Consequences of inclusion of services in multilateral trade negotiations:

The proposal by the US in  1982  to include services  in multilateral  trade negotiations (MTNs) had  profound  effects on the nature of MTNs and  the position of less developed countries (LDCs). The proposal was initially met with hostility by developing countries, particularly the High Level  Informal Group, which included India and Brazil (Narlikar, 2003). The Europeans also reached  cautiously as nobody was sure about the  true. picture regarding services  trade and what the negotiations might entail.

Gradually,  the  issue of inclusion of services  brought about a schism among the developing countries. While India and Brazil and some other countries  remained opposed  to the inclusion of services, others such as Colombia, South Korea, Jamaica, etc. become more open to the idea of inclusion  or  at  least  to an examination of the issues involved in services  trade. They formed an informal group, which included some developed countries to  examine the  issue  of services  trade.

Motives for  this change  varied  among  developing countries. Some, particularly the East and South East Asian countries, thought that they might have a comparative advantage in some services. Others wished liberalisation in  other areas and believed that without  some progress  in services, trade in their prefer products would not be liberalised. Gradually  this group gained importance. Ultimately countries like Brazil and India were not able to keep services out  of the negotiating agenda that was decided  at Punte del Este, Uruguay in  1986. But they  thought that they had managed  to keep service negotiations separate. There was a negotiating group for  services separate  fiom the other negotiating groups. This separation was to  prevent  cross sector retaliation.  If a country did not fulfil its commitments in the services area  then a partner country could not take retaliatory action on its exports of goods. So retaliation would be  restricted  to  the country's  service exports. Since developing countries did not export much of services, only limited retaliation could be carried out against their exports. However, the final Uruguay Round agreements allowed such cross-sector retaliation.