EU Requests U.S. Service Sector Liberalization
Feb 28, 2003

The European Union has requested changes to U.S. state and federal regulation of services industries. The EU requests are part of the request-offer procedure adopted by the WTO Doha Trade Round. According to the WTO negotiations time line for services, the U.S. administration is set to respond by the end of March with a list of changes it is willing to make to service-sector regulations.

Some of the EU positions have been known for months, but the final list includes new language regarding accounting standards, cross-border insurance and the retail sale of electricity, all highly controversial topics. Consumer groups, as well as a growing number of state officials, contend that the secretive talks within the World Trade Organization could undermine the ability of local authorities to oversee vital economic services.

The EU push coincides with a public inquiry into the role that government, and particularly state and local governments, play in limiting competition. The Federal Trade Commission, under Bush appointee Timothy Muris, is seeking to open regulated markets across the economy, and has created a task force to examine anticompetitive restrictions on Internet commerce.

The Federal Communications Commissionis also seeking to eliminate the role states play in overseeing wholesale rates that the four big regional Bell telephone companies charge competitors for using their lines.

U.S. Trade Representative Robert Zoellick has made opening up global trade in services a central plank of his strategy in the Doha round of WTO trade talks, which are meant to wrap up at the end of next year. Persuading the rest of the world to accept U.S. banks, insurers and overnight-delivery companies would be a boon to U.S. business, but promises to reciprocate in the U.S. are already raising the ire of environmental and labor groups.

The EU demands mirror those that the U.S. regularly makes on its trading partners to lift government rules that tend to favor domestic companies over U.S. competitors.

An area of chief concern to labor is the push by the EU and other countries to allow for the temporary movement of skilled and business personnel. This would ease restrictions on offshore outsourcing and hiring of workers offering services ranging from computer software to equipment maintenance and landscape architecture. Environmental groups, meanwhile, oppose efforts to open all water and sewage services to foreign competition.

The EU document also indicates that European officials may be ready to further challenge the requirement that businesses operating in the U.S. abide by U.S. accounting standards, as opposed to international standards used in Europe. The Securities and Exchange Commission has rebuffed several recent requests to allow the domestic use of international accounting standards, which critics say are overly subjective and lack clear rules. The EU, in its request to the U.S., calls this practice "a regulatory trade barrier" that must be resolved.

The EU also is requesting that the U.S. expand the cross-border sale of "large-risk" insurance services, a proposal that some experts say could weaken controls over insurers offering services to businesses or even individuals. The EU's earlier requests sought to open the U.S. market to foreign sales of mutual funds; the new document seeks to expand that to the sale of financial derivatives, especially futures.

Some of the previously known EU objectives could have a bigger effect on individual states. For instance, the EU wants to eliminate rules in 16 states that give state authorities the sole right to sell packaged liquor. The document also seeks to lift restrictions in nine states on foreign ownership of land and to remove certain residency and citizenship requirements for practicing law.

Some of the requests aren't likely to go far. For instance, the EU wants the U.S. drop its centuries-old prohibition on foreign ships moving cargo between U.S. ports, an unlikely move in these times of heightened security. The document also includes a request that the U.S. allow foreign companies and governments to acquire 100% ownership of U.S. radio stations. The EU also wants the U.S. Postal Service to cede its monopoly over bulk, first-class letter delivery.

The document containing the EU service sector requests was leaked by Public Citizen and the document is available from Public Citizen .