Lok Sabha Question No. 378 (STARRED), answered on 2016-12-12
Subject: Trade Facilitation Agreement in Services
Ministry: COMMERCE AND INDUSTRY
Asked by: ANTO  ANTONY

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY (DEPARTMENT OF COMMERCE)

## LOK SABHA STARRED QUESTION NO. 378 TO BE ANSWERED ON 12 th  DECEMBER, 2016

## TRADE FACILITATION AGREEMENT IN SERVICES

## *378.   SHRI ANTO ANTONY:

Will the Minister of COMMERCE & INDUSTRY ( वाͨणÏय एवं उɮयोग मंğी ) be pleased to state:

- (a) whether  the  Government  has  recently  submitted  a  concept  note  on  a  Trade  Facilitation Agreement (TFA) in services at the World Trade Organisation (WTO);
- (b) if so, the details thereof along with the salient features of the said TFA;
- (c) whether the Government has received any reply from the WTO regarding TFA in services; and
- (d) if so, the details thereof along with the response of the Government thereto?

## ANSWER

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THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE AND INDUSTRY (INDEPENDENT CHARGE) (SMT. NIRMALA SITHARAMAN)

- a) to  d):  A Statement is laid on the Table of the House.

*****

## STATEMENT REFERRED TO IN REPLY TO PARTS (a) TO (d) OF LOK SABHA STARRED QUESTION NO. 378   FOR ANSWER ON 12 th  DECEMBER, 2016 REGARDING 'TRADE FACILITATION AGREEMENT IN SERVICES'

- (a) Yes, Madam.
- (b) India  tabled  the  'Concept  Note  for  an  initiative  on  Trade  Facilitation  in  Services' dated 27 September 2016 at the WTO(copy enclosed as Annexure -I).The objective behind India's proposal for an Agreement on Trade Facilitation in Services (TFS) is to initiate  discussions  at  the  WTO  on  how  to  comprehensively  address  the  numerous border  and  behind-the-border  barriers, across all  modes  of  supply, which  are impediments to the realization of the full potential of services trade. Like the Trade Facilitation Agreement ("TFA"), adopted by WTO Members in 2014 to facilitate trade in  goods, a  well-structured  TFS  will  significantly enhance the  potential for trade  in services for all WTO Members. India has proposed that the TFS Agreement could be based on the TFA in goods, with suitable modification and adaptation to the services context, as required.
- (c) Yes, Madam.
- (d) India's  proposal  was  discussed  at  the  WTO  on  6 th October  2016.  Many  WTO Members expressed interest in India's proposal as a positive move to revive Services negotiations at the WTO. Some of the key issues raised by members related to scope and coverage of India's proposal, mandate for a TFS and provisions related to Special and  Differential  Treatment.  Some  members  sought  greater  detail  about  India's proposal.

The response of the Government was that India's proposal for an Agreement on TFS is  to  comprehensively  address  the  numerous  border  and  behind-the-border  barriers impeding trade in services across all modes of supply. India has taken the position that the mandate for a TFS arises from the various provisions of the General Agreement on Trade in Services (GATS). India also intends to propose appropriate Special and Differential  Treatment and provisions  for  technical  assistance and  capacity building for developing countries and Least Developed Countries (LDCs) in the proposed TFS Agreement.

Subsequently,  India  tabled  a  follow-up  proposal  dated  14 th November  2016  on 'Possible Elements of a Trade Facilitation in Services Agreement' (S/WPDR/W/57) at  the  WTO,  which  outlines  the  possible  elements  of  the  TFS  Agreement,  as conceived by India, in a more detailed manner (copy enclosed as Annexure- II). Given  the  growing  importance  of  Trade  in  Services  globally,  India  is  hopeful  of constructive engagement with Members regarding the contours of the proposed TFS Agreement at the WTO.

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(16-5137)

Working Party on Domestic Regulation

## COMMUNICATION FROM INDIA

## CONCEPT NOTE FOR AN INITIATIVE ON TRADE FACILITATION IN SERVICES

The  following  communication  from  the  delegation  of  India,  dated  23  September  2016,  is  being circulated to the Members of the Working Party on Domestic Regulation.

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## 1  BACKGROUND AND MOTIVATION

- 1.1.  Services occupy a significant and growing share of domestic and international transactions. However,  trade  flows  in  services  remain  subject  to  numerous  border  and  behind-the-border barriers  as  well  as  procedural  bottlenecks,  which  are  impediments  to  the  realization  of  the  full potential of services trade. These impediments particularly limit the benefits of trade in services especially for small and medium enterprises and small exporters worldwide.
- 1.2.    The  Trade  Facilitation  Agreement  ("TFA"),  adopted  by  WTO  Members  in  2014,  was  a significant milestone in relation to trade in goods. Its overall purpose is to expedite the movement, release and clearance of goods  as  well  as co-operation  on  customs  compliance  issues.  Like  the TFA, there is need for a counterpart agreement in services, an Agreement on Trade Facilitation in Services  ("TFS  Agreement"),  which  can  result  in  reduction  of  transaction  costs  associated  with unnecessary regulatory and administrative burden on trade in services. The TFS Agreement will address the key issues that are pertinent to facilitating trade in services, such as transparency, streamlining procedures, and eliminating bottlenecks.
- 1.3.  The scope of the proposed TFS Agreement would encompass measures by Members affecting trade in services across all modes of supply.
- 1.4.  Importantly, the TFS Agreement, as in the case of the TFA, will also contain provisions for special and differential treatment for developing countries and LDCs and address related issues of technical assistance and support for capacity building.

## 2  ILLUSTRATIVE ELEMENTS OF A TFS AGREEMENT

- 2.1.    The  TFS  Agreement  could  be  based  on  the  TFA  in  goods,  with  suitable  modification  and adaptation to the services context, as required.
- 2.2.  Some of the issues would be cross-cutting issues relevant for all modes of supply of services, and others would be specific to each mode of supply.
- 2.3.  An illustrative list of such elements is provided below:

## ANNEXURE-I S/WPDR/W/55

27  September 2016

Page: 1/2

Original: English

## 2.1  CROSS-CUTTING ISSUES

- Publication and availability of information, including automation and international electronic exchange of trade data.
- Transparency in application of all measures of general application affecting trade in services.
- Ensuring administration of measures affecting trade in services in a reasonable, objective and impartial manner.
- Consultations and cooperation among relevant authorities.
- Opportunities to comment before entry into force of measures affecting trade in services.
- Procedures and timelines for consideration of applications from service suppliers, as well as for appeal and review.
- Disciplines on taxes, fees, charges and other levies on supply of services.
- Special and Differential Treatment for developing country Members and LDCs.
- Institutional arrangements.

## 2.2  MODE-SPECIFIC ISSUES

## Mode 1:

- Facilitation  of  free  flow  of  data  across  borders  for  ensuring  meaningful  supply  of  Mode  1 services.

## Mode 2:

- Facilitation of supply of Mode 2 services, including through cross border insurance portability for availing of medical or tourist related services in a foreign country.
- Endeavour to streamline temporary entry formalities, such as visa processing fees, procedures  and  timelines  for  consumers  seeking  entry  into  another  country  to  avail  of services (such as medical services, education services, tourism, etc.).

## Mode 3:

- Facilitation of supply of Mode 3 services, including through measures such as single window clearance for setting up commercial presence.
- Disciplines on charges applicable on Mode 3 service suppliers, in order to ensure that these do not unfairly disadvantage foreign service suppliers.

## Mode 4:

- Facilitation of supply of Mode 4 services through simplification of procedures for temporary entry and stay, and clarity in respect of work permits and visas as relevant for the categories of the Mode 4 commitments.
- Disciplines on measures relating to taxation, fees/charges, discriminatory salary requirements,  social  security  contributions  in  relation  to  temporary  entry,  etc.  in  order  to ensure that these do not unfairly disadvantage foreign service suppliers.

## 3  CONCLUDING COMMENTS

India firmly believes that like the TFA, a well-structured TFS will significantly enhance the potential for trade in services for all Members. This concept requires careful deliberation in order to enable the development of a framework that can effectively address the main concerns of all Members. India looks forward to comments and suggestions from all Members on this critical concept and to developing the elements for the same.

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(16-0000)

Working Party on Domestic Regulation

## COMMUNICATION FROM INDIA

## POSSIBLE ELEMENTS OF A TRADE FACILITATION IN SERVICES AGREEMENT

The  following  communication  from  the  delegation  of  India,  dated  14  November  2016,  is  being circulated to the Members of the Working Party on Domestic Regulation.

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## 1  INTRODUCTION

- 1.1.  India  tabled  its  proposal  on  the  'Concept  Note  for  an  Initiative  on  Trade  Facilitation  in Services'  (S/WPDR/W/55)  at  the  WPDR  meeting  held  on  6  October  2016,  with  the  objective to briefly outline the concept of a TFS Agreement. As mentioned in that paper, while services occupy a significant and growing share of domestic and international transactions, trade flows in services still  remain  subject  to  numerous  border  and  behind-the-border  barriers  as  well  as  procedural bottlenecks.  These impediments particularly limit the  benefits of trade in services  for small  and medium enterprises as well as small exporters worldwide. The TFS Agreement will address the key issues  that  are  pertinent  to  facilitating  trade  in  services,  such  as  transparency,  streamlining procedures, and eliminating bottlenecks. In brief, the TFS Agreement is aimed at ensuring that the market access arising out of existing as well as future liberalization commitments are effective and meaningful.
- 1.2.  We were very encouraged by the interest generated amongst the membership on the concept of  a  TFS  Agreement.  India  would  like  to  thank  the  Members  for  the  engagement  and  interest shown in the proposal. Many Members also desired that India present a more detailed proposal which encapsulates India's idea on furthering the initiative on trade facilitation in services.
- 1.3.  India hereby presents this Elements Paper which outlines the possible elements of the TFS Agreement, as conceived by India, in a more detailed manner. We look forward to participating in constructive  discussion  and  engagement  with  Members  regarding  the  contours  of  the  proposed TFS Agreement.
- 1.4.  The issues which India proposes to cover in the TFS Agreement are inspired from the Trade Facilitation Agreement, the ongoing DR discussions (TN/S/36 dated 21 April 2011 and JOB/SERV/239/Rev.1  dated  31  October  2016),  provisions  of  the  GATS,  several  bilateral  and regional  FTAs  as  well  as  experience  and  feedback  from  service  suppliers.  As  mentioned  in  the Concept Note by India (S/WPDR/W/55), some of the elements could be cross-cutting issues which are relevant for all modes of supply of services, and others could be specific to a mode of supply.

## 2  ELEMENTS OF THE TFS AGREEMENT: THE PROVISIONS OF THE TFS AGREEMENT COULD ENCOMPASS THE FOLLOWING ELEMENTS:

- 2.1.  SCOPE AND DEFINITIONS: In our initial assessment, the focus of the TFS Agreement will be with  regard  to  measures  affecting  trade  in  services  in  sectors  where  specific  commitments  are undertaken.  However,  some  provisions,  such  as  transparency,  would  apply  to  all  measures affecting  trade  in  services,  following  the  approach  in  the  GATS.  The  definitions  will  be  largely based on the GATS. In addition, we would need to define certain terms that are not covered by the GATS.

ANNEXURE-II

S/WPDR/W/57

14 November 2016

Page: 1/1

Original: English

-:2:-

2.2 PUBLICATION AND AVAILABILITY OF INFORMATION: This provision  can be based on GATS Article III on Transparency. It may encompass obligations such as publishing all measures of general application relating to supply of a service in an easily accessible manner and provide opportunity to comment  before  entry  into  force  so  as  to  enable  governments,  service  suppliers  and  other interested  parties  to  become  acquainted  with  them.  Another  principle  that  may  be  considered  is establishing  and  maintaining  an  appropriate  mechanism  for  responding  to  enquiries  regarding measures affecting trade in services.

2.3 ADMINISTRATION  OF  MEASURES:  The  provision  could  deal  with  obligations  that  lead  to simple and transparent administration of measures affecting trade in services. This provision could comprise  of  aspects  such  as  single  window  facility  for  applications,  specific  timeframes  for applications,  acceptance of electronic applications and  authenticated copies  of  documents, procedure for appeal and review, including procedures for information and verification requests as well as an expedited fast-track procedure for acceptance of applications. We note that this provision could draw on the elements specified in the communication from Australia and others on ' Domestic Regulation  -  Administration  of  Measures' ,  dated  31  October  2016  (JOB/SERV/239/Rev.1).  The elements of this provision would be particularly relevant for supply of services through all modes of supply, in particular Modes 3 and 4.

2.4 FEES  AND  CHARGES:  Fees  and  charges  relating  to  the  supply  of  services  sometimes themselves become barriers  for  the  supply  of  a  service.  The  TFS  text  could  address  this  through provisions similar to the DR text, which seek to ensure that fees and charges applied are reasonable, transparent,  commensurate  with  the  costs  incurred  by  the  competent  authorities,  and  do  not  in themselves restrict or impair the supply of the relevant service. The elements of this provision would be particularly relevant for supply of services through all modes of supply.

2.5 ADMINISTRATION OF ECONOMIC NEEDS TESTS: Members have a legitimate right to schedule economic  needs  tests  (ENTs)  in  their  commitments.  However,  lack  of  information  on  criteria  for applicability of such ENTs, often becomes a barrier for supply of services. It is extremely important to provide  information with regard to the criteria  on which  ENTs  are  based,  and  details of requirements, procedures and guidelines for administration of such ENTs as per Members' Schedule of specific commitments in order to enable effective market access. This provision could accordingly include obligations that require Members to ensure that ENTs, where applied, do not impose undue costs on the service supplier, and do not result in undue delays and uncertainty for service suppliers. In this regard, Members  may  like  to consider aspects that were  highlighted in a recent communication by Turkey on ' Economic Needs Test' ,  dated 29 February 2016  (JOB/SERV/224). The elements of this provision would be particularly relevant for supply of services through Modes 3 and 4.

2.6 FACILITATING CROSS-BORDER FLOW OF INFORMATION: Cross-border flow of services under Mode 1 is in essence rooted in the cross-border flow of information that can be processed by service suppliers.  This  is  particularly  relevant  in  today's  internet  driven  and  highly  digitized  world.  The concept  of  free  cross-border  flow  of  information  is,  therefore,  very  important  for  ensuring meaningful supply of services through Mode 1. While a Member may adopt or maintain measures in accordance with its respective laws and regulations to protect such data / information, it should not impose  barriers  for  flow  of  such  information  merely  because  the  measures  adopted  by  another Member for the protection of such information/data, are different from its own. The focus of this provision would be to address issues relating to this aspect.

-:3:-

2.7 FACILITATING  CONSUMPTION  ABROAD:  An  important  service  relevant  to  consumption abroad  is  health  services  (also  commonly  referred  to  these  days  as  'medical  tourism').  Lack  of insurance  coverage  for  availing  of  medical  services  in  a  foreign  country,  however,  acts  as  an impediment for the growth of services under this mode. Members could also consider a provision relating  to  the  expedited  processing  of  immigration  formalities  by  the  host  territory  in  respect  of foreign consumers who are seeking medical services or such other urgent services. Such a provision could be helpful for facilitating consumption abroad of health services.

2.8 PROVISIONS FACILITATING MOVEMENT OF NATURAL PERSONS: As has been explained in the Background  Note  by  the  Secretariat  on  Movement  of  Natural  Persons  dated  15 September 2009 (S/C/W/301), Mode 4 has not been able to contribute significantly to services trade owing to lack of a  number  of  facilitative  elements.  In  this  regard,  the  TFS  Agreement  could  address  some  of  the critical  bottlenecks  impacting  Mode  4  delivery  of  services.  This  provision  could  comprise  of facilitative provisions pertaining to the meaningful supply of Mode 4 services as well as include an additional  clarification  and  publication  requirement  that  allows  for  providing  and  making  publicly available,  explanatory  material  on  all  relevant immigration  formalities,  in particular for the categories  of  natural  persons  specifically  committed  by  Members.  Other  facilitative  elements  for temporary entry could include multiple entry permits for natural persons committed in a Member's schedule, and exemption of committed categories of natural persons from payment of additional costs and charges, including social security payments, etc. Members could also consider that where payments  such  as  social  security  cannot  be  exempted,  then  can  consideration  be  given  for portability of such benefits? The provision may  also address adequate opportunities and mechanisms  especially  for  developing  country  Members  to  accede  to  recognition  agreements pertaining to authorization, licensing and certification of service suppliers under Article VII.1.

2.9 COOPERATION AMONG COMPETENT AUTHORITIES: Cooperation among competent authorities of Members is very important for facilitating trade in services. The areas for cooperation under  this  provision  could  include  exchange  of  information  on  procedural  requirements  and associated formalities and documentation. Other areas of cooperation could address the sharing of experiences regarding implementation, best practices for collection and compilation of data relating to trade in services, exchange of statistics on trade as well as technical guidance or assistance and support for capacity building to small and medium enterprises.

2.10 SPECIAL AND DIFFERENTIAL TREATMENT: This provision may comprise of special provisions for developing countries and LDCs pertaining to the entry into force of this Agreement due to their special economic and developmental situation as well as trade and financial needs. While LDCs shall not be required to implement any obligations, they would be encouraged to do so.

2.11 TECHNICAL  ASSISTANCE:  This  provision  could  address  technical  assistance  that  may  be provided to developing countries and LDCs in order to advance and strengthen their institutional and regulatory  capacities.  The  provision  could  entail  obligations  that  help  build  the  supply  capacity  of developing countries and LDCs.

2.12 INSTITUTIONAL ARRANGEMENTS: The TFS Agreement could include institutional arrangements  such  as  the  establishment  of  a  Committee  on  Trade  Facilitation  in  Services  at  the WTO. Additionally, obligations under the provision could encompass the establishment of a National Committee  on  Trade  Facilitation in Services in each Member  State  in order to facilitate implementation of the provisions of this Agreement.

## 3 CONCLUSION

- 3.1 India  appreciates  Members  earlier  engagement  and  discussion  on  the  Concept  Note  and looks forward to views and suggestions on the Elements Paper.

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