TABLES OF CONTENTS LIST OF TABLE............................................................................................3 ABBREVIATIONS........................................................................................4 INTRODUCTION.........................................................................................5 PART 1. OVERVIEW OF THE DOHA ROUND NEGOTIATIONS: .....

8
1.1. Services, trade in services and modes of supply........................................................8 1.1.1. Services.............................................................................................................8 1.1.1.1.Definition......................................................................................................8 1.1.1.2.Service characteristics..................................................................................9 1.1.1.3.Classification of services sectors................................................................11 1.1.2.Trade in services and modes of supply.............................................................11 1.1.2.1.Trade in services.........................................................................................11 1.1.2.2.Modes of supply.........................................................................................12 1.2. Doha Round Negotiations on trade in services.......................................................14 1.2.1. Negotiations on trade in services in the Doha Round......................................14 1.2.2. Agreements signed in the Doha Round on trade in services............................15 1.3. The importance of trade in services in developing countries..................................18 1.3.1. Importance of trade in services........................................................................18 1.3.2. The importance of trade in services to developing countries...........................23 2.1. Developing countries arguments for liberalization of trade in services in the Doha Round..............................................................................................................................30 2.1.1. Concerns of the developing countries in services trade liberalization............30 2.1.2. The benefits of liberalizing trade in services to developing countries............34 2.2. Developing countries arguments against liberalization in services.......................35 2.2.1. Divergence of the developing countries in opening services market..............35 2.2.2. The reasons for cautious approaches of developing countries to services liberalization. ............................................................................................................36 2.2.2.1. Internal reasons..........................................................................................36 2.2.2.2. External reasons.........................................................................................38 2.2.3. The typical example for these arguments: financial services..........................41 2.2.4. Arguments against liberalization of trade in services of some developing countries......................................................................................................................42

PART 3. IMPACTS OF DOHA ROUND NEGOTIATIONS ..................45

3.1. Trade in services of Vietnam after entering the WTO............................................45 3.1.1. Current state of the services sector in Vietnam ..............................................45 3.1.2. Level of commitments and structure of Service Schedule ............................46 3.1.2.1. Level of commitments...............................................................................46 3.1.2.2.Structure of the Service schedule ..............................................................47 3.1.3. The Schedule of specific commitments of Vietnam in services......................48 3.1.3.1. Horizontal commitments...........................................................................48 3.1.3.2. Sector specific commitments..................................................................49 3.1.3.3. The list of Article II (MFN) exemptions....................................................50 3.1.4. The financial services commitments of Vietnam ...........................................50 3.1.4.1. Insurance sub-sector .................................................................................50 1

3.1.4.2.Banking sub-sector commitments of Vietnam............................................51 3.1.4.3. Securities sub-sector..................................................................................52 3.2. The influence of Doha Round Negotiations on Vietnams Trade in services.........53 3.2.1. Two scenarios of Doha Round Negotiations in the future .............................53 3.2.2. Impact of Scenario 1........................................................................................55 3.2.2.1.Possible positive effects..............................................................................55 3.2.2.2. Possible negative effects ...........................................................................57 3.2.3. Impact in Scenario 2........................................................................................59 3.2.3.1. Possible positive effects.............................................................................59 3.2.3.2.Possible negative effects.............................................................................60 3.3. Some solutions for Vietnams trade in services in the context of on-going Doha Round..............................................................................................................................61 3.3.1. For the government.........................................................................................61 3.3.2. For domestic providers....................................................................................61 3.3.3. For individual..................................................................................................62

LIST OF TABLES

Figure 1.1: The role of services in the economy........................................................................19 Figure 1.2: The percentage of GDP from services between regions..........................................20 Figure 1.3: Share of services employment (percentage) 1995 and 2005..................................21 Figure 1.4: World exports of commercial services 1980 - 2007................................................23 Table 3.1: Sample of Schedule of Specific Commitments.........................................................48

ABBREVIATIONS

ACP APEC ASEAN CSI EC EU FDI GATS GDP IMF LDCS MFN NAMA OECD R&D TNCs UN UNCTAD WB WEF WTO

African, Caribbean and Pacific Asia Pacific Economic Cooperation Association of Southeast Asian Nations Coalition of services industry Europe Commission Europe Unions Foreign direct investments General Agreement on Trade in Services Gross domestic product International money fund Least developed countries Most favor nation National agriculture -marketing Association Organization for economic co-operation and development Research and Development Transnational Corporations United Nations United Nations Conference on Trade and Development. World bank World economic forum World Trade Organisation

INTRODUCTION

1.

Background

Globalization, the most popular trend in recent years, has faced with different issues. On the one hand, the multilateral trading system brings back all people the increased opportunities and welfare gains. On the other hand, the particular vulnerability of the least-developed countries and the special structural difficulties they face in the global economy is an on-going issue. Above all, globalization proved international trade can play a major role in the promotion of economic development and the alleviation of poverty. Recognizing these matters, the World Trade Organization (WTO), an effective forum for global trade rule-making and liberalization takes interest in them by implementing its functions. The General Agreement on Trade in Services (GATS) is the first and only set of multilateral rules governing international trade in services. Negotiated in the Uruguay Round, trade in services has been developed in response to the huge growth of the services economy over the past 30 years and the greater potential for trading services brought about by the communications revolution. Following the Uruguay Round, The Doha Round has continued dealing with liberalization in services, which is the most important issue for all countries including developing countries. In general, trade brings a lot of gains for both domestic economy and foreign economies beside some losses. Services trade helped to develop the large service market without geographic barriers, contributing more to the GDP. Consumer can have access to diverse and different services from other countries. However, trade in services causes negative effects on trading economies. The degree of influence of trade in services is different from

different countries, depending on economic development level. For the developed countries, gains from liberalization of trade in services are said to be divergent and considerable. However, for developing countries, getting benefits or losses is the conversational concern. It is the key topic of Doha Round which causes conflicts between negotiators. Due to this concern, we do research to seek answering Should developing countries liberalize their services market? To have a persuasive answer, we carried out a study Developing countries and Doha Round negotiation on trade in services. 2. Research objectives On basis of background of this issue, this study targets the following objectives. 2.1. Overview objective Identifying arguments of developing countries towards liberalization in trade in services and accordingly providing some suggestions for them in opening up the service market. 2.2. Specific objectives - To examine the current negotiations on trade in services in the Doha Round. - To analyze some developing countries 'arguments against and for liberalization of trade in services - To examine Vietnams services sector development and commitments under the WTO; identify two possible scenarios of Doha Round negotiations in service trade liberalization; and provide some implications for Vietnam in the process of opening up its service market. 3. Research methodology The study makes use of the secondary research method. It means that the

research issue is exploited based on secondary data and information from reports, articles and studies both domestically and abroad. There are two reasons for the choice of secondary research method. Firstly, the research issue belongs to the Doha Round, an international trade negotiation conducted by the WTO. Thus, data or related information are almost published or announced in the WTOs website and are available in other international organizations such as the WB, IMF and the UN. Secondly, scope of this research issue is quite large, which cover issues of almost all the developing countries. As can be recognized, liberalization in services concerns all WTO members including 153 nations, of which 90 developing ones attend the Doha Round. For this obstacle, direct statistics, surveys, questionnaires or interviews seem inappropriate. So this study is carried out by using the secondary research method. 4. Scope of research In reference to the space, the study focuses on the Doha Round negotiations in trade in services and developing countries arguments on liberalization of trade in services in the Doha Round. About the time, this study focuses on the of Doha Round negotiations. This round began the first negotiation in 2002 in Doha, Qatar. Then, the ministerial discussions have taken place in Cancun in 2003, Geneva in 2004, Hong Kong in 2005 and Geneva in 2006 and 2008. Until now, it has not finished yet. 5. Organization of the study The study is divided into three parts:
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Part 1: Overviews of the Doha Round negotiations; trade in services and developing countries Part 2: Developing countries' arguments in the Doha Round

negotiations on services
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Part 3: Impacts of Doha Round on trade in services in Vietnam

PART 1. OVERVIEW OF THE DOHA ROUND NEGOTIATIONS: TRADE IN SERVICES AND DEVELOPING COUNTRIES 1.1. 1.1.1. Services, trade in services and modes of supply Services Definition A service is the intangible good. Service provision is an economic activity where the buyer does not generally obtain exclusive ownership of the thing purchased, except by exclusive contract. The benefits of a service, if priced, are held to be self-evident in the buyers willingness to pay for it. Public services are those society pays for as a whole through taxes and other means. By composing and orchestrating the appropriate level of resources, skill, ingenuity, and experience for effecting specific benefits for service consumers, service providers participate in an economy without the restrictions of carrying stock (inventory) or the need to concern themselves with huge raw materials. On the other hand, their investment in expertise does require consistent service marketing and upgrading in the face of competition which has equally few physical restrictions.

1.1.1.1.

Many so-called services, however, require large physical structures and equipment, and consume large amounts of resources, such as transportation services and the military. Providers of services make up the tertiary sector of the economy. Service characteristics - Intangibility Services are intangible and insubstantial: they cannot be touched, gripped, handled, looked at, smelled, tasted or heard. Thus, there is neither potential nor need for transport, storage or stocking of services. Furthermore, a service cannot be (re)sold or owned by somebody, neither can it be turned over from the service provider to the service consumer nor returned from the service consumer to the service provider. The service delivery only can be commissioned to a service provider who must generate and render the service at the distinct request of an authorized service consumer. - Perishability Services are perishable in two regards Firstly, the service relevant resources, processes and systems are assigned for service delivery during a definite period in time. If the designated or scheduled service consumer does not request and consume the service during this period, the service cannot be performed for him. From the perspective of the service provider, this is a lost business opportunity as he cannot charge any service delivery; potentially, he can assign the resources, processes and systems to another service consumer who requests a service. Examples: The hair dresser serves another client when the scheduled starting time or time slot is over. An empty seat on a plane never can be utilized and charged after departure. Secondly, when the service has been completely rendered to the requesting service consumer, this particular service disappears as it has been consumed by the service consumer. Example: the passenger has been transported to the destination and cannot be transported again to this location at this point in time. - Inseparability The service provider is very necessary for service delivery as he must generate and

1.1.1.2.

render the service to the requesting service consumer. In many cases the service delivery is carried out automatically but the service provider must put resources and systems and actively keep up appropriate service delivery readiness and capabilities. Additionally, the service consumer is inseparable from service delivery because he is involved in it from requesting it up to consuming the rendered benefits. Examples: The service consumer must sit in the hair dresser's shop & chair or in the plane & seat; correspondingly, the hair dresser or the pilot must be in the same shop or plane, respectively, for delivering the service. - Simultaneity Services are rendered and consumed during the same period of time. As soon as the service consumer has requested the service (delivery), the particular service must be generated from scratch without any delay and the service consumer instantaneously consumes the rendered benefits for executing his upcoming activity or task. - Variability Each service is unique. It is one-time generated, rendered and consumed and can never be exactly repeated as the point in time, location, circumstances, conditions, current configurations and/or assigned resources are different for the next delivery, even if the same service consumer requests the same service. Many services are regarded as heterogeneous or lacking homogeneity and are typically modified for each service consumer or each new situation. Example: The taxi service which transports the service consumer from his home to the opera is different from the taxi service which transports the same service consumer from the opera to his home - another point in time, the other direction, maybe another route, probably another taxi driver and cab. Each of these characteristics is retractable and their inevitable coincidence complicates the consistent service conception and makes service delivery a challenge in each and every case. Proper service marketing requires creative visualization to effectively raise a concrete image in the service consumer's mind. From the service consumer's point of view, these characteristics make it difficult, or even impossible, to evaluate or compare services prior to experiencing the service

delivery. Classification of services sectors According to the WTO Secretariats services sector classification, there are total 11 services sectors which consists of 155 sub-sectors negotiated by WTO Members The lists of 11 services sectors are presented below: - Business services - Communication services - Construction and related engineering services - Distribution services - Educational services - Environmental services - Financial services - Health related and social services - Tourism and travel related services - Recreational, cultural and sporting services - Transport services Each of the 11 services sectors are divided into smaller components called subsectors. Depending on their characteristics, services sectors can have different subsectors. For example, financial services can be divided into 3 sub-sectors including insurance, banking and securities. 1.1.2. Trade in services and modes of supply Trade in services Trade in services refers to the sales and delivery of an intangible product between producers and consumers. Trade in services taking place between producers and consumers that are, in legal terms, based in different countries, or economies, is called International Trade in Services. Services, from health and education to telecommunications and transport, are becoming the single largest sector in many economies. Not only do they provide the majority of employment and income in many countries, but also in areas such

1.1.1.3.

1.1.2.1.

as the financial or telecommunications sectors, services provide vital input for the production of other goods and services. So the efficiency of the services sector is very important to the efficiency of the overall economy. Trade in services is also growing. All developing countries have registered a considerable expansion of total services trade in recent years, although in many cases from low bases. And recent OECD work has shown that developing countries could stand to make significant gains from more open services trade, despite a general perception in much of the developing world that they will lose out if they open up to trade in services because their domestic service industries are inefficient and non-competitive. Modes of supply The General Agreement on Trade in Services (GATS), the first multilateral agreement to cover trade in services, has a unique and unprecedented structure. It defines trade in services as the supply of a service through any of four modes of supply: cross border, consumption abroad, commercial presence and the presence of natural persons. Each country has scheduled its commitments in individual sectors with respect to each mode, with the level and nature of commitment generally differing across modes. To evaluate the results of the GATS and to set priorities for future negotiations, it will be necessary to assess, not only the relative importance of individual services sectors, but also the relative importance of modes of supply in each service sector. There has so far been little research on such an assessment because of the paucity of statistics and the newness of the GATS. - Cross-border supply (Mode 1) The first mode is defined as the supply of a service from the territory of one Member into the territory of any other Member. It is similar to the traditional notion of trade in goods, wherein both the consumer and the supplier remain in their respective territories when the product is delivered. For a service product, this

1.1.2.2.

situation may arise when the service can be embodied in a transportable medium. Mode 1 supply is also similar to current services transactions between residents and nonresidents, as recorded in balance of payment. Examples of the cross-border supply of a service given in the Explanatory Note are international transport, the supply of a service through telecommunications or mail, and services embodied in exported goods (e.g. a computer diskette, or drawings). The development of communication and transportation infrastructures has favored the growth of crossborder supply even in sectors where it was hardly considered an option until recently. - Consumption abroad (Mode 2) The second mode is defined as the supply of a service in the territory of one Member to the service consumer of any other Member. Consumption abroad often involves the actual movement of the consumer, as in tourist services. The consumer, although being abroad, remains a resident of its home country, thus giving rise to transactions between residents and nonresidents. The line between mode 2 and mode 1 is often unclear for the electronic supply of services, as well as for some types of financial service transactions sich as bank deposits or property insurance. In principle, these transactions should be recorded in the relevant balance of payments service categories and thus be included in the mode 1 estimate. - Commercial presence (Mode 3) The third mode is defined as the supply of a service by a service supplier of one Member, through commercial presence in the territory of any other Member. Commercial presence covers not only juridical persons in the strict legal sense , but also legal entities that share some of the same characteristics, such as corporations, joint ventures, partnerships, representative offices and branches. Commercial presence may often be the only way to supply services, the production of which necessitates direct contact between the supplier and the consumer. In certain cases,

commercial presence is used as a complement to cross border supply, such as in computer services, where the local presence of experts may be necessary for installation, adaptation, training, etc. Sometimes, the production of the service occurs in the foreign parent company and the local agents acts as trade facilitating intermediary, for instance, in travel; wholesale banking; reinsurance; auditing and consultancy. - Presence of natural persons (Mode 4) The fourth mode is defined the supply of a service by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member. The presence of natural persons can assume two forms under GATS. The first relates to commercial presence, and includes the foreign employees of service suppliers, such as intracorporate transferees (e.g., a foreign engineer temporarily transferred to a foreign branch from a parent construction company). In the country schedules, this aspect has been reflected in commitments for high level staff, such as managers, executives and specialists. The second form relates to the presence of foreign natural persons independently of foreign commercial presence. This could involve persons who are themselves service suppliers, and present on a temporary basis in foreign markets for the supply of their services, such as foreign consultants, or the employees of foreign services suppliers sent abroad to fulfill a service contract. 1.2. 1.2.1. Doha Round Negotiations on trade in services Negotiations on trade in services in the Doha Round In the Doha negotiations, the focus is primarily on agriculture and manufactured goods. Services are mentioned, but more out of a sense of obligation than conviction. This is a puzzle. Some 80 percent of GDP in the US and the EU originates in services. Together they account for over 60 percent of world services

exports. The business service exports of India, China and Brazil have grown by well over 10 percent every year for the last decade, and India may soon export more services than goods. Negotiations in services take place both plurilaterally and bilaterally using a request-and-offer approach1. Members in Doha Round negotiated on two main channels which are market opening and issues of rule. Additionally, they also discuss about the text of Chairman of the negotiation on trade in services group. It reveals some aspects which is very necessary to end the negotiations. This is an important document because it refers to whether we can consider services as important as agriculture and NAMA in the Doha Round or not, the approach to negotiate and the issues related to give more opportunity for countries which have just entered the WTO. Concerning the issue of opening up market, the most aggressive countries in negotiations on trade in services requests is those countries that have large services industries such as the United State, EC, Australia, Japan whereas ASEAN countries take a cautious approach. Regarding rule issues, members of the WTO are discussing the agreement about domestic regulation which only concentrates on the rule of license, one way license and license through internet. Related to the discussion of Negotiation Chairman on trade in services, there has not been agreed with the issues considering services is a main part of Doha Round. 1.2.2. Agreements signed in the Doha Round on trade in services Members of the WTO are still struggling to make the common decisions of liberalization issue. There is a little agreement signed because it is difficult to compromise the benefit of all groups. The compromise text late December 16 2005 aimed at securing a deal among WTO
1

A negotiating approach whereby requests are submitted by a country to a trading partner identifying the concessions another seeks through negotiations. The requested country then will provide an offer which will be negotiated by delegates of the countries involved

members on the services in Hong Kong Ministerial Conference. The text seeks to alleviate the concerns of developing countries by offering amendments to the language in the services annex to the draft declaration. A large number of developing countries have voiced complaints about various aspects of the Annex C2 which sets out principles the objectives, approaches, and timelines for the postHong Kong phase of the negotiations. The changes highlight the need to preserve flexibility for individual developing countries while negotiating further liberalization commitments, and declare that the services annex C does not have any legal standing under WTO rules. In annex C, all members agree to intensify and expedite the request-offer bilateral negotiations and also are pursued on a plurilateral basis. Plurilateral requests negotiations would be organized in the following manner: any member or group of members may present requests or collective requests to other members in any specific sector or mode of supply. Members receiving such requests shall consider them and enter into talks along agreed negotiating guidelines. All results of such negotiations shall be extended on an MFN basis. The draft text that was sent to ministers in Hong Kong states that the request/offer mode of negotiations should be pursued on both a bilateral and plurilateral basis, and that any member or group of members that have made such requests in a specific sector shall enter into plurilateral negotiations to consider such requests. The revised text now states that a member or members shall consider such requests, dropping the reference for such negotiations to be on a plurilateral basis. Developing countries complaint weakly the multilateral nature of the WTO and result in agreements that poorer members are pressured to accept, even though they did not participate in the negotiations. The Group of 90 alliance3 composed mainly of African countries calls for weaker language regarding plurilateral negotiations as well as the removal of specific
2

Annex C is an extension of Hong Kong Ministerial Declaration in order to guide countries to achieve a progressively higher level of liberalization in trade in services 3 G90 is an alliance between the poorest and smallest developing countries that are part of the World Trade Organization (WTO). It includes African, Caribbean and Pacific Group and the group of Least Developed Countries.

references to the need for new and improved commitments on commercial presence, enhanced foreign equity participation, and certain particular goals related to Mode 4 (cross-border movement of professionals) commitments on visa and residency requirements. Finally, members reach a common view which shows up in the Annex C. The results can keep the failure leaving away, but the dilute proposals already lack ambition. Services industry associations slammed the attempt by the G-90 to weaken the services chapter to a draft Hong Kong ministerial conference declaration. In a joint statement, the U.S. Coalition of Services Industries, the European Services Forum, and services industry groups from Australia, Canada, China, Japan, and Hong Kong expressed their deep concern regarding the proposal from the Group of 90 developing countries to amend the services annex to the draft declaration. The industry group said the proposal would weaken the mandate for further services trade negotiations within the Doha Round. The service sector accounts for more than half of global economic output, and provides the essential infrastructure for economic growth. Services trade liberalization is inherently pro-development, and will bolster economic growth, living standards and jobs in developing countries they also said. The U.S. Coalition of Service Industries (CSI) said that the Hong Kong ministerial declaration provides a new impetus for serious negotiations early next year but is not in itself sufficient to generate the energy necessary for the hard country-by-country bargaining that lies ahead. The U.S. services industry noted that the Hong Kong declaration supports plurilateral negotiations among like-minded countries that want to make progress in sectors such as express delivery and logistics services, telecommunications, computer and related services, financial services, energy services, audiovisual services, and legal and accounting services. We welcome the WTO membership's

support of the work of friends groups, said J. Robert Vastine, president of CSI. Many WTO Members will not come forward with commercially valuable new offers until they see the clear outlines of an agreement that provides them new market access for their agricultural products, said Norman Sorensen, chairman of the Coalition of Service Industries. Progress will depend on the European Union's ability to move further than it has been able to do at Hong Kong. The bald truth is that services, which account for 68 percent of the world economy, are hostage to agriculture, representing 4 percent. To sum up, the Doha Round Negotiation has progressed slowly. Each country always tries to minimize the risk of liberalization so it is difficult to achieve the successful of the Doha Round. Many organizations or groups such as APEC and WEF support Doha Round but they do not bring any encouragement obviously. However, we are still hoping about a brilliant future of services liberalization in the Doha Round. 1.3. 1.3.1. The importance of trade in services in developing countries Importance of trade in services The beginning of this study mentions the definition of service, modes of services supply, and some characteristics of services. In this part, the study seeks answering the question: Which is the role of trade in services to developing countries? through analyzing the importance of trade in services and the role of trade in services to developing countries specifically. The term services covers a broad range of industries that typically dominate absolute output and employment in most countries. It encompasses both intermediate services (communications, transport, financial intermediation, electricity and gas, distribution, construction, and business services) and final demand services (tourism and travel, recreation, education, health, and

environmental services). The role of services in an economy is illustrated in the following diagram:

Figure 1.1: The role of services in the economy

Source: James Fitzsimmons (2006)

Firstly, as can be seen, services have a significant impact on growth and efficiency across a wide range of user industries and overall economic performance. For instance, sectors such as transport, telecommunications and financial services are key determinants of the conditions in which persons, merchandise, services and capital flow. Another illustration of the services major role is environmental services, which contribute to sustainable development by alleviating negative

impacts of economic activities. Secondly, services currently represent more than two thirds of World Gross Domestic Product (GDP). The share of services value added in GDP tends to rise significantly with the countries level of income, standing at 72% on average in high income countries (76% in the United States), against 54% and 45% respectively in middle- and low- income countries (Figure 1.2). Even in the latter group, the production of services is generally a core economic activity, whose contribution to GDP is above that of both industry and agriculture. Significant differences however exist between countries within the same income group, as for example for India and Nigeria two low-income countries whose respective shares of services in GDP are 52% and 24%.

Figure 1.2: The percentage of GDP from services between regions

Source: http://earthtrends.wri.org/

Moreover, the current importance of services value added follows decades of sustained growth of contribution of the services sector to GDP, which is also mirrored in employment statistics. Looking at developments over the 1995-2005

periods, a significant shift of employment from the agriculture and industry sectors to the services-producing sector can be observed. Services' contribution to total employment gained on average 5 percentage points in high income countries, and available information suggest that the increase was also sharp on average in upper middle income countries (over 6 percentage points growth, with, for example, Mauritius, recording 10 and Malaysia over 7 points, but only 0.5 points for Indonesia) (Figure 1.3). The share also rose significantly in a number of lower middle income countries (e.g. China, Egypt, Thailand), but available data for low income countries seemed to show a smaller growth of services' contribution to total employment, (e.g. 2 percentage points in Pakistan). Employment data nevertheless confirm the importance of the services sector which is accounting for more than half of the employment in most countries under review (up to 78% in the United States).

Figure 1.3: Share of services employment (percentage) 1995 and 2005

Sources: World Bank (2008)

In short, the current fact proved the crucial role of services to an economy through the percentage of GDP indicator, the structure of employment and the effect on other sectors: agriculture and industry. The provision of services not only takes place within one country but also is expanded cross-borders from one country to others. So that services have additional effects in an economy through exporting or importing them. World exports of commercial services amounted to US$ 3,300 billion in 2007, after growing on average at around 8.5% per year in value terms since 1980. Trade in commercial services grew faster than trade in goods (7.5% on average) during this period, increasing its share in total world trade by 3 percentage points. In 2007, services accounted for approximately 19% of total world trade. The share of services in world trade contrasts with the central contribution of services production in domestic economies. Due to their intangible nature, trade in services is inherently subject to more constraints than trade in goods. While a (tangible) good may be produced, stored, moved and consumed at different places and times, the delivery of a (intangible) service is seldom dissociated from its production and its consumption, requiring the proximity of the supplier and the customer. For instance, hairdressers and their clients need to be physically close for a haircut. The need for proximity for supplying many services has led providers to deliver their products through a commercial presence abroad, i.e. the establishment of foreign affiliates. This form of international trade in services is considered at least as important as conventional international trade in services between residents and non-residents.

Figure 1.4: World exports of commercial services 1980 - 2007

Source: WTO (2009)

In general, trade brings a lot of gains for both domestic economy and foreign economies beside some losses. Services as well as goods are becoming the more important part of national and international trade balance than goods. On one hand, trading in services developed the large service market without geographic barriers so contributed more to the GDP. On other hand, for consumers, they can approach diverse and different services from other countries. However, trade in services causes negative effects on trading economies such as: a domestic services enterprise.The degree of influence of trading in services is different from different countries depending on its economic development level. And this essay mentions to the group of developing countries where they suspect the positive and negative role of liberalization of trade in services. 1.3.2. The importance of trade in services to developing countries. Interest in the area of services liberalization is a very recent one on the part of developing countries, both in Southeast Asia and in the Western Hemisphere, and has been manifested only since the completion of the Uruguay Round. However,

ambitious efforts are underway at present to incorporate services within the scope of many of the sub-regional arrangements to which developing countries are parties. This is also occurring at the broader regional level; both the APEC grouping and the Free Trade Area of the Americas (FTAA) process in the Western Hemisphere have included services among their wide-ranging liberalization objectives. Above all, as well as developed countries, trading in services brings a lot of standard gains from trade such as increasing GDP and creating jobs,...Many developing countries are concerned that most of the gains from trade liberalization will accrue to industrial countries. This perception is based on the observation that many services sectors are human capital intensive, physical capitalintensive, or bothwhich means that industrial countries will have a comparative advantage and will dominate any trade after liberalization. This argument, however, ignores the facts that all countries have comparative advantage in some area, which services have a key intermediate role in the economy, and that services are largely traded through FDI. Developing countries have already shown that they do have some comparative advantage in services and are able to export a broad range of services effectively. The most significant export is tourism, which accounts for a large proportion of total export revenues among poorer countries (Karsenty 2000). Other natural resourcebased exports include water and electric power. Labor-intensive sectors such as construction have clear comparative advantages for developing countries, but trade has been limited by trade barriers, including the reluctance of most countries to extend to the less-skilled occupations the permissible temporary movement of people to deliver a service (UNCTAD 2000). Developing countries are however, also active in sectors that are more intensive users of human capital or of physical capital. The best-known example is software services exports by India,

which is now a multibillion dollar industry. Other examples of information technologyrelated services include back-office processing and call centers. Part of the reason for developing countries entry into these activities is that firms in communications and transport services are able to carve up the production chain, allowing developing countries to operate in the labor-intensive parts of the chain. Another reason is that some developing countries are exploiting their comparative advantage in these sectors relative to their less-developed neighbors. For instance, South Africa exports a full range of financial and business services to the southern African region, allowing it to maintain a positive trade balance on its services account. The initial benefit from this specialization and trade is the increased output and consumption that becomes possible as resources are reallocated to their most productive use in the economy. This expands output in the sector of comparative advantage while lowering the cost of both domestically produced and imported goods. The fact that trade expands the scale of the market is important if there are economies of scale in production: it makes possible further benefits from trade, as firms are able to reduce unit costs. It also permits a far greater number of differentiated services to exist simultaneously, adding value for consumers. Because of economies of scale in research and development (R&D), an expanding market may increase the incentive for those activities, enhancing long-run growth rates. Furthermore, learning is enhanced through technological spillovers in exporting. Trade also increases the extent of competition in the market. In brief, trading allows developing and developed countries to specializing in providing and exporting services which they have comparative advantages. The two group countries use the same manner to gain benefits from trading in different services. Besides standard gains from trade, gains from services as intermediate inputs can also be seen. Even in the extreme case in which developing countries have no

comparative advantage in services, they could still gain from trade in services because it enables them to concentrate on non-service sectors in which they have a comparative advantage (agriculture, mining, and some manufacturing).This, of course, assumes that their liberalization in services is matched by liberalization in these other sectors by their trading partners, so that specialization is possible. The argument is strengthened in the case of services because of the prominent intermediate role of that sector countries should become more competitive, and the countries should become more attractive as investment locations for industries relocated from industrial countries. In fact, services liberalization may actually lead to greater industrialization in developing countries. Furthermore, indirect gains from FDI as a Means of Trade in services are prevalent. The use of FDI as the preferred means of delivery makes services liberalization unique in terms of the additional gains it provides to developing countries. Imports of services through FDI bring with them inflows of physical capital, human capital, and technologyfactors important for overcoming some of the main development constraints that poor countries face. Foreign capital inflows make possible a higher savings rate and thus the potential for a higher investment rate because domestic funds can be diverted to other opportunities. Inflows of foreign capital also lower the balance of payments constraint on growth and permit lower real interest rates. This and the boost to short-term growth rates should crowd in greater domestic investment. Because foreign entrants will employ significant numbers of the local work force, this process should result in a period of sustained development of the human capital of the local labor force involved. Technology transfer may well be enhanced via spillovers from use of local suppliers and employee turnover. The demonstration effect of using new technology and management techniques could also improve their adoption by domestic firms. Finally, many services make use of

common inputs. Thus, a reform package that liberalizes a few sectors at once may well see the emergence of a sufficient critical mass to develop an intermediate industry. Of particular interest in this respect is the information technology industry, which is a crucial input to all services and is fundamental in bringing about productivity improvements and new product development. Nevertheless, the developing countries still suffer from some losses from trading in services especially liberalization of trading in services. For instance, it is the difficult to adjusting cost and distributing incomes. The clear winners in this process are all the downstream users of any service that is liberalized and the owners of capital and labor in the services sectors of comparative advantage. These groups are likely to realize growth in profits and employment. The potential losers from trade are firms and labor working in services with no comparative advantage. The effects of the mix of various modes of supply, including FDI, are more difficult to assess. Firms in the import-competing sectors are likely to see their abnormal profits eroded by entry of foreign firms, but they may not exit the market even if they are less efficient. If the firms have considerable market power and large sunk investments, they should be able to survive entry and continue to produce. For instance, most incumbent public utilities tend to survive entry relatively easily and remain dominant years after competitive reform. Under performance is likely, however, to lead to change in ownership (possibly to foreign ownership) and to a push for efficiency. This efficiency drive will lead to significant adjustment costs on the part of labor, particularly in public utilities, which have been a source of social employment in developing countries. Once these firms are privatized and opened to competition, the quickest source of efficiency gains is to shed labor. For example, in Argentina the electricity distribution companies shed up to 40 percent of employment over 30 months. The loss of employment from productivity improvements will be offset to some

extent by output expansion, but this is rarely sufficient to maintain employment in highly inefficient public utilities in the short run. If foreign entry also expands the market through increases in the variety of services available, the job losses may well be offset completely in the same sector. Nevertheless, certain categories of labor may still lose out. The drive for productivity improvements will shift demand toward higher-skilled workers, leaving lower-skilled workers to bear the brunt of job losses. It is important, however, to place any sectoral job losses in a general equilibrium context alongside employment gains in downstream industries and sectors of comparative advantage. The other means through which labor benefits from regulatory protection is through the wage premium. Full trade liberalization is likely to reduce this premium, resulting in a drop in real wages. Opening up the presence of natural persons (mode 4) will put direct pressure on wages for both skilled and unskilled labor, with little effect on owners of capital. A further concern for many countries is the potential social loss from reform. This may arise as low-income households lose access to necessary services once crosssubsidization is removed and commercial concerns focus on profitable segments of the market. Subsidization of such groups can still occur under a reformed regulatory regime but through different mechanisms, such as a nondiscriminatory levy on all providers in the industry, proceeds from which are distributed directly to the households requiring assistance. Regulatory reform provides the additional benefit of facilitating price reductions that allow larger numbers of low-income households to demand such services and that raise the real income of those households that are already making use of the services. Liberalization in trading in services places developing countries in risk situation with a lot of opportunities according to threats. So that, the problem posed now is that whether or not the developing nations should be for liberalization on Doha round. And it is the central issue of this research. In other words, basing on gains

and losses of trade in services, developing countries might agree or disagree with liberalization in services which are negotiating in Doha rounds.

PART 2.

OPINIONS OF DEVELOPING COUNTRIES TOWARDS THE DOHA ROUND NEGOTIATIONS ON TRADE IN SERVICES
2.1. Developing countries arguments for liberalization of trade in services in the Doha Round. Many developing country governments regard themselves as essentially ruletakers in trade negotiations, including in the services field. It means that they find themselves thus taking a relatively passive stance in discussions on rule-making issues. This is the reason why there is a little argument of developing countries for the liberalization of trade in services in the Doha Round. 2.1.1. Concerns of the developing countries in services trade liberalization The most priority of developing countries in trade in services negotiations is to improve the market access through Mode 4. For many developing countries, the movement of natural persons (Mode 4) represents one of the few areas that offers concrete benefits from services liberalization. India has led a group of 18 developing countries including Brazil, China and other Latin American and Asian WTO Members in advocating modalities for reflecting improvements in commitments in Members schedules. While mode 4 which developing countries have a comparative advantage, the commitment level of developed countries about it is very loose. Even there had not been any real improvement in developed countries Mode 4 commitments. Most of the members of WTO, especially developed countries put many constraints about the moving of natural persons by mode 4. They can be the requirement of salary, procedures of visa, unrecognized qualification, putting the rules which have

discrimination or complicated license requirements, social insurance which is inconsistent with benefits. Developed countries fear that the supply of services by developing countries can lead to job losses in their countries. This is a reason for the Acts which restrict outsourcing, are given by developed countries. For example, 40 states of America released 112 anti outsourcing Acts. In Europe, there are some juridical regulations are given to protect workers which work in outsourcing contracts. It is called job transferring and worker protection. All of these regulations can be restrictions against outsourcing in future. Current negotiations of GATS in the Doha Round are creating valuable opportunities to ensure the marker opening. Refer to mode 4; the request of developing countries is to loosen the restrictions in current commitments. While there are many commitments to allow the moving of well - educated workers, there is a little commitment to allow the moving of medium or low quality workers from developing countries to developed countries. Thus, many developing countries are requiring of opening commitment list about mode 4. In addition, the removing of economic demand checking also helps the moving of individual and low skills specialists. The developing countries argue that the developed countries need to improve their request-offers significantly in mode 4. However, both of EU and the United States made developing countries disappointed because of the quality of their offers. The developing countries also argue that liberalization of trade in services will make benefits for both parties. Service is an industry which liberalization of trade can bring win win situation. The table 2.1 can reflect the argument above. It can be seen that the table represents the effect of services liberalization on national income of some countries or areas in the world. The table shows that full liberalization of border measures will bring more benefits for almost countries or

areas. Even with developing countries such as China, Indiathe national income increases significantly. It is double compared to 50% liberalization of border measures from 742 to 1524 millions of dollars in total in China and from 2016 to 4657 millions of dollars in India with increasing returns to scale. The table reflects the reason why liberalization of trade in services can bring win win situation for both parties. .
Constant returns to scale 50% liberalization of border measure NonTotal OECD OECD 98 67 31 2281 2296 798 172 636 8742 2026 793 1957 1722 325 670 555 102 354 23,527 2212 2220 587 193 558 8461 315 279 44 1577 329 654 36 73 323 17918 69 76 211 -21 78 281 1711 514 1913 145 -4 16 519 29 41 5609 Increasing returns to scale 50% liberalization of 100% liberalization of border measure border measure NonNonTotal OECD Total OECD OECD OECD 507 399 108 1130 892 238 1275 2068 2031 504 1176 7015 1907 742 2016 2031 751 736 461 184 728 24132 1014 1916 1579 372 1002 6334 647 -280 55 1967 630 715 93 153 630 17225 262 152 453 133 174 681 1260 1022 1961 64 121 21 368 31 98 6907 2802 4412 4342 970 2525 16260 4109 1524 4657 4257 1522 1569 1086 394 1493 53053 2262 4092 3390 623 2146 14805 1258 -93 132 3960 1252 1523 196 332 1277 38046 540 320 953 347 379 1456 2852 1617 4525 297 270 46 890 62 216 15007

Netherlands France Germany Rest of EU 15 CEECs Mediterranean North America South America China India High Income Asia Other Asia-Pacific Australia-NZ South Africa Sub-Saharan Africa Rest of World Total

Table 2.1: Services Liberalization Static National Income Effects, millions of dollars (based on

equivalent variation)
Source: J. Francois1, H. van Meijl2, F. van Tongeren2 (2003)

The developing countries argue that a lot of benefits are associated with removing restrictions on Mode 4. For instance, the workers can move temporarily easier. Outsourcing, foreign investment and tourism will bring benefits for both suppliers and receivers as well. Globalization created many pressures to make the change in cost saving of firms and enhance competitive ability. The solution for this issue is that firms can outsource their services to save cost thank to the labor price of developing countries. According to the study of McKinsey Global Institute (2003), America will earn from 1.12 to 1.14 dollars and foreign services suppliers will be paid 0.33 dollar. From 1.45 to 1.47 dollars will be made when American firms pay 1 dollar for foreign services suppliers. For example, the saving earnings from outsourcing may be very significant because the salary paid for software engineers in India is less much than in developed countries. Simultaneously, it will ensure the services quality as well as increasing productivity. Moreover, according to arguments by the developing countries, opening labor market in developed countries will create more jobs for foreign workers. This is one of the reasons which developing countries agree with the liberalization of trade in services. In general, the developing countries desire that they can see higher level of liberalization on mode 4. Most of the developing countries have labor abundance, so the moving of natural personal will benefit them. In addition, developed countries also get more benefit from outsourcing or offshoring because of cost savings and higher services quality. In Doha Round this issues is a considerable concern and has the most ambiguous successful prospect.

2.1.2.

The benefits of liberalizing trade in services to developing countries Although many arguments said that developing countries will lose from global services trade liberalization since their domestic service industries are inefficient and non-competitive, some studies said that there is an existing the potential benefits to developing countries of services trade liberalization raises. In the case of China, the services liberalization brings well benefits as well as opportunities for China. According to the study of CSI (2004), they said that the liberalization as well as foreign competition will create domestic efficiencies. It can be said that gains from services liberalization for China are extremely large a 14.6% of GDP (Dee and Hanslow, 2000). The reason for that would be labor cost advantages in China. As you know, services sector now make up 40.7 percent of the economy according to an announcement from the National Bureau of Statistics (NBS). Thus, services sector play an important role in the Chinese economy. China has known as the most populous country in the world so it means that it has labor abundant. Liberalization especially on mode 4 will benefit for China. According to the table 2.1 above, it shows that liberalisaion of trade in services will double national income of China. India as well as other developing countries will gain significantly from liberalisation of world trade in services in the negotiations in the World Trade Organisation (WTO). India is also a populous country as China in the world. The gains from services liberalization for India is significant number, 5.1% of GDP gain (Dee and Hanslow 2000). The reason for that is quite similar to the case of China. Especially, India has interests in liberalization of services as it has some comparative advantages which are not shared by other countries in the services sector. Export of services from India is growing 2.2 times faster than other export sectors (Ministry of Commerce and Industry of India)

In general, developing countries get more benefit from trade in services liberalization. For the past two decades, trade in services has grown faster than merchandise trade and developing countries have participated in this trade growth. Nine out of the 25 leading importers and exporters of commercial services are developing countries. 2.2. 2.2.1. Developing countries arguments against liberalization in services Divergence of the developing countries in opening services market WTO members all participate in Doha Round in order to discuss and reach an agreement on some common issues. In this Round, each countries group shows its own opinions. While almost developed countries contend and encourage the process of liberalizing trade in services, many developing ones are afraid of opening the services markets. There are different reasons to explain why there exists disagreement on this issue between countries at two levels of economic development, including objective and subjective reasons. 90 developing countries have generally fanned out into three basic groupings basing on their opinions: - The first group consists of Brazil, the ACP countries, the African Group, and the group of small and vulnerable economies which are keen on preserving and emphasizing Members right to regulate and introduce new regulatory measures, as they see their regulatory frameworks as still being in a nascent stage of development. This group is almost cautious to even against liberalizing in services across-borders. The second group includes Hong Kong, Mexico, Chile, Taiwan, and Korea, who advocate strong horizontal disciplines as a means of reducing the unduly restrictive effects of domestic regulatory measures. These are highly

developing economies or emerging economies. So that they hope the disciplines of WTO after this round will remove or at least reduce trading barriers and domestic regulations in order to push the rapid economic growth. In other words, these members have nearly same ideas with developed countries. - The final group has India, Thailand, Pakistan, Peru, and others which are pushing for disciplines focusing on qualification requirements and procedures, which this group sees as the most relevant regulatory measures affecting Mode 4 -in area of strong offensive interest for these countries. This group only agrees partly depending on the extent of liberalization and the services sector of liberalization and especially the mode of supply in the process of opening the services market. The related issues on mode 4 are most mentioned in this round at the vision of these countries. 2.2.2. The reasons for cautious approaches of developing countries to services liberalization. In the scope of research, this part examines the reasons why some developing economies disagree with disciplines of liberalization in service trade. The reasons include internal reasons (subjective ones) and external (objective) ones. Internal reasons The developing countries are facing some serious problems relating to the WTO's General Agreement on Trade in Services (GATS) and the current negotiations. These are internal causes leading to attitudes of these countries versus liberalization in services trade. Firstly, there is the lack of data on services trade, especially as they pertain to the WTO services framework. This is an old problem that had been highlighted before,

2.2.2.1.

during and after the Uruguay Round GATS negotiations, but had never been dealt with by the international organizations. The inadequacy of data makes it difficult or impossible for developing countries to assess the effects of past or future liberalization. This creates a negotiating situation akin to developing countries "chasing a black cat in a dark room, blindfolded". The lack of data also made it impossible to fulfill a GATS condition, that there be a proper evaluation of effects of services liberalization, before embarking on new negotiations. It also hinders efforts to develop safeguard mechanisms against the negative effects of liberalization on developing countries. GATS are inherently imbalanced as developing countries have far less capacity for services production than the developed countries. Even if market access was increased, most developing countries could only benefit little due to supply constraints as well as anti-competitive and monopolistic structures that act as barriers to entry to the developed countries' services markets - a point brought out in the UNCTAD secretariat documents before the Commission. Another reason is the weak capacity of developing countries in assessing the impact of services. In fact, developing countries face problems such as lack of analytical capacity, and scant statistic. The assessment can only be qualitative and not quantitative due to data deficiency. Even, some countries can not adjust benefits and costs from services and trade in services. Thus, it is difficult for them to open freely the services market and enter international market full of different competitors. Thirdly, inappropriate and over-rapid liberalization could cause a range of problems for developing countries, such as financial instability (resulting from opening up financial markets to the vagaries of capital flows and speculation), displacement of local firms and net job losses by the entry or expansion of foreign service

providers, and significant net foreign exchange outflows due to profit repatriation of foreign firms (which also mainly provide for the local markets and thus do not earn much foreign exchange for the host countries). Fourthly, the combination of privatization (often under loan conditionally) and liberalization was leading to higher prices of essential services, thus hampering the people's access to water, electricity, health care, etc.(Martin Khor,2003). There have been protests in many developing countries against this trend. Empirical studies involving more than 30 countries conducted by Social Watch and a NGO, show how the liberalization and privatization of essential services have left consumers worse off. The GATS architecture is often said to be 'development-friendly'. However, whilst each WTO Member can choose to commit which sectors to liberalize, when and to what extent, in reality the developing countries face tremendous commercial and political pressures to liberalize, and once they commit in the GATS they would be unable to "backtrack" unless they can afford to pay compensation. The last problem belongs to the national regimes and structures. Developing countries do not have a comprehensive services development plan or strategy, or a coordinating Services Ministry, and thus they are unable to make informed decisions such as on offers and requests in the WTO negotiations. UNCTAD assists developing countries in developing such plans and strategies, as well as in the negotiations. In summary, these particular characteristics keep developing countries cautious to even against the services market access and trading internationally services. External reasons

2.2.2.2.

As can be seen, service is intangible, so it is difficult to make agreements in negotiations. Some facts prevent developing economies from open services market. The first reason is associated with the complexity of service which arises from a number of factors, including: - The intangible nature of service-sector activity and the corresponding difficulty of measuring and assessing a sectors contribution to production and exchange and the economic consequences of alternative policy choices; - The considerable diversity of activities encompassed in a sector; - The challenge of factor mobility (capital and labor) involved in services transactions; - The ubiquity (and diversity) of market failures affecting services transactions and related regulatory. Therefore, the nature of services which is different from goods is one of the main reasons why developing economies keep more cautious than developed ones in liberalizing trade in services Secondly, the recent events proved the negative effects of opening services market in some countries, namely Mexico, USA, EU, Japan and some emerging countries. The financial crisis occurred in USA and then spread to EU, Japan and others which supplied and received financial services from American financial institutions. Thus, it is clear that liberalization in financial services contains numerous risks to economies. That's why these nations seem alert to commitments in Doha round on this issue. The next thing relates to the difference between developing and developed countries in comparative advantages of some kinds of products. In fact, the economic development level of the first group is much lower than the second group. The second group possesses the comparative advantages on almost services.

Therefore, the first group worried that they could not get benefits from free trade in services. Even they cannot protect domestic service sectors. Furthermore, the big wave of foreign services may influence other industries as well as the independence of the national economy. Finally, in reference to difficulties of following negotiated outcome, it is the service sector unions, which will face several following key challenges, among which: - The heterogeneous nature of the service sector causes the conflict of interests among sectors that derive from such diversity. So this heightens the challenge to coordinate among the various sectoral positions within such unions;
-

The ongoing back-lash of globalization often targets the alleged dangers of service sector liberalization for domestic policy space, social security, employment or access to public services;

- The next challenge is the occasional adverse implications of the lobbying role played by influential non-service private sector players. These implications have succeeded, in some instances, in focusing the respective governments attention on other economic sectors regardless of the services sectors' importance in the economies; - The difficult of harmonizing interests among services leads to challenges in formulating trade policies. The latter challenge tends to be compounded by budgetary constraints. In short, recognizing the risks and the difficulties of liberalization in services trade, many developing countries are not still in favor of opening services market. These issues are due to inside and outside problems. Thus, it is not easy to solve them

quickly. Accordingly, the Doha negotiations round has not completed agreement yet on international services liberalization. 2.2.3. The typical example for these arguments: financial services In the scope of the research, financial services are the most essential sector mentioned accompanying liberalization in services trade. The financial sector is a critical component of a nations economy. The financial system serves as a channel through which savings can be mobilized and used to finance investment and, at the same time, facilitates transactions necessary for internal and external trade. It also helps to manage risks and reduce so-called information asymmetries between providers and users of funds. For these reasons, a sound and efficient financial system is imperative for economic growth and development. International trade in financial services - together with enhanced prudential regulation and supervision and other basic structural reforms - can play an important role in helping countries build financial systems that are more competitive and efficient, and therefore more stable. Financial services trade can enhance capital market efficiency; improve the quality, availability, and pricing of financial services; stimulate innovation through the dissemination of new technologies, know-how, and skills; and promote the use of international good practices in areas such as accounting, risk management, and disclosure of financial information. The rapid growth of trade in financial services in recent years reflects a combination of economic, technological, and regulatory factors. These include new and expanding markets in developing and transition economies, technological advances, and progress in reducing or eliminating a variety of host-country barriers Although the lack of broad cross-border commitments by some emerging market economies or other developing countries also represents a binding gap, many developing countries continue to impose barriers that significantly restrict or prohibit the provision of cross-border financial services to their residents. Crossborder trade in financial services can benefit host-country consumers and

contribute to the development of more competitive host-country markets. From the perspective of developing countries, however, cross-border services may not appear to offer the same benefits as establishment of a commercial presence, particularly the transfer of technology, know-how, and skills. A further complication is that capital flows either are an integral part of, or typically associated with, most types of cross-border financial services. In addition to their concern about the overall volatility of international capital flows, some developing countries may be concerned about capital flight on the part of individual residents.47 Restrictions on residents opening bank accounts abroad, for example, constitute both capital controls and barriers to trade in financial services. Developing countries should be encouraged to liberalize trade in cross-border services, but they can reasonably be asked to bind in the GATS only what OECD countries are willing to bind. In the 1997 agreement, the failure of a number of OECD countries to make broad cross-border financial services commitments in mode 1 that fully encompassed existing levels of liberalization appears to have been associated with several factors. These include uncertainty about WTO jurisprudence, more liberal regulatory treatment that goes beyond national treatment for some wholesale cross-border services, and ongoing work on regulatory responses to the potential use of the Internet for retail cross-border financial services. In setting priorities for the negotiations on financial services in the Doha round, it is important to recognize that the first two factors remain unchanged and that, despite progress with regard to e-finance regulatory issues since 1997, the third factor also remains important. 2.2.4. Arguments against liberalization of trade in services of some developing countries

To clarify arguments of each country, the following part of this study shows some examples of some representative developing countrys arguments. The Indian delegate agreed that movement of natural persons is one of the most importances to developing countries but they face many problems of access and regulations. UNCTAD should undertake work on this as well as on the lack of statistics to measure, the services trade flow, and how the monopolistic practices of TNCs hinder market access. The Morocco delegate emphasis that developing countries have the flexibility to choose the extent of liberalization commitments and said since Doha the African countries face many problems. It was a complex task to identify national interests especially in the absence of a services plan and a Ministry of Services. Therefore, it is no surprise that African countries are unable to fulfill the negotiating datelines. He added that there has to be an assessment first before the negotiations, and that the GATS Council must make continuous assessment and to make adjustments accordingly, as stated in the negotiating guidelines. The Uganda delegate agreed that it is in the best interests of developing countries to exercise maximum caution in making commitments in their GATS schedules. He said: "In practice, our countries have received requests in areas where we have already liberalized and we are asked to commit. There will be enormous pressure put on developing countries." Another delegate from Uganda added: "The LDCs are caught in a poverty trap. Commodity prices have collapsed. Due to liberalization, most LDCs ended up with deindustrialisation, many local firms have closed. Due to subsidies in rich countries, even our farmers are threatened by cheap agricultural imports. In view of all these problems - the poverty trap, commodity price collapse, deindustrialisation, farmers going out of business, workers retrenched - what can developing countries

do so that their services sector can be boosted? Or will our service sector also go down? How can we address this problem?" The Bangladesh delegate said LDCs had little chance to benefit from market access in most services such as banking, and thus had little prospect from trade in services. He agreed that the best benefit could come from movement of labor. If this is to benefit developing countries, then why is this being blocked? The Iranian delegate agreed that developing countries lack a Services Ministry as well as facing structural weaknesses. He called on UNCTAD to draft a model services plan and study the social impact of services liberalization on developing countries. The Brazil delegate said there appeared from the panel to be two contrasting approaches that developing countries can take to services negotiations: a "constructive position" of being willing to negotiate, and a "defensive position" vis-vis the requests of the major countries. For the agenda to progress there should be a constructive position first. However, there is no progress now on the areas where the developing countries have the comparative advantage such as agriculture. On topics where developing countries are on the defensive there is progress, for example services where there is the most progress. Now we have a constructive position, but this can swiftly change to the defensive position if there is no progress in areas of our interest.

PART 3. IMPACTS OF DOHA ROUND NEGOTIATIONS ON TRADE IN SERVICES IN VIETNAM

3.1. 3.1.1.

Trade in services of Vietnam after entering the WTO Current state of the services sector in Vietnam The service sector has played an increasing role in the economy and is a main motive for the world economic growth. The Vietnamese government has applied different policies to create good environment for services activities, enabling services industry to better meet the social demand. However, the contribution of the services sector in Vietnam to GDP is not high, only 38.1% in 2006 (General Statistic Office 2006). Some sectors such as scientific research, designing or marketing and market research have not developed. Some important sectors such as telecommunication and finance have not strong enough. Until now, transportation and telecommunication services only account for 9.6% and financial services only 5% of total contribution of the services sector. The services sector creates employment for only around 25% of total labor force. In addition, the environment of the services sector in Vietnam is not good enough for developing the economy. The costs of telecommunication or transportation services

of Vietnam are higher than the average level of other countries in the region (the telecom services costs are from 30% to 50% higher and transportation costs from 40% to 50% higher). After more than 11 years of intensive preparations and negotiations, on 7th November 2006, the World Trade Organization (WTO) has formally admitted Viet Nam as a Member of the Organization. After this event, services industry in Vietnam is liberalized more and more. In consistent with the United States Vietnam Bilateral Trade Agreement, Vietnam committed opening up most of the services sub-sectors such as banking, telecommunication and insurance services for American companies. To sum up, the services sector in Vietnam is considered a weak industry despite of the fact that we have not had a sound services statistic to precisely measure trade in services of Vietnam. After 3 years joining the WTO, we are trying to develop the services sector stronger with the objective to achieve the service growth rate of 7% - 8% every year. 3.1.2. Level of commitments and structure of Service Schedule Level of commitments As the conditions used in the Schedule of each Member shall constitute legal binding commitments, the lists of limitations on market access and national treatment must be accurate and consistent. Depending on the extension of limitations, each Member may schedule in one of the following 4 cases: full commitments, commitments with limitations, no commitments and unbound due to lack of technical feasibility. Each level has a different limitation on market access and national treatment. Full commitments refer to the situation in which Members do not list any limitations on market access or national treatment for one or more services or one or more modes of delivery. Commitments with limitations means

3.1.2.1.

that Members make commitments with one or more services or one or more modes of delivery but there are still limitations in relevant columns and entries. No commitments imply that Members may maintain their ability to put forward limitations on market access or national treatment for one or more services or one or more modes of delivery. Unbound due to lack of technical feasibility means Member does not have any commitments. Level of commitments reflects the argument of a country about liberalization of trade in services. If a country has full commitments, it means that they support for the services liberalization. In general, each country has different level of commitments because it still has disagreement between them. Structure of the Service schedule The Schedule has four columns: i) Sectors and sub-sectors; ii) Limitations on market access; iii) Limitations on national treatment and iv) Additional commitments. The first column lists the name of specific services which are total 11 services sectors and 155 sub-sectors (presented in part I). The second column lists measures applied to foreign services suppliers. The final column lists measures affecting the supply and consumption of services but not included in the market access limitation column or national treatment limitation column. An example of schedule of services will be represented below in Table 3.1:
(1) Mode 1 Sectors and sub-sectors (2) Mode 2 Limitations on Market Access (3) Mode 3 Limitations on National Treatment (4) Mode 4 Additional Commitments

3.1.2.2.

II. SECTOR-SPECIFIC COMMITMENTS 1. BUSINESS SERVICES A. Professional Services (a) Legal (1) None. services (2) None. (CPC 861

(1) None. (2) None

excluding: - participation in legal proceedings in the capacity of defenders or representatives of their clients before the courts of Viet Nam; (3) Foreign lawyers organizations are permitted to establish commercial presence in Viet Nam in the following forms: - Branches of foreign lawyers organizations; - Subsidiaries of foreign lawyers organizations; - Foreign law firms; (4) Unbound, except as indicated in the horizontal section. (3) None. (4) Unbound, except indicated section. as in

the horizontal

Table 3.1: Sample of Schedule of Specific Commitments 3.1.3. The Schedule of specific commitments of Vietnam in services In all Viet Nams commitments in the WTO (including commitments on trade in goods, trade in services and multilateral commitments), those on opening service markets are possible most complicated. In the process of WTO accession, Viet Nam has committed 11 service sectors and about 110 sub-sectors, which are diversified in nature, from telecommunications, finance, transportation to such services as services incidental to manufacturing, audio-visual services. A clear understanding of these commitments is a pre-requisite for enterprises and stakeholders to know which Viet Nams service markets will be opened and to have optimal solutions to take advantage of opportunities and overcome challenges when Viet Nam joins the WTO. The Service Schedule consists of three parts: horizontal commitments, sectorspecific commitments and List of Article II (MFN) exemptions. Horizontal commitments Horizontal commitments cover commitments applied to all services sectors and sub-sectors included in the Schedule. This part mostly refers to general economictrade issues like investment regime, forms of establishment, land leasing, taxation issues, and subsidies for State-owned enterprises. Vietnam has only horizontal

3.1.3.1.

commitments on mode 3 and 4, except some particular rules in schedule. More specifically, Vietnam almost does not limit mode 3 on both market access and national treatment. In general, Vietnam allows foreign companies to set up commercial presence under business contract or joint-venture company or 100% foreign invested company. However, Vietnam has not committed on opening branch of foreign enterprises. In addition, subsidies may be limited to Vietnamese service suppliers. It means that subsidies only are given for juridical personal established on territory of Vietnam. Related to mode 4, Vietnam almost has not committed yet except some measures related to entry and temporary stay of natural persons. Sector specific commitments Sector-specific commitments include commitments applied to each service sector/sub-sectors included in the Service Schedule. It means that for each service included in the Service Schedule, there will be commitments specifically applied to that service, for example commitments for telecommunications, commitments for insurance, commitments for banking or commitments for transportation services. The commitments represent the extent of market access opening for Foreign Service suppliers in each service. In some important sectors, Vietnam has not a high level of commitments. For example, in telecommunication sector, foreign enterprises are not allowed to supply wire-based and mobile services. In mode 4, we unbound except horizontal commitments. In educational sector, we almost have not committed yet. We have just committed no limitation on mode 2 while most of other modes unbound except horizontal commitments. In conclusion, Vietnam follows a relatively cautious approach in opening up sectors that are considered sensitive such as education and telecommunication. At one

3.1.3.2.

extreme, it is good for the Vietnamese economy in the short run because it guarantee some protection for newly developed services sectors in Vietnam. At the other extreme, following the liberalization trend, Vietnam should by the end consider the master plan to open up its services market. The list of Article II (MFN) exemptions The list of Article II (MFN) exemptions lists measures, which may be maintained to reserve the right to act inconsistently with the MFN principle in services where the MFN exemptions are applicable. Under GATS rules, a Member can act inconsistently with the MFN principle if it has listed, with agreement from other WTO Members, the inconsistent measure in the list of Article II (MFN) exemptions. Most of exemptions given by Vietnam are in audiovisual services and maritime transport. Countries that have signed bilateral or plurilateral agreements with Vietnam will be applied to the measures. The intended duration of exemptions majority are indefinite. Vietnam gives the exemptions for a little country and sector. It proved that we have just opened the economy slowly. This is not unreasonable. The economy of Vietnam is not strong enough to receive too much investments as well as foreign enterprises. The opening gradually is the best method to develop the economy and prevent risks as well as crises. 3.1.4. The financial services commitments of Vietnam In the scope of this study, we examine Vietnams commitments in the financial services because this sector is considered strategic and are subjected to many liberalization measures in many countries in the world. Financial services can be divided to 3 sectors such as insurance, banking and securities. Insurance sub-sector In the insurance sub- sector, Vietnam has just committed liberalization with mode

3.1.3.3.

3.1.4.1.

1 in some sub-sectors such as: insurance services provided to enterprises with foreign-invested capital, foreigners working in Vietnam, reinsurance services, insurance services in international transportation, insurance broking and reinsurance broking services or consultancy, actuarial, risk assessment and claim settlement services. There is no restriction with mode 2 while mode 3 is committed fully except 100% foreign-invested insurance enterprises shall not be allowed to engage in statutory insurance business, including motor vehicle third party liability, insurance in construction and installation, insurance for oil and gas projects, and insurance for projects and construction works of high danger to public security and the environment. As of 1 January 2008, this limitation shall be abolished. After 5 years from the date of accession, non-life branches of foreign insurance enterprises shall be permitted, subject to prudential regulations. Banking sub-sector commitments of Vietnam In the banking sub- sector, Vietnam committed on sub-sectors following: - Acceptance of deposits and other repayable funds from the public - Lending of all types, including consumer credit, mortgage credit, factoring and financing of commercial transaction - Financial leasing - All payment and money transmission services, including credit, charge and debit cards, travellers cheques and bankers drafts - Guarantees and commitments - Trading for own account or for account of customers - Money broking - Asset management, such as cash or portfolio management, all forms of collective investment

3.1.4.2.

- Settlement and clearing services for financial assets, including securities, derivative products and other negotiable instruments services. - Provision and transfer of financial information, and financial data processing and related software by suppliers of other financial. Vietnam has not committed related to market approach and MNF with mode 1 in financial services except provision and transfer of financial information, and financial data processing and related software by suppliers of other financial and consultancy, broking services Vietnam does not limit Vietnamese people go abroad and get benefits from the suppliers in the third country. During 5 years from the date of accession, Viet Nam may limit the right of a foreign bank branch to accept deposits in Vietnamese Dong from Vietnamese natural persons with which the bank does not have a credit relationship to a ratio of the branch's paid-in capital according to the schedule below: - 1 January 2007: 650% of legal paid-in capital - 1 January 2008: 800% of legal paid-in capital - 1 January 2009: 900% of legal paid-in capital - 1 January 2010: 1,000% of legal-paid-in capital - 1 January 2011: Full national treatment. Viet Nam may limit equity participation by foreign credit institutions in equitized Vietnamese state-owned banks to the same level as equity participation by Vietnamese banks. A branch of foreign commercial bank is not allowed to open other transaction points outside its branch office. Securities sub-sector Finally, in the securities sector, Vietnam has not committed about MNF and market approach by mode 1 except:

3.1.4.3.

- Provision and transfer of financial information, and related software by suppliers of securities services - Advisory, intermediate-on and other auxiliary securities related excluding Mode 2 is committed fully while foreign securities service suppliers shall be permitted to establish representative offices and joint ventures with Vietnamese partners in which foreign capital contribution not exceeding 49% by mode 3. Both of three sectors of financial services unbound in mode 4 except as indicated in the horizontal section. In conclusion, financial services in Vietnam after entering WTO have many opportunities to be liberalized. However, almost sub-sectors were only committed in mode 1, 2 and 3 while mode 4 is considered to be an important factor to get benefits from liberalization. 3.2. The influence of Doha Round Negotiations on Vietnams Trade in services In the previous part, the study analyzes the situation of services and commitments of Vietnam in trade in services when joining in WTO. Being a member of WTO and a developing country, it is evident that Vietnam has the right to take part in Doha Round and has obligation to follow the agreements after this round. These agreements impact both negatively and positively on Vietnam's overall economy, in particular on its services sector which is developing quite rapidly over time. 3.2.1. Two scenarios of Doha Round Negotiations in the future Doha Round began the first negotiation in 2002 in Doha, Qatar. The next ministerial discussions have taken place in Cancun in 2003, Geneva in 2004, Hong Kong in 2005 and Geneva in 2006 and 2008. Until now, it has not finished yet. This round examines many international issues but focused on two large topics: liberalization in agricultural products and in services. So far, the Doha Round Services Talks have not gone to the end yet. There still exist disagreements between

negotiators from different countries. It is not easy to affirm surely the future of Doha Round negotiations. Basing the development of this round indicated in chapter II of this study, we could predict that two clear scenarios maybe occur in the near future. Scenario 1: Service trade liberalization negotiations in the Doha Round will be successful This scenario means that commitments on liberalization or reduction of trade barriers in services will be prevalent among countries. In other words, there will be a competitive international services market. In more details, some essential services (electricity, telecommunications, education...) which provided domestically before, will gradually be opened to foreign exporters and investors. Some developing countries will have some special priorities about the time limit and the degree of opening the market of some services. Moreover, they will be supported in deal with difficulties, obstacles in the process of liberalizing trade in services such as financial aid, legal system; technical assistance... Main issues relating to Mode of Supply services, Mode 4 specifically will be resolved in terms of the market access. In this scenario, commitments on Mode 4 will permit developing countries to get benefits from trade in services. In brief, the first scenario illustrates a global services market with low trade barriers. Scenario 2: Members will fail pushing the services trade liberalization in the Doha Round It is a possible pessimistic case or a bad end of Doha Round. WTO members can't reach any agreements on opening up the service market. Both developed and developing countries conservatively keep trade barriers and provide domestically some services. Perhaps, liberalization in services will only take place between countries within a region Each of the two above mentioned scenario will bring different effects to WTO

members in general and developing countries in particular. The following part will analyze the possible impacts of Doha round negotiations on Vietnams trade in services in each scenario. 3.2.2. Impact of Scenario 1 Possible positive effects As other members of WTO, Vietnam will potentially enjoys a lot of visible benefits if Doha round succeed. Outcome of Doha might contribute to increase Vietnam GDP and create more jobs in services sectors and related sectors. The first benefit that Vietnam as well as other developing countries can enjoy is labor export. This is one of the huge sources of foreign-currency revenue for developing countries. Recent statistics showed that in 2005, India received $30 billions USD foreign currency from labor export, those of China was around $20 billions USD, Mexico was $15b USD and Philippines was $10b USD. Vietnamese labors working overseas also sent back home about $2 billions USD which gives substantial contribution to equilibrate the States international balance of payments and Governments activities on poverty reduction. However, these figures would be much greater if the WTO members, especially developed countries, loosen their management measures on transfer of natural person (Mode 4).When Vietnam is a member of WTO and joined the Doha Round, Vietnam will automatically can enjoy the achievements of negotiations by WTO members. Clearly these are more opportunities for export labor activities of Vietnam and the number of $2 billions USD (1998) may be much greater. The second benefit which Vietnam can enjoy is the ability to use Dohas negotiation mechanism to achieve some beneficial results for us. The traditional negotiation mechanism in GATS in general and the current Doha round is still the request offer mechanism. In this mechanism, upon becoming an official WTO

3.2.2.1.

member, if Vietnam wishes to access another members service market, it may send its request to that member to negotiate. This request may rise from virtual interests of a certain industry or even an enterprise. The economic development practice in Vietnam in recent years proves there are some Vietnamese service enterprises not only surviving in the market but having plans to expand their operating scope into other areas or countries as well. However, in this process, some enterprises have difficulty in establishing their appearance overseas. That the US rejects to grant license to establish trade appearance to 3 famous Vietnamese banks is a typical example. By joining the Doha round, this issue can be settled by GATSs negotiation mechanism. Thirdly, Vietnamese consumers might receive many benefits from diversity of foreign services. Specifically, individual consumers as well as enterprises using services as intermediates gain benefits from the competitive price. Moreover, the providers introduce a wide range of diverse services at higher quality, at the available price. Besides, Vietnam also has opportunities to reinforce services exportation by approaching more deeply the overseas services market throughout direct negotiations in the framework of Doha Round. So that, services sector as well as services exportation contribute more to GDP. In other words, Doha round opens a door full of perspectives for the economic growth of Vietnam. Another benefit to be mentioned is that the service liberalization process in the Doha round in particularly and in the WTO in general helps to create a clear business environment and support trade activities. Market studies and business assessments by some international organizations such as JETTRO (from Japan), UNCTAD or WB show that business costs in Vietnam are rising and in some cases the most expensive in the region. Typical examples are telecommunication industry, port expenses, business supporting services, etc., which are both deficient and

expensive. The main reason is partly the lack of fair competition environment and partly the limit of participation of foreign investors in service sector. If the Doha round ends in expected results, the world business environment and also in Vietnam will be improved a lot. Then, not only service enterprises but also producing and trading enterprises may enjoy the benefits. Briefly, Vietnam will wait for a promising future after joining in WTO, especially finishing the round of services negotiations Doha. It is important to itself improve to use actively and efficiently these benefits. Possible negative effects If Doha Round succeeds, Vietnam might have to push up to open up its services market. It has the same meaning as Vietnam will have to face up with a lot of problems and challenges. To the government, committing and implying commitments at higher level as the results of the Doha Round is a must for Vietnam a developing country which has just struggled to join in WTO. The second effect relates private groups. When the Doha Round finishes and achieves envisaged results, the world services liberalization will have break through. At that time, competition environment will be fiercer since services markets in Members will be more liberal and transparent. In its turn, pressure on Viet Nams services sectors will be stronger. For sensitive sectors, unless having prepared for a competitive environment will face tremendous difficulties in order to have a strong foothold and development. In fact, domestic services providers have to prepare for the fierce competition with foreign counterparts. Vietnam providers don't receive benefits from the protectionism such as tariff, subsidies, quotas, technique barriers... These providers themselves compete with importers by their weak and young forces. They are perishable and it is hard to survive in the market without active improvement on every side (human resources, legal instruments,

3.2.2.2.

international law). Another impact is that Vietnam will face risk of losing jobs when opening the service market. In reality, Vietnam is a developing country with a large source of labors. However, a majority of them are low-skilled, and a small share of this source is educated for the services sectors. So that external services are flooded in the Vietnam market, the market share of internal services is crowded out. Decreasing provision domestically causes losses in employment. It is a serious problem for all developing countries including Vietnam, others. Doha Round negotiated different services and liberalization in trade in services. The financial services are considered as a central sector of the round. However, liberalization in trade in services puts Vietnam in risky situation. Financial services are provided freely cross-borders while financial institutions in Vietnam are imperfect. Like many other developing countries, Viet Nams law and regulation framework is not completed and, in many cases, less transparent than expected. Meanwhile the transparency is a compulsory, and in many case relatively hard, obligation of WTO. To implement this obligation, WTO Members must ensure transparency in series of issues, from licensing procedures, notification mechanism, coordination forms, etc. In this aspect, Viet Nam has been making gradual progress. Accepting additional results from the Doha round will make it harder for Viet Nam in its effort to implement WTO obligations. When the Doha Round finishes and achieves envisaged results, the world services liberalization will have break through. At that time, competition environment will be fiercer since services markets in Members will be more liberal and transparent. In its turn, pressure on Viet Nams services sectors will be stronger. For sensitive sectors, unless having prepared for a competitive environment will face tremendous difficulties in order to have a strong foothold and development.

Therefore, many problems relating finance can take place anytime such as financial crisis, control of interest rates. In conclusion, although Doha round has not finished yet, it is evident that Vietnam a new member WTO, a developing country not only enjoys considerable benefits but also risky losses from disciplines of Doha round. It can be said that, when accepting to integrate into the world economy, Viet Nam has prepared to grasp opportunities as well as to face challenges there from. The important task is to how to take advantage of opportunity and prepare for challenges to reap best benefits for the economy. The Doha round is a golden opportunity not only for the global economy but also for Viet Nams economic development. As a result, its impact should be considered accurately, objectively and impartially to ensure effective participation with expected results and benefits. Benefits always accompany losses or opportunities enclose challenges. Thus, it is important to take its opportunities and minimize its harmful impact. 3.2.3. Impact in Scenario 2 The new development of Doha Round Negotiations on services indicated the high risk of its failure. One of two crucial tasks of this round will be able to have a consensus. This second scenario will be either good or bad for Vietnam economy. Possible positive effects In this case, Vietnam only has to follow previous commitments of GATS and WTO when entering WTO. These commitments, which are analyzed in the previous part, have considerable effects on Vietnam, especially liberalization in goods. The delay of the success of Doha Round leaves more time for Vietnam to prepare for a complete liberalization in services in the future. When Vietnam became an official WTO member, Doha Round has been taking place. In case of the success of Doha round, Vietnam will have to implement WTO commitments and Doha Round ones

3.2.3.1.

on services at the same time. Thus, obstacles are unavoidable for Vietnam. Moreover, opening up the services market immediately when just entering WTO without careful preparation, may make the Vietnam economy suffer significant losses. In other words, the future of Doha Round may be good opportunities for Vietnam to some extent. Vietnam will have more time to improve business environment and deal with difficulties before opening totally its service markets, for example perfecting the system of laws on international trade, developing the system of data and statistics on services and preparing a thorough services master plan or strategies,... Possible negative effects. However, the failure of Doha round will take away a lot of benefits of Vietnam. Vietnamese consumers will not have the opportunity to enjoy the diversity of services at the competitive price. Foreign services may be either expensive or unavailable. Close services market limits the choice of Vietnamese consumers and some enterprises which import services as inputs. It may lead to a monopolistic market without the competitiveness. Thus, innovation in providing services can not be motivated. Furthermore, the quantity and the quality of domestic services are improved slowly. In fact, Vietnam has comparative disadvantages in some services sectors such as financial services, business services and transportation services,... International trade is the best way to improve this weak point. However, the failure in pushing the process of liberalizing in services still keeps a range of trade barriers in service exportation and importation. So, it is difficult for services providers to export some services abroad and import other services. Finally, services importers lose opportunities to cut costs from removing import taxes, special taxes... Consequently, Vietnam has not got indirect gains from trade in services which are used as intermediate goods.

3.2.3.2.

In conclusion, any scenario of Doha round negotiations on services will impact both positively and negatively on Vietnam, from consumers to the community of enterprises and the government. However, liberalization of trade in services seems to give more benefits to Vietnam a new WTO member. Vietnam can take part in this round as a WTO member, but its outcome depends on services talks between countries. It is important for Vietnam to have suitable solutions in any possible scenarios after this Round. 3.3. Some solutions for Vietnams trade in services in the context of on-going Doha Round In attempt to restrict negative effects, it is necessary to offer contemporary solutions for the government, the domestic enterprises and individual labors. 3.3.1. For the government Liberalization does not mean deregulating all trade barriers on all sectors. Thus, the Vietnamese government should combine well between the speed of liberalization and the extent of deregulation. In detail, the government gives policies in order to open gradually the services market of only some suitable sectors and maintain some necessary barriers. Moreover, like other developing countries, Vietnam lacks data on services and trade in services. Thus difficulties always exist when assessing the outcome of the Doha round. As a result, the state has to provide a complete system of data on services and trade in services. Finally, the government creates legal instruments to improve capacity in assessing the impact of services. It is the weakness of almost all developing countries, and Vietnam is not an exception. 3.3.2. For domestic providers The biggest problem of domestic enterprises is the competition. Above all things,

they have to raise the competitiveness throughout using effectively ready resources such as labors and capital. By this way, Vietnam enterprises not only maintain their market share in the domestic market but also intervene in international markets. Furthermore, providers need to equip themselves with adequate knowledge on trade in services, regulations, international law and especially disciplines of Doha Round and GATS. 3.3.3. For individual As a labor, it is essential to equip him/her some skills and knowledge on services sectors and international trade so that he can adapt quickly the changing business environment in service trade. Furthermore, a labor can become representatives for providing services to foreigners under the mode 4 which is the most favorite to developing economies. As a result, Vietnamese labors have opportunities to work for foreign providers in Vietnam as well as home countries, resulting in reduction of loss in employment. In short, Vietnam is in the process of struggling to deal with challenges as well as use effectively opportunities from liberalization in service trade. It requires the participation of all players such as the government, enterprises, individuals, consumers and labors in this task. Therefore, Vietnam will have good preparation in the legislation and the politics and the business environment to open up the services market.

CONCLUSION
Services trade plays an important role in the economic growth of each nation. However, liberalization of service trade can cause complicated impacts, which are not easy to be assessed and quantified, on individual countries. Therefore, the issue of trade service liberalization has not been resolved yet in the Doha Round and the developing countries with a relatively weak service sector have raised a lot of concern about the possible negative impacts of liberalization. Finishing this study, some considerable findings are presented as bellows. Firstly, Trade in services plays an important role for all countries in general, and developing countries in particular. Trade in services significantly contributes to push and strengthen the economic development of the developing countries. An open services market encourages the export and import activities between countries, accordingly increase GDP. Furthermore, a large number of jobs are created in developing countries. Beside benefits of services consumers, free services trade helps enterprises to cut costs of services as one of inputs of the production.

In the Doha round, services talks have been prolonged until now and have no signal of the end in attempt to resolve following main issues: Mode of supply for developing countries. The extent and the service sectors of the process of liberalization. Modalities and priorities for least developed and developing countries Aid and assistance for the process of opening the service market in developing countries. The second finding is that developing countries have opposite arguments towards the liberalization of trade in services in the Doha Round. While many countries seem cautious to take away trade barriers for subjective and objective reasons, others recognize more benefits in comparison with threats from trade in services. Some developing countries don't have enough economic, legal, infrastructural and political conditions for entering a competitive international services market. Thus, they are reluctant to liberalize service market. Others support and promote services liberalization in order to catch up opportunities to develop and strengthen the national economy. According to these countries, potential threats are not too serious and avoidable. Finally, the study analyzes some possible impacts on Vietnams services sector in the framework of 2 scenarios for Doha Round service negotiations and draws some implications for Vietnam in the process of liberalizing services. Each of the scenarios will bring about different effects, both positive and negative, on Vietnam. Therefore, it is important for the Vietnam government, the community of domestic enterprises as well as Vietnamese individuals are prepared themselves to integrate successfully in services trade liberalization.

APPENDIX
7. FINANCIAL SERVICES A. Insurance (1) None for: and - Insurance services provided to enterprises with Insuranceforeign-invested Related Services capital, foreigners working in Viet Nam; - Reinsurance services; a. Direct insurance - Insurance services in international transportation, including insurance of risks relating to: (a) Life insurance, excl. + international maritime transport and international commercial health insurance aviation, with such insurance to cover any or all of the following: services (b) Non-life the goods being transported, the vehicle transporting the goods and insurance services any liability arising there-from; and b. Reinsurance + goods in international transit; and - Insurance broking and reinsurance broking services; retrocession c. Insurance - Consultancy, actuarial, risk assessment and claim settlement intermediation (such as services. (2) None. brokerage and agency) (3) None, except: 100% foreign-invested insurance enterprises shall d. Services auxiliary to not be allowed to engage in statutory insurance business, including insurance (such motor vehicle as consultancy, third party liability, insurance in construction and actuarial, risk installation, insurance for oil and gas projects, and insurance for assessment (1) None.

(2) None. (3) None. (4) except as indicated in the Unbound,

and claim settlement)

projects and construction works of high danger to public security and the environment. As of 1 January 2008, this limitation shall be abolished. After 5 years from the date of accession, non-life branches of foreign insurance enterprises shall be permitted, subject to prudential regulations. (4) Unbound, except as indicated in the horizontal

section. B. Banking and Other Financial Services Commitments with respect to banking and other financial services are undertaken in accordance with relevant laws and regulations promulgated by competent authorities of Viet Nam to ensure the consistency with Article VI of the GATS and Para 2 (a) of the Annex on Financial Services. As a general rule and on a non-discriminatory basis, the offer of banking and other financial services or products is subject to relevant institutional and juridical form requirements. (a) Acceptance of deposits and (1) Unbound, except B(k) and B(l). (1) Unbound, other (2) None. except B(k) and repayable funds from the (3) None, except: B(l). public (a) Foreign credit institutions are (2) None. (b) Lending of all types, only permitted to establish (3) None, except: including commercial presence in Viet Nam in (a) The consumer credit, mortgage the following forms: conditions for the credit, (i) With respect to foreign establishment of factoring and financing of commercial banks: a commercial representative office, branch of branch of a transaction foreign commercial bank, foreign (c) Financial leasing commercial joint venture bank with commercial bank (d) All payment and money foreign capital contribution not in Viet Nam: transmission services, exceeding 50% of chartered capital, - The parent including credit, joint venture financial leasing bank has total charge and debit cards, company, 100% foreign-invested assets of more travellers' financial leasing company, join than cheques and bankers drafts venture finance company and 100% US$20 billion at (e) Guarantees and foreign invested finance company, the end of the commitments and, beginning on 1 April 2007, year (f) Trading for own account or 100% foreign-owned banks are prior to for permitted. application (b) account of customers, whether (ii) With respect to foreign finance The conditions on an companies: representative office, for the exchange, in an over-thejoint venture finance company, establishment counter market 100% foreign-invested finance of a joint venture or otherwise, the following: company, joint venture financial bank or a 100% - Money market instrument leasing company and 100% foreignforeign-owned (including invested financial leasing bank: cheques, bills, certificates of company. (iii) With respect to foreign - The parent deposits); bank has financial leasing companies: - Foreign exchange; total assets of

- Exchange rate and interest rate instrument incl products such as swaps, forward rate agreements; Bullion. (h) Money broking (i) Asset management, such as cash or portfolio management, all forms of collective investment management, pension fund management, custodial, depository and trust services (j) Settlement and clearing services for financial assets, including securities, derivative products, and other negotiable instrumentsservices (k) Provision and transfer of financial information, and financial data processing and related software by suppliers of other financial (l)

representative office, joint venture financial leasing company and 100% foreigninvested company. (b) During 5 years from the date of accession, Viet Nam may limit the right of a foreign bank branch to accept deposits in Vietnamese Dong from Vietnamese natural persons with which the bank does not have a credit relationship to a ratio of the branch's paid-in capital according to the schedule below: - 1 January 2007: 650% of legal paidin capital; - 1 January 2008: 800% of legal paidin capital; - 1 January 2009: 900% of legal paidin capital; - 1 January 2010: 1,000% of legalpaid-in capital; - 1 January 2011: Full national treatment. (c) Equity participation: (i) Viet Nam may limit equity participation by foreign credit institutions in equitized Vietnamese state-owned banks to the same level as equity participation by Vietnamese banks. (ii) For capital contribution in the form of buying shares, the total equity held by foreign institutions and individuals in each Viet Nam's joint-stock commercial bank may not exceed 30% of the bank's chartered capital, unless otherwise provided by Viet Nam's laws or authorized by a Viet Nam's competent authority. (d) A branch of foreign commercial bank: - is not allowed to open other transaction points outside its branch office. (e) Upon accession, foreign credit institutions are allowed to issue credit cards on a national treatment basis. (4) Unbound, except as indicated in the horizontal section. financial leasing

more than US$10 billion at the end of the year prior to application. (c) The conditions for the establishment of a 100% foreigninvested finance company or a joint venture finance company, a 100% foreign-invested financial leasing company or a jointventure financial leasing company: - The foreign credit institution has total assets of more than US$10 billion at the end of the year prior to application. (4) Unbound, except as indicated in the horizontal section.

C. Securities (f) Trading for own account or for account of customers, whether on an exchange, in an over-the-counter market or otherwise, the following: - Derivative products incl. futures and options; - Transferable securities; - Other negotiable instruments and financial assets, excluding bullion. (g) Participation in issues of all kinds of securities incl. under-writing and placement as an agent (publicly or privately), provision of services related to such issues (i) Asset management, such as portfolio management, all forms of collective investment management, pension fund management, custodial depository and trust services (j) Settlement and clearing services for securities, derivative products, and other securitiesrelated instruments (k) Provision and transfer of financial information, and related software by suppliers of securities services (l) Advisory, intermediate-on and other auxiliary securitiesrelated excluding (f), including investment and portfolio research and advice, advice on acquisitions and on corporate restructuring and strategy (for other services under (l), refer to (l) under banking sector)

(1) Unbound, except services C(k) and C(l). (2) None. (3) Upon accession, foreign securities service suppliers shall be permitted to establish representative offices and joint ventures with Vietnamese partners in which foreign capital contribution not exceeding 49%. After 5 years from the date of accession, securities service suppliers with 100% foreigninvested capital shall be permitted. For services from C(i) to C(l), after 5 years from the date of accession, branches of foreign securities services suppliers shall be permitted. (4) Unbound, except as indicated in the horizontal section.

(1) Unbound. (2) None. (3) None. (4) Unbound, except as indicated in the horizontal section

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