considered improved efficiencies for the entire transportation system.

Panelists and participants then discussed whether or not seeking to liberalize the broadest range of transportation services potentially could have the effect of damaging the whole. Risks exist, and therefore how much could be achieved should be considered. Setting too high a standard might result in being unable to reach an agreement, as had occurred with Maritime.

This led to a dialogue that contemplated what might be the most that could be achieved and what positions our trading partners might adopt. It was noted that the Europeans also were examining liberalization of express shipping. The growing recognition of the economic benefits of international networks might yield significant gains in the Services 2000 negotiations.

Conclusion

The A/S Hunnicutt closed the roundtable by asking participants to consider how best to organize U.S. policy during the next few years, not only for express shipping but all forms of transportation.

The rapid growth of electronic commerce has made electronic commerce a key issue in trade negotiations. IBM, for instance, invested over $2 billion in Internet related research and is expected to generate 10's of billion dollars in sales in 1998, while EDS received $30-35 billion in 1998 assisting companies in learning how to use this new medium. The industry as a whole is expected to generate sales of $200-$300 billion over the next few years. Panelists indicated that the future of electronic commerce will depend on how today’s policy makers decide on a wide range of pivotal and often contentious issues. Such issues include regulation of content, imposition of taxes and tariffs, regulation of telecommunications environment, governance of the media itself, encryption, electronic authentication, privacy, and intellectual property.

Regulation of Content

Regulation of content may include limiting what can be said in advertisements or regulating slanderous or obscene statements. While government regulators have long had the authority to limit content in other media, such as broadcasting, the ubiquitous nature of the Internet makes regulating content a greater challenge while at the same time, its more advanced capacity for end user content controls raises the question of whether government should have a role. To regulate content issues effectively, governments would need resources beyond the capabilities of existing agencies and law enforcement officials.

Taxes and Tariffs

Governments generate a large portion of their revenues from the imposition of taxes and tariffs, so it is very tempting for governments to impose a tax/tariff on electronic commerce transactions. Industry has supported U.S. Government efforts at the WTO to win a stand-still on imposition of tariffs on electronic transmissions. This temporary agreement should be made permanent as soon a practical Apart from tariffs, governments generally can impose three types of taxation - 1) sales taxes, 2) income taxes, and 3) property taxes. In the short run, most of the debate has centered around sales tax on electronic commerce transactions. In the longer term, policy makers will have to look at the issue of income taxes and property taxes. The general consensus is that governments should not impose any new taxes on electronic commerce transactions.

Regulation of Telecommunications Environment

The rapid increase of electronic commerce has created a need for greater bandwidth, which controls the rate at which data is transferred over the Internet. If bandwidth is excessively priced or monopolized, then that could discourage the development of electronic commerce.

Governance of the Internet

The Internet was created by the Department of Defense and the National Science Foundation. Technical management of the Internet is currently performed under cooperative agreement with the Department of Commerce. In June 1997, President Clinton directed the Department of Commerce to privatize management of the Internet in a manner that increases competition and facilitates international participation in its management. Accordingly, the Department of Commerce has entered into a joint project agreement with the Internet Corporation for Assigned Names and Numbers (ICANN) to design, develop and test mechanisms for private sector management. It is expected that the transition of technical management functions to ICANN will be complete by September 2000.

Encryption

Information that is transmitted over the Internet is valuable and warrants protection from outside parties. At the same time, the government has a legitimate need to monitor the activities of criminals, terrorists, etc. Who may use encryption to hide their activities. The question that policy makers are looking at is how to balance the needs of the government with the needs of the private sector.

Electronic Authentication

Electronic authentication allows businesses and consumers to know who they are transacting with. For electronic commerce to develop worldwide it is necessary for a worldwide standard to develop so that people can make transactions from country to country. The United States is advocating that U.S. policy should be technology neutral and that the industry should develop the standards for electronic authentication.

Intellectual Property

The key issue regarding intellectual property is clarifying liability issues. For example, Internet providers should not be held liable for a piece of pirated information that is sent over their server. Establishing a legal framework which facilitates electronic commerce transactions will give consumers and businesses greater confidence in conducting on-line transactions.

Privacy

The United States wants the issue of privacy to be addressed through self-regulation methods and is advocating that other countries, who may adhere to a highly-regulated position on privacy such as the European Union, do not discriminate against the United States approach. It will be essential to come to a solution that avoids interruption of data flows.

Electronic Commerce and the WTO

The May 1998 WTO ministerial declaration on electronic commerce called for the establishment of a comprehensive work program on the trade-related aspects of electronic commerce. An intensive series of expert-level meetings ended successfully on September 25^th with agreement on the WTO work program, which is expected to conclude its work by mid-summer 1999. The program calls for review of the implications of electronic commerce on the work of the General Council, the Council on Goods, Services and TRIPS and the Committee on Trade and Development. In recognition of the importance og ht e provate sector’s role, the work program will include obtaining information from relevant non-governmental organizations, as well as from intergovernmental bodies.

Summary

There is an overarching consensus that electronic commerce will be most effectively developed if it is based upon the following principles: electronic commerce should be industry led and market driven, electronic commerce should be self regulated and encourage private investment, and electronic commerce should be developed in a competitive environment.

Many problems are caused for companies doing business internationally by restrictive regulation of temporary entry of key personnel in various countries. Some of the results are delayed operations and hampered ability of service companies to meet their clients’ needs on a timely basis.

One possible solution to this problem would be an international agreement on temporary movement of key personnel with specialized knowledge. The agreement would apply to certain types of personnel, who would stay less than one year in a particular country with no intention of establishing permanent residence and it would apply only to workers already employed. Thus, there would be no immigration or labor displacement problems. A valid passport would be used for initial entry. Business visas would be waived for stays of less than 90 days or could be applied for after entry into the country. Work permits would not be required if the stay is less than three months and could be applicable for a one year period. Business visas could be applicable for a one-year period. Taxes would not be required if the stay is less than 183 days in any 12-month period. When taxes apply, they would be applicable only to income earned in that country. The employer would be responsible for filing tax payments. Key personnel would be permitted to leave the country prior to payment of taxes. Taxes would not be subject to withholding on temporary entries for one year or less.

There was some discussion of the issue of movement of personnel during the Uruguay Round of negotiations. A small number of countries, including India and the Philippines, were interested in gaining greater access abroad for their personnel. Most countries, including the United States, encountered difficulties in addressing temporary entry issues, namely from government agencies that face tough immigration enforcement problems and strong opposition from organized labor.

In the Uruguay Round, the United States reserved the "H-1b" visa category limit at 65,000 per year, the existing quota. The United States demonstrated more flexibility in temporary entry than most other countries. The European Union, for example, had no authority in this area. The outcome of the Uruguay Round was modest, partly because it was addressed as a North-South issue. The United States has much to gain from liberalization of entry restrictions and should be on the offensive rather than defensive. We should be as ambitious in our own schedules as we would want others to be.

There are developments taking place regarding movement of business personnel in the Asia Pacific Economic Cooperation (APEC) forum. Despite only a few meetings of the APEC Informal Expert Group for Mobility of Business Persons, a number of interesting activities are taking place. A temporary residents’ handbook has been prepared. A model of business service standards for residency in the 18 member economies is being developed to expedite entry of intra-company transferees (executives and managers). There is agreement to widen the dialog between government and the private sector to get a better understanding of business needs and government enforcement problems. Several countries are experimenting with an APEC business travel card to facilitate entry.

The United States has its own experimental visa entry system, which is currently being applied to countries subject to the U.S. visa waiver pilot program.

Robert Shapiro, Under Secretary of Commerce for Economic Affairs, who directs the work of both the Bureau of Economic Analysis and the Census Bureau, opened the roundtable’s discussion with an examination of the broad policy relevance of the many critical measurement and analysis difficulties posed by a services-based economy. Panelists were then invited to share their perspectives on the service sector’s special statistical challenges, and no less importantly, to describe some of the ways in which these challenges are being met by the statistical programs represented by the panel. Following these presentations, a roundtable discussion provided all participants with the opportunity to identify issues, to pose questions, and to suggest solutions.

Summarizing broadly, the services statistics roundtable highlighted three key points:

1. Measurement Difficulties

Despite the service sector’s crucial importance as gauged by general indicators such as its share of U.S. GDP and employment, the multi-billion dollar U.S. services trade surplus, or the sector’s key role in generating economic and technological innovation, much of the information that corporate executives and government policy-makers need remains elusive. Quantification of services outputs and classification of services activities were the two most widely relevant issues cited by panelists and discussants.

2. Public Awareness

Several participants emphasized the special pertinence of activities that over time will contribute to greater public awareness of the key contributions of services to U.S. economic welfare. A variety of past milestones were cited, e.g., the first time a services firm was included among the "blue chip" companies that make up the Dow Jones industrial average, the overhaul of the Fortune 500 to properly reflect the dominant role of services in the economy, and the transition earlier in the decade to a convention of reporting U.S. trade figures on a "goods and services" basis.

3. Data Improvement Programs

While noting that the Commerce Department’s statistical programs already provide a rich data source that is not broadly mined, panelists and other roundtable participants nonetheless agreed that there are a number of important areas in which services data could be usefully improved. Panelists and discussants shared a variety of insights into recent innovations such as BEA’s recent introduction of a travel and tourism satellite account, important ongoing improvements to BEA’s estimates of U.S. services trade, and other important developments, such as the vastly expanded coverage of services in the new North American Industry Classification System.

Energy Services

Energy markets worldwide are changing dramatically. There is no clear definition today of what "energy services" are. In addition to oil, the sector includes natural gas, electricity, exploration, and processing, to name just a few. Better definitions would enhance the trade negotiation process. The many types of energy-related services are all inter-related, in a continuum of activities. Balkanization of the sector would disrupt trade negotiations.

Energy services providers need predictability, reliability, and greater transparency from government negotiations. Reduced risk and overall liberalization are needed to enhance private sector competition. Energy services is one of the most fundamental sectors, and therefore the benefits of trade liberalization, through "the ripple effect" have the potential to be great.

Healthcare Services

The negotiating processes for the various services industries must meet the needs of the individual sectors. The requirements for negotiating market access for the healthcare services are unique, since the industry has unique social, cultural, and human dimensions.

The United States is one of the more difficult countries in which to do business in the healthcare field, partially due to licensing requirements. Privatization and reform of the healthcare industries worldwide must be encouraged.

Services Statistics

A number or improvements have been made in services data collection and reporting, but measurement issues such as properly defining output of services industries and quantifying quality improvements remain. However, the importance of the services sector to the economy is finally being noticed by the media and others, and there is likely to be increased demand or services statistics for economic forecasting.

Governmental statistical agencies are at the forefront of this important issue and continue to make significant contributions including the development of the North American Industry Classification System (NAICS) and expanded coverage of international trade in services by the Bureau of Economic Analysis.

Audio Visual Services

Roundtable participants agreed that the entertainment industry differs from other service industries in that, outside the United States, entertainment is perceived as culture, not commerce. The audio visual trade problems that the United States has with other countries flow from this view.

Concerning the three goals of the negotiations:

(1) The number one industry priority to is get more WTO member countries to make commitments on market access and national treatment.

(2) An important second goal is to obtain commitments which are as broad in scope as possible.

(3) Finally, the panelists would like to see the negotiations take into account changes in the audio visual business environment created by new technologies, including satellite delivery systems for films and television programming, digital film projection, and computer-generated ticketing.

Professional Services

National differences exist among the professional services, but those differences are mostly irrelevant when discussing trade in services. Most services are provided to highly sophisticated business clients regardless of the country.

Several cross-cutting issues affect trade in professional services such as transparency, mobility of individuals, and the electronic delivery of services.

The United States’ system of state regulation poses problems in international negotiations. Our trading partners will expect us to liberalize our regulatory systems and we must be able to comply if we expect our partners to liberalize.

Financial Services

There is consensus among financial services sectors that the 1997 financial services agreement was worth supporting, although not perfect. A standstill was a key benefit to the industry.

In international negotiations, one of the most important priorities for nearly all financial services sectors is to reach beyond most-favored-nation and national treatment and influence the regulatory environments in key export markets. Another priority should be to educate the decision-makers in the heavily regulated sectors in foreign countries and the United States, with an emphasis on modernizing the regulatory structures.

It is also important to emphasize the benefits which will ensue from further liberalization in the financial markets of developing countries, which will lead to more competition.

Education and Training Services

To be treated as a sector in its own right in international negotiations is a key goal for education and training services. It is a fundamental industry, in that the education and qualifications of people in all other services sectors are gleaned from education and training services. While education and training services are two distinct types of services, there is much overlap regarding priority needs during the Services 2000 round.

Electronic delivery of education and training services is rapidly expanding worldwide. Thus, elimination or prevention of restrictions on this type of information transfer is a top priority. Elimination of restrictions affecting delivery of services and reluctance to permit travel for education and training purposes should also be top priorities in the next round of negotiations.

One other problem area involves certification of the quality of educational products; many institutions internationally refuse to recognize qualifications of graduates from other countries. This issue should also be a priority in the 2000 round.

Distribution Services

International negotiations would benefit immensely if distribution service providers from many countries and all types of industries would join together to tackle the key problems as a united front. The industry would also benefit considerably from a clearer definition of what "distribution services" encompasses. U.S. companies in the distribution services business should work with their international partners to educate their representatives in Geneva on the impediments that affect trade in their services.

Transportation/Express Shipping Services

U.S. express delivery providers benefit from the U.S. Government’s success in negotiating 31 "Open Skies" agreements bilaterally with our trading partners. It will be important in the Services 2000 round not to detract from the success of these bi-lateral agreements. It may be beneficial to continue to focus on plurilateral negotiations in the sector, such as the FTAA, concurrently with the WTO negotiating process, although consensus has not been reached on this point.

There is a need to better define and label the industry; some suggestions are "Express Delivery Services" and "Express Integrated Transport Services". It’s important to note that these services are not merely shipping services, but have a value-added component as well. The size of packages and speed of delivery are important factors, as is the customs clearance impact on the industry.

Environmental Services

The services component of the environmental industry has evolved rapidly over the past ten years, and is considered a relatively new industry. It is very government-dependent, since governments determine that environmental needs exist, which leads to business development. But much privatization has also occurred in recent years.

The definition of the industry has been a problem in that there are no "SIC", "SITC", or "HS" classifications for these services. Most environmental goods are dual-use or multiple-use. Companies frequently integrate environmental products and services. APEC spent six months attempting to define the environmental goods and service industry while negotiations progressed in other industries. One top priority is thus a broad definition of the industry.

Some of the international barriers are corruption, lack of transparency, standards, and professional licensing restrictions. The United States has some licensing problems of its own.

Electronic Commerce

Most of the roundtables at the "Services 2000" conference discussed electronic commerce issues affecting their industries. What makes the electronic commerce industry most unique is its chaotic nature. Rapid development and lack of analogies to which to refer create both opportunity and danger.

It is not always clear who is responsible for electronic commerce, where jurisdictional lines are drawn, where government should be involved and where industry should lead. An overall consensus has developed within the United States that government should try to lead in the development of electronic commerce, particularly regarding privacy and cryptology policy.

Great need exists for global education and development of a cohesive, coherent "understanding" on electronic commerce. Fora for reaching such an understanding could include the WTO, APEC, or FTAA.

Movement of Personnel

Delivery of services is highly dependent on people more than in the goods sectors. The need to move people is critical to international business operations. Problems in this regard can increase costs for businesses and result in lost opportunities. The issue relates only to people who are already employed by companies doing business internationally, most of whom are highly skilled.

Opinion strongly supports tackling the movement of personnel issue within the WTO. Perhaps a separate agreement would be an appropriate means. Regional agreements on movement of personnel, such as those negotiated in APEC, are confidence builders for those involved in the issue, but have limited impact.

Overall Observations

Patterns appeared among the topics reported from the specific roundtables. First, once specialists in one area convene to discuss issues of concern, the importance of the choice between regional vs. multilateral trade agreements seems to fade.

Second, new delivery systems are affecting most service industries, especially electronic delivery. Some of the new issues that have developed as a result are intellectual property rights and access to technology. One question to ask in this regard is: Will technological delivery run the trading community into a new set of discriminatory practices? For audio visual companies, a priority is to allow freer competition in delivering programming to consumers worldwide. Government control over access to the delivery systems for many industries are potential barriers to trade.

Third, regulations in all countries are a major factor for trade in most industries, but they are difficult to change. The concept of international standardization is desirable to many U.S. industries, but they must be the right kind of standards. In some regards, the United States Government is the greatest resistor to the development of international regulatory standards. This is the case for the proposed international accountancy standards, since the standards developed thus far do not meet with U.S. Securities and Exchange Commission approval.

Industry representatives, on the other hand, recognize the potential cost-savings and other benefits of international standardization. Regulations should not be an impediment to innovation. In some countries and sectors it is possible to draw a distinction between the amount of regulation and the amount of liberalization that’s allowed.

Fourth, the United States has room to liberalize its own trade policies as it asks its partners to further liberalize theirs. The next round of negotiations is an opportunity for trade to impose political rectitude on the United States. It is also a chance for the United States to get what it wants from its trading partners.

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