WASHINGTON - U.S. Trade Representative Rob Portman announced today that the United States submitted a revised services offer aimed at securing greater economic growth and opportunities for American services industries and workers in keeping with the end of May 2005 deadline set by WTO Members. At the urging of U.S. services industries, and after consultation with Congress and state and local governments, the United States has offered to improve its GATS commitments in targeted services sectors.
"The services negotiations are an integral part of the market opening results needed to make the Doha Round successful and expand economic prosperity and growth," said Portman. "Submitting the U.S. offer, on time, is yet another example of the United States commitment to and leadership in the Doha global negotiations."
"These negotiations are a two way street," Portman said. "The U.S. revised offer is conditioned on our trading partners producing revised offers with meaningful commitments in key areas of interest to the United States such as financial services, telecommunications, computer and related services, energy services, distribution, express delivery and audio-visual services. We look to our trading partners to meet or exceed the level of commitment and openness provided by the United States."
Ambassador Portman noted that these negotiations are important because in the United States, services account for approximately three quarters of GDP and 8 out of 10 jobs. U.S. service firms derive their strength in large part from their successful expansion into foreign markets. U.S. services exports have increased 69% under the global trade rules in services. Of the 148 WTO Members, only 56 have submitted initial offers.
The revised U.S. submission improves upon a robust set of existing commitments by including new commitments in telecommunications, computer and related services, express and other delivery services, business services, higher education, transportation (excluding air and maritime) and energy services. The revised U.S. offer responds to requests from our trading partners to update our existing commitments to reflect the current level of market access in areas such as financial services and professional services, to make improved commitments in sectors like logistics, professional services, and translation services, and where appropriate, to clarify the scope of our existing commitments by providing direct references to the United Nations Provisional Central Product Classification (UNCPC).
"Our existing temp entry commitments, so-called ‘mode 4,’ are among the most generous of all WTO Members in terms of entry categories covered and they apply to all services sectors where we have commitments. Only a handful of developed countries have comparable Mode 4 commitments," said Portman. "Together with Congress and U.S. stakeholders, we need to look carefully at this issue as negotiations proceed."
The United States has responded to numerous requests to provide greater transparency concerning U.S. policies and procedures for the temporary entry and stay of foreign service suppliers by offering to establish a single Internet-based information resource. This should facilitate the ability of U.S. and foreign service suppliers to obtain information about the US temporary entry system.
Services Negotiations Provide Opportunity to Expand US Exports
U.S. services exports measured $340 billion in 2004, which represents approximately 30 percent of the total value of America’s exports. Each year U.S. services exports generates a substantial surplus. In 2004, this surplus measured $48 billion.
Meanwhile, U.S. service firms that have established offices abroad generate an additional $400 billion in sales per year – doubling the total volume of U.S. services trade. These overseas operations offer major benefits to the United States. Foreign affiliates of U.S. firms purchase about 30 percent of all U.S. exports of goods and services, and at the same time generate well over $100 billion per year in income for U.S. investors. More importantly, foreign affiliates enable U.S. service firms to expand into new and rapidly growing markets and thereby enhance their global competitiveness. Such world class competitors in turn draw upon home-grown technology, expertise, goods and services, supporting domestic employment and economic development. This helps explain why service industries provide more new jobs than the rest of the U.S. economy combined.
The WTO’s General Agreement on Trade in Service (GATS) negotiations cover all forms of services trade – sales through cross-border channels as well as foreign offices. For the United States, this currently represents a market of three quarters of a trillion dollars, despite the fact that many of the WTO’s 148 members maintain significant impediments to trade. Eliminating these impediments offers enormous benefits to the United States by fostering the expansion of the global services market – a market in which we hold a 16 percent share.
Services Liberalization Will Promote Growth in Developing Countries
The benefits of open services markets also accrue to the world as a whole, including both developed and developing countries. Researchers at the University of Michigan estimate that the elimination of service barriers would yield a $1.4 trillion income gain for the world, $450 billion of which would accrue to the United States. In middle- and low-income economies, the service sector accounts for the largest share of total economic output. According to data published by the World Bank, the service sector accounted for 54 per cent of middle-income economies' total GDP in 2000, while industry and agriculture accounted for 36 per cent and 11 per cent, respectively. In that same year, services, industry, and agriculture respectively accounted for 44 per cent, 33 per cent, and 23 per cent of total GDP in low-income economies. Services typically account for a larger share of total output in small, open markets, such as the Caribbean island countries.
World Bank data also indicate that service sector GDP is the fastest-growing component of total GDP in both low- and middle-income economies. Moreover, service sector GDP in such economies is growing faster than the world average. During 1990-2000, service sector GDP in low-income economies increased at an average annual rate of 5.1 per cent, faster than the average annual growth rates experienced by world service sector GDP (2.9 per cent) and total GDP in low-income economies (3.2 per cent). Likewise, in middle-income economies, average annual growth in service sector GDP (3.9 per cent) exceeded that of total world service sector GDP (2.9 per cent) and total GDP in middle income economies (3.6 per cent).
A substantial share of workers in developing economies is employed in the services sector. Between 1960 and 1999, the share of workers in Latin America and the Caribbean that were employed in service industries increased from 31 per cent to over 50 per cent. Likewise, more than half of workers in East Asia are employed in the services sector.
Removing barriers to services trade around the world will strengthen the prospects of economic growth in the developing world, creating jobs and developing human capital in knowledge-based industries.
The WTO Services negotiations call for the submission of "requests" and "offers" from WTO members which cover all services sectors. The United States submitted its initial services offer in March 2003. WTO Members decided in July of 2004 that revised services offers were to be submitted by the end of May 2005.
The U.S. revised offer was developed in consultation with domestic stakeholders, including Congress, trade advisory groups and state and local government representatives. The revised offer is part of the long-term process of expanding choice and opportunity for U.S. service industry workers and consumers, particularly in key sectors such as financial services, telecommunications, computer and related services, express delivery, distribution, energy services and audiovisual services.
Nothing in the U.S. revised offer or the U.S. obligations under the GATS undermines the ability of U.S. federal, state or local authorities to regulate service activities. In addition, the revised offer does not affect government monopoly service suppliers (such as public utilities), government programs targeted towards U.S. or minority citizens, or the autonomy of U.S. educational institutions.