State of Play - Mode 3 Services

RUN-UP TO HONG KONG/ WTO SPEAK: Kiran Karnik, Nasscom

Kiran Karnik

The negotiations in mode 3 (commercial presence) are focused on countries seeking liberalised foreign direct investment regimes to facilitate the establishment of joint ventures, subsidiaries or branches of their domestic companies in other countries .

India

It is seeking delinking commitments under mode 3 from those under mode 4 (movement of natural persons). It has improved its revised offers in select sectors by offering to bind the FDI limits for banking and telecom at 49 per cent and 26 per cent for insurance.

It has, however, not offered any commitments in sectors like auditing, legal, retail and water. Commitments in sectors like medical and dental services and higher education have been offered with several restrictions. India is seeking liberalisation of sectors like R&D and health in developed countries.

United States

Its offers under mode 3 are liberal with most sectors open to FDI. There are restrictions on foreign investment in sectors like health and R&D, not just at the federal level but also at the state level.

The US is seeking a liberal investment regime in developing countries for sectors like financial services, telecommunications, computer and related services, energy, distribution, express delivery and audio-visual services.

European Union

The EU also has a liberal offer in mode 3. However, the health sector, including the dental and medical services, are not open to FDI.

The audio visual and social sectors have also not been opened up under mode 3. The EU is seeking a liberal investment regime in developing countries in sectors like courier services, environment and energy.

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What's at stake?

India can become a large exporter of services. Export of IT software services is expected to cross $50 billion by 2009. If healthcare and education are also opened up, possibilities for India are immense.

What should Kamal Nath do?

India should try for some kind of a professional services visa to allow greater movement of people .

LEXICON

Offer: A country's proposal for its own liberalisation.

Request: A country's proposal seeking access in other countries.

Initial commitments: Commitments for liberalising services, which members are prepared to make early on.

Bound commitment: A commitment which cannot be rolled back.

Horizontal commitment: A commitment that applies to multiple services.

Most favoured nation treatment: The principle of not discriminating against one's trading partners.