CRNM - Report On Tourism and Services
CRNM - Report On Tourism and Services
CRNM - Report On Tourism and Services
August 2003
Part III Negotiating options on tourism services for CARIFORUM WTO members in
the GATS negotiations ………………………………pages 22-30
The three negotiating options for CARIFORUM on tourism services
How should CARIFORUM respond to the requests received from WTO
members?
The barriers to market entry in the EU, US and Canada
The WTO negotiations to agree on disciplines for services subsidies
WTO negotiations to agree on guidelines for domestic regulations
Part IV “Offensive” negotiating requests for CARIFORUM in the EU, FTAA, and
Canada-CARICOM services negotiations ……………………pages 31-44
The scope of regional and hemispheric negotiations on tourism services
The negotiating recommendations for CARIFORUM on tourism services
- Horizontal requests affecting tourism services
- Sector specific requests on tourism services.
- Negotiating requests to implement Article IV of the GATS
- Development assistance and technical cooperation requests.
- Other requests to address some specific trading problems
Part V Priority actions at the CARIFORUM level to promote the tourism sector in
services trade negotiations …………………………………pages 45-50
The liberalisation of tourism inputs of goods and services in CARIFORUM states
Policy recommendations to support the growth of tourism
- The development of a regional policy on cruise tourism.
- The development of a regional definition for tourism, to be included within the
CSME and used in services trade negotiations.
- The need to upgrade the statistical capacity of CARIFORUM member states to
measure the impact of tourism on national economies.
- The need to facilitate the movement of tourists within CARIFORUM, and of
international tourism professionals entering the market on a temporary basis.
Actions to promote the tourism industry in services trade negotiations
Areas where further research is required
Selected Bibliography............................................................................................page 51
Annex I – Model Request on Tourism and Travel Related Services................page 52
Annex II – Objectives of the Caribbean Tourism Strategic Plan ......................page 56
Annex III – Terms of Reference for Study ..........................................................page 57
TEXT BOXES
Box 1.8: Customs Duty Free exemptions (“duty free limits”) for the
EU, US and Canada…………………………………………….page 37
Box 1.9: Should compensation from trading partners be sought for the costs
incurred by CARIFORUM hospitality training institutes? ........page 38
Box 1.10: Information technology and Tourism: CRS, GDS and the
Internet………………………………………………………….page 41
Box. 1.12: The 2002 ASEAN Regional Tourism Agreement: a model for
CARIFORUM?............................................................................page 47
LIST OF ACRONYMS
* The following are CARIFORUM member states: Antigua and Barbuda, The Bahamas, Barbados, Belize,
Dominica, The Dominican Republic, Grenada, Haiti, Guyana, Jamaica, St Christopher and Nevis, St Lucia, St
Vincent and the Grenadines, Suriname, Trinidad and Tobago.
This report sets out a regional negotiating strategy on tourism services in external trade
negotiations, and proposes negotiating recommendations to execute this strategy.
The member states of CARIFORUM1 are currently engaged in five sets of trade negotiations
that have a services component: the multilateral trade negotiations at the World Trade
Organisation (WTO) under the General Agreement in Trade in Services (GATS), the
negotiations for a Free Trade Area of the Americas (FTAA), the negotiations with the
European Union (EU) for Economic Partnership Agreements (EPAs), the bilateral
CARICOM-Canada and CARICOM-Costa Rica negotiations. All apart from the EU
negotiations are set to conclude by 1st January 2005, which is also the deadline for the
establishment for the regional services market under the CARICOM Single Market and
Economy (CSME).
One of the main challenges facing regional negotiators seeking to develop a regional
negotiating position on tourism services is the diversity of the industry within CARIFORUM
states. Although the sector is led by the hotel and accommodation sub-sector, a typical
tourism experience in a CARIFORUM destination can involve an almost infinite number of
direct and indirect services transactions across many economic sectors. These can include
transactions with airlines, hotels, guesthouses or private villas, car rental companies, water
and electricity services, restaurants, retail outlets, local taxis, water-sports companies, yacht
charter companies, marine transport companies, entertainers, tour guides, laundry service
providers, food suppliers, local banks, and telecommunications service providers. The ability
of CARIFORUM tourism destinations to compete internationally will depend on whether the
entire range of these services can be provided efficiently, at low cost and in a manner the
exceeds the expectations of incoming tourists.
From a public policy perspective, tourism cuts across many economic sectors, and many
ministerial portfolios. The sector’s diversity and fragmented nature complicates tourism
public policy planning at the national and regional levels. Tourism’s crosscutting nature also
means that trade negotiations in a whole range of goods and services sectors will have an
impact on the industry.
CARIFORUM states are a mix of emerging and developed tourism destinations. The pace of
growth among them also differs considerably. Tourism growth in the Dominican Republic
has outpaced its CARICOM neighbours, not least because of the lower operating costs that
make it the most price competitive destination within CARIFORUM. In contrast, tour
operator generated business in the Eastern Caribbean has been steadily declining. Different
tourism sub-sectors are also growing at different speeds across CARIFORUM. For example,
cruise tourism has displayed an upward trend in most CARIFORUM states.
1
In this report, wherever possible, and according to the terms of reference for this assignment, “CARIFORUM”,
refers to the member states of the Caribbean Community (CARICOM), and the Dominican Republic. It should
be noted that the memberships of both the Caribbean Tourism Organisation (CTO) and the Caribbean Hotel
Association (CHA) extend far beyond the CARIFORUM grouping.
In general terms, tourism is believed to account for one in every four Caribbean jobs.
According to World Travel and Tourism Council (WTTC) statistics for 2002, “tourism and
travel economy2” accounted for 47.4% of total employment in the Bahamas, but only 6.1% in
Haiti. Its contribution to GDP ranged from 71.7% in Antigua and Barbuda, 50.6% for St
Lucia but only 4.8% for Haiti.
The trading challenges currently facing the CARIFORUM tourism sector are numerous. They
include lack of adequate incoming air service due to low traffic density; the high operating
costs in most CARIFORUM states; variable levels of product quality and the reliance on
foreign direct investment (FDI) to improve this; low rates of return on investment which
discourages new FDI; the high cost of marketing in tourism generating countries; lack of
control over the product distribution channels for CARIFORUM tourism products which are
nearly all foreign-owned; and lack of access to affordable financing. These challenges were
exacerbated by recent global developments beginning with 9/11, but not caused by them. A
review of the performance record of CARIFORUM destinations in the period preceding 9/11
reinforces the view that tourism growth in some states was stagnating even before the
external events began to undermine global tourism demand and confidence in air travel.
To suggest that international trade negotiations on services can resolve all these issues would
be an exaggerated claim. However, participation in services trade negotiations should be an
important element of the regional tourism sector’s strategy to address these issues as outlined
in the June 2002 Caribbean Tourism Strategic Plan. Surprisingly, this regional master plan
for the tourism sector made no reference to participation in external trade negotiations. It is
therefore recommended that the Plan be amended to refer to participation in external trade
2
The WTTC’s “travel and tourism economy” statistics measure the broader economy-wide impacts, direct and
indirect, of travel and tourism.
Given the increasingly intense levels of global competition for the tourism dollar, this report
recommends that any CARIFORUM strategy on tourism services in international trade
negotiations must be driven by the general objective of gaining competitive advantage for
CARIFORUM tourism destinations over competing international destinations.
Besides this, the strategy seeks to attain the following specific objectives:
This report recommends that a clear distinction should be made between the negotiating
strategy on tourism services at the multilateral WTO level, and in regional or hemispheric
trade negotiations on tourism services (e.g. the EPA negotiations with the EU, the FTAA
negotiations and the Canada-CARICOM negotiations).
At the WTO multilateral level, the Most-Favoured Nation (MFN) principle means that
CARIFORUM states will be unable to negotiate specific concessions on tourism services for
their sole benefit. In practical terms, the MFN principle means that any market opening to
any WTO member must automatically be extended to all other WTO members. For this
reason, the report recommends that CARIFORUM’s more ambitious negotiating requests
should be reserved for regional and hemispheric negotiations (e.g. FTAA3, negotiations with
the EU, Canada-CARIFORUM), rather than multilateral trade negotiations on tourism
services under the GATS.
3
Securing concessions for the Caribbean alone will be possible in the negotiations with the EU and Canada
respectively. Whether this is possible within the FTAA, however, will depend on whether, and how, a “regional
MFN” will be applied among the FTAA signatories. This issue has yet to be resolved in the FTAA negotiations,
but CARICOM negotiators have been pushing for differential treatment for small states as a fundamental
principle in the final agreement. If this succeeds, CARICOM could submit negotiating requests to the US, for
example, for its sole benefit. An alternative would be to negotiate some of the negotiating requests in a side-deal
to the FTAA agreement (e.g. a Hospitality Service Providers Programme under Mode 4).
Tourism Services Negotiation Issues: Implications for CARIFORUM - August 2003 iii
E. A Mix of Defensive and Offensive Negotiating Re commendations
The proposed strategy is also a mix of defensive and offensive negotiating recommendations.
A major defensive element of the proposed strategy is the preservation of some tourism
related activities for regional service suppliers. Every CARIFORUM state preserves at least
some tourism-related services for national companies and local service suppliers. In some
countries, the preservation of some tourism sub-sectors for nationals is enshrined in national
legislation for tourism development. In others, this is unwritten policy. These services are
usually those that are within the investment capacity of CARIFORUM nationals. They
include small hotels of 75 rooms or less, water-sports services, diving services, tour guide
services, ground handling services, ground transport and marine transport services,
entertainment services, travel agent services, speciality restaurant services, and destination
management companies.
Some within the tourism sector have argued that service efficiency, rather than nationality,
should be the determinant of who provides these services. But preserving some tourism
activities for regional suppliers should be viewed as a response to the vertical integration of
developed country tourism service providers in CARIFORUM markets, which poses an
increasing threat to community involvement in the sector. It is no secret that tour operator
business strategy is now to control every transaction with the tourist, thereby maximising
margins and revenues.
It is therefore recommended that a list of tourism services that are currently preserved for
regional service suppliers be compiled, by Mode of Supply, to guide services negotiators.
Tourism is generally considered to be a sector where the linkages to other economic sectors
are low, and the leakages of tourism profits high. Reaching agreement on which tourism
services should be preserved for regional services suppliers could be a starting point for a
regional strategy to maximise the linkages between tourism and other economic sectors, and
for a strategy to ensure that the leakages of tourism profits does not accelerate.
A further defensive element to this strategy is to safeguard a measure of policy flexibility for
national governments to regulate their tourism sectors in the national interest. It is a paradox
that despite the liberalised nature of the tourism sectors of CARIFORUM states, government
remains at the heart of all decision-making regarding new entrants to the tourism market.
Although the preamble to the GATS recognises the right of developing countries in particular
to regulate their services sectors to meet national policy objectives, two current areas of
negotiation at the WTO could significantly constrain the policy space available. These are the
negotiations in the WTO Working Party on GATS rules to agree multilateral disciplines for
services subsidies, and the negotiations in the WTO Working Party on Domestic Regulation
(WPDR) to agree guidelines for domestic regulations for services. It is recommended that
both are monitored closely.
In terms of the export profile of CARIFORUM tourism services suppliers, most regional
tourism services supplie rs export their services through a combination of Modes 1, cross-
border supply (e.g. through Internet reservation systems, via a GDS, or through a tour
operator), and Mode 4, by visiting these markets to meet clients (e.g. at international tourism
trade fairs). Only a handful of companies sell their services by establishing a “commercial
Because most CARIFORUM tourism services suppliers “export” their services only when
foreign tourists enter CARIFORUM markets, they also rely heavily on Mode 2 trade,
“consumption abroad”. Proposals to remove the remaining Mode 2 restrictions that the EU,
US and Canada impose on their outgoing residents such as travel taxes and duty free limits -
which as “frontier formalities” are not currently within the scope of the GATS - are included
in a later section of this report.
The report also assesses the regulatory barriers for CARIFORUM tourism exporters seeking
to enter the EU, US and Canadian markets, as recorded in the GATS schedules of
commitments of these WTO members. For most tourism services suppliers, the commercial
barriers to entry in these markets are just as onerous, if not more so, than the regulatory
barriers as recorded in GATS schedules of commitments of WTO members. Commercial
barriers include the high cost of marketing and advertising, which is beyond the means of all
but the largest CARIFORUM hotel groups, and the difficulties that CARIFORUM SMEs
face in gaining access to the distribution channels that place tourism products on the EU, US
and Canadian retail markets (e.g. tour operators, airlines, CRS or GDS systems).
Concerning the regulatory barriers, Mode 4, the movement of service providing natural
persons, is the most restricted mode of supply for regional tourism services exporters. In this
regard, the report reviews the initial GATS offers of the EU, US and Canada on Mode 4. It
concludes that they do not improve access for lesser skilled service providers, a key area of
export interest for CARIFORUM states on tourism services, and offer no significant
improvement for higher skilled tourism professionals seeking to enter these markets on a
temporary basis.
To address this, the report recommends the following approach. Firstly, regional negotiators
should request at the WTO that tourism professionals with qualifications from the University
of the West Indies (UWI), the Pontificia Universidad Católica Madre y Maestra (PUCMM) in
the Dominican Republic, and the national hospitality training institutes within CARIFORUM
are included within the EU’s category of Contractual Service Suppliers (CSS); within
Canada’s list of “Professionals”; and within the US horizontal commitments on Mode 4.
Secondly, the report recommends that regional negotiators should submit more ambitious
Mode 4 requests on tourism services in regional and hemispheric trade negotiations, in the
form of requests for Hospitality Service Providers Programmes at both skilled and lesser
skilled levels.
CARICOM WTO members have yet to submit any formal proposals or negotiating requests
on tourism services within the GATS negotiations, which began in February 2000. As
CARICOM, and indeed CARIFORUM, is one of the most tourism-dependent regions of the
world, there is a clear rationale for the region to play a leadership role in framing the global
rules for the international trade in tourism services. The following three negotiating options
are presented:
1. Support the Dominican Republic-led proposal for a new GATS Tourism Annex.
The Dominican Republic’s proposal for a new Tourism Annex to the GATS highlights three
issues worthy of CARIFORUM’s careful consideration: the need for multilateral competitive
safeguards to counter anti-competitive practices in the international tourism sector; the need
to promote sustainable tourism development in the GATS, and the need to expand the
definition of tourism under the GATS agreement. It is recommended that CARIFORUM
support the first two issues, but only seek a wider GATS definition of tourism after a regional
definition for the sector has been agreed. A brief discussion of these three issues follows.
Anti-competitive practises between tourism services suppliers within the regional market can
only be addressed once a regional competition policy has been introduced under the CSME.
This means that CARICOM states do not yet have the legislative means to implement - in the
regional market - any new multilateral WTO provisions on anti-competitive practices in the
tourism sector. The potential for anti-competitive practices in the cross-border trade of
tourism services, between companies in tourist-originating markets and suppliers in tourist-
receiving countries, is increasing. This is a consequence of mergers and acquisitions in the
European and North-American airline and hospitality sectors. Further market consolidation
will concentrate the ownership of the distribution channels for the CARIFORUM tourism
product in the hands of an ever-decreasing number of companies in Europe, the US and
Canada. CARIFORUM services suppliers are particularly vulnerable to anti-competitive
behaviour on account of their weak bargaining power and small size. It is therefore
recommended that CARIFORUM WTO members support new multilateral provisions to
encourage a pro-competitive international trading environment for tourism, particularly
concerning the cross-border trade of tourism services.
Regarding the definition of tourism at the WTO, the GATS uses the Services Sectoral
Classification list (MTN.GNS/W/120 ), within which category 9 on “Tourism and Travel Related
Services” consists of the following: A. Hotels and restaurants, including catering, (CPC 641-
643); B. Travel agencies and tour operators services (CPC 7471); C. Tourist guides services
(CPC 7472); D: Other. Almost every WTO member that has submitted a negotiating proposal
on tourism has recognised the inadequacy of this classification. But there is no consensus
after two years of discussions on how best to amend this.
CARIFORUM WTO members would be in a stronger position to push for changes to the
classification of tourism at the multilateral level if a definition for tourism had been agreed
within the region. This should be the starting point on this issue, and the development of a
regional definition for tourism is therefore recommended. If possible, this definition should
be included in the agreement to establish the regional services market under the CSME. A
regional tourism definition would guide public policy tourism planning at the national and
regional levels. It would also be useful to guide regional negotiators in all services trade
negotiations. Through the development of a regional tourism definition, the tourism sector
could also emphasise the diversity of its product offering by including cultural events and
heritage tourism (e.g. carnivals and festivals) and other unique selling points.
It has been recently suggested that cruise ships services should be re-classified under the
GATS as a “tourism and travel related service”, rather than a “maritime transport service”.
The cruise ship sub-sector is believed to be the only economic sector where the Caribbean is
the leading global market. The Cruise Lines International Association (CLIA) noted in 2002
that “the Caribbean represents the number one destination with almost 47% of capacity
placement”, followed by Europe, the Mediterranean, Alaska, Mexico, Hawaii and South
America.
This report recommends that cruise ship services should be re-classified under the GATS as a
“tourism and travel related service”, given the increasing importance of cruise ships to
Caribbean tourism economies and the impact of their activities on land-based tourism sub-
sectors (e.g. hotels, tours, attractions, entertainment etc). Cruise ships compete directly with
the land-based hotel and accommodation sub-sector. They also control access to the tourist
for many services and goods suppliers in CARIFORUM states (e.g. tour guides, entertainers,
arts and crafts salesmen, retail outlets etc.) either by selling goods and services onboard, or by
directing passengers to preferred retail outlets or service providers onshore. While there are
diverging views on the benefits of cruise tourism to CARIFORUM destinations, it is evident
that cruise tourism is a key element of the Caribbean tourism economy. The re-classification
of cruise ships will be easier to achieve at the WTO if cruise ships are included within a
regional definition of tourism.
However, in regulatory terms, the re-classification of cruise ships under the GATS will have
little practical effect on the ability of CARIFORUM WTO members to regulate their
activities in the region. Governments are already free to include market access or national
treatment limitations on cruise ships in their GATS commitments on maritime transport
services, should they wish to do so. A further recommendation is that regional negotiators
seek clarification at the WTO where the regulatory authority for cruise ships lies, given that
Tourism Services Negotiation Issues: Implications for CARIFORUM - August 2003 vii
most operate under flags of convenience (some under Caribbean flags of convenience). This
highlights the anomalous position of cruise ships within the world trading system.
The Uruguay Round GATS commitments made by CARIFORUM - and other - WTO
Members on tourism services had no liberalising impact. They were essentially “standstill
commitments” that reflected, or were less than, the actual prevailing level of market access
and national treatment for foreign services suppliers. But this is now changing. WTO
members, including the US, are now making negotiating requests to CARIFORUM WTO
members for improved commitments that go beyond the prevailing level of liberalisation.
The report recommends an approach to guide CARIFORUM WTO members as they respond
to the sectoral negotiating requests on tourism services received from their trading partners in
the GATS negotiations. Whereas the EC has presented tailored negotiating requests to each
CARIFORUM state taking into account their varying levels of commitments on tourism
services, the US has presented a standardised request to all CARIFORUM states. The EC4
requests are the more benign of the two.
The following approach is recommended for CARIFORUM WTO member states when
responding to negotiating requests on tourism services from WTO trading partners:
i. Make full GATS commitments (i.e. schedule “none”) in areas where further
investment is required from trading partners such as large hotels, or where access to
high quality services is required by the tourism sector. For example, the former could
be achieved by listing “none” for Mode 3 commitments for hotels. One example of
the latter is environmental services, a key area of offensive negotiating interest for the
US and EC in the GATS. Access to these services is essential for sustainable tourism
development, and CARIFORUM has limited capacity in this services sector.
ii. Make “defensive” GATS commitments in tourism services sectors that are currently
preserved for national or - after 2005 and the launch of the CSME - regional services
suppliers. This will involve listing additional market access and national treatment
limitations for five sub-sectors included in the GATS classification list for Tourism
and Travel services (W/120, 9 A-D): travel agent and tour operators services, the
construction and development of small hotels, certain types of restaurants, and tourist
guide services. CARICOM states are removing restrictions on these services to
liberalise the trade in services on a regional basis within the CSME by 2005. Any
early market opening to suppliers from third countries such as the EU, US and Canada
would deny regional tourism services suppliers a transition period to first adapt to
increased competition within CARICOM.
4
The EU is more aggressive in its horizontal requests to CARIFORUM states (e.g. the request that Barbados
“eliminate” the Property Transfer Tax that foreign investors must pay when disposing of or acquiring an asset).
Tourism Services Negotiation Issues: Implications for CARIFORUM - August 2003 viii
J. “Offensive” Negotiating Recommendations for CARIFORUM on Tourism
Services in the FTAA, EU and Canada-CARICOM Negotiations
It is assumed that the final agreements on services resulting from the FTAA, CARIFORUM-
EU and CARICOM-Canada negotiations will contain two elements: a set of guidelines and
priorities between the contracting parties; and a schedule of specific commitments. In all
cases, regional negotiators should seek to insert language that recognises tourism’s
development potential for small economies in particular, and that positions the industry as a
recipient of technical and financial assistance under EDF, USAID or CIDA funding facilities.
The following negotiating recommendations are proposed. They are grouped into horizontal
requests, sectoral requests, requests to implement GATS Article IV, development assistance
requests, and other requests to address specific trading problems.
1. Reduce costs and facilitate access to visas for the temporary entry of CARIFORUM
tourism professionals wishing to enter the EU, US and Canadian markets to supply
services.
2. Include tourism professionals, with tertiary level hospitality qualifications from UWI,
PUCMM and national hospitality institutes, within criteria established for the
temporary entry of “professionals” or “business visitors”.
3. Establish programmes within the EU, US and Canada to recognise tourism
professional qualifications and credentials developed in CARIFORUM states.
4. Review EU, US and Canadian legislation relating to health and safety standards in the
hospitality sector that are applied to CARIFORUM hoteliers – a Mode 1 request.
5. Introduce tax incentives for EU and Canadian businesses holding conferences or
conventions in CARIFORUM countries – A Mode 2 request.
6. Reduce travel taxes imposed on EU, US, and Canadian tourists travelling to
CARIFORUM states to consume tourism services. A Mode 2 request.
7. Increase duty-free exemptions for EU, US and Canadian returning residents, and
make information available to all tourists, including cruise ship passengers, making
purchases in CARIFORUM states for personal or household use. A Mode 2 request.
10. The introduction of market access contact points for the Mode 4 export of
CARIFORUM tourism services in the European, US and Canadian markets.
11. Provide small airline carriers from tourism-dependent regions with affordable access
to European and US Computer Reservations Systems (CRS) and Global Distribution
Systems (GDS).
12. Enhance interface possibilities of CARIFORUM reservation systems - such as
CHARMS and the Go Caribbean online booking engine - with GDS and online
reservation systems, and increase their visibility in the tourism Internet marketplace.
13. The establishment of Web sites to identify market access opportunities in tourist-
generating markets for small hoteliers and tourism services suppliers.
14. Establish government-to-government consultation mechanisms to ensure that
CARIFORUM governments are consulted prior to the issuance of travel warnings.
15. A programme of assistance for Internet marketing strategies for small hotels.
16. Technical and financial assistance to CARIFORUM states to introduce Tourism
Satellite Accounts (TSA).
17. Provide technical support to CARIFORUM services providers wishing to establish
commercial presence in the EU, US and Canadian markets
18. Encourage partnership programmes between CARIFORUM hospitality training
institutes and their counterparts in the Europe, the US and Canada.
19. Establish a programme with unallocated EDF resources to increase air services to
small, tourism-dependent states within CARIFORUM5.
20. Request that the US exercises stronger oversight control over US exports of food and
other inputs for the CARIFORUM tourism industry to ensure that old stocks are not
being dumped on CARIFORUM markets.
21. Introduce specific measures to expand insurance coverage for the CARIFORUM
tourism sector, and to reduce costs.
22. Request that EU, Canada and the US approve the portability of health insurance
policies in order to cover spa, rehabilitation, and chronic care services provided to
their nationals in CARIFORUM states (request on health tourism services).
5
This builds on a World Tourism Organisation (WTO-OMT) proposal to address “aviation market failure, and
with it tourism market failure” in Least Developed Countries, submitted to the Worldwide Air Transport
Conference in Montreal, Canada (24-29, 2003). The WTO-OMT referred to existing national and regional
programmes in the EU and US to strengthen “distressed market failure regions,” such as the US Essential Air
Services System. These were based on the provision of substantial central funds for “supplemental payment to
airlines willing to operate under special licenses to such regions”. It is discussed in more detail in Part Four of
the report.
The tourism sector is the major consumer of goods and services in many CARIFORUM
states. The industry is dependent on a range of inputs of goods and services, including both
public infrastructure services (e.g. airports, transport and public utilities), and privately traded
services (e.g. hotels and restaurant services, insurance services). Further liberalisation of
some of services inputs into the tourism product could help the industry to achieve cost
efficiencies, a prerequisite for increasing competitiveness.
Compared with the global competition, CARIFORUM destinations – apart from the
Dominican Republic – are now considered high cost destinations. As the President of the
Caribbean Development Bank (CDB) recently stated, “To put it starkly, CARICOM
destinations are pricing themselves out of the market” 6. From a services trade negotiating
perspective, the CARIFORUM tourism sector would support further liberalisation in the
following services, all of which are major inputs into the tou
rism product, if this leads to more efficient services at lower cost:
Concerning goods, tariff reductions on the following tourism inputs have been identified as
being of particular benefit in lowering the operating costs of the hotel and restaurant sub-
sector: furniture and linen, pasta, wines and spirits, bar and kitchen equipment (e.g. chillers
and freezers) and specialty meats, fish and shellfish.
It is also important to note that the design of the regional services market under the CSME
affects the negotiating recommendations in a number of ways. One example is that
CARICOM requests for greater Mode 4 market access for lesser skilled service providers in
the tourism sector – a key area of competitive advantage for CARIFORUM states - may be
constrained by the scope of the CSME Protocol II provisions on the free movement of labour.
These provide for the temporary movement of only qualified labour within CARICOM states.
As a result, CARICOM requests for enhanced Mode 4 market access for lesser skilled
6
Some thoughts on tourism, address by Dr. Compton Bourne, President, Caribbean Development Bank (CDB),
October 21 st, 2002.
7
Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public
Sector Interventions, P. Auffret, World Bank Policy Research Working Paper 2963, January 2003.
The report has also sought to identify some policy recommendations for CARIFORUM states
to support the future growth of the tourism sector. These are:
i. The development of a regional policy towards cruise ships and the tourism sector.
ii. The development of a regional definition for tourism, to be agreed before 1st January
2005 and to be included within the CSME.
iii. The need to upgrade the statistical capacity of CARIFORUM member states to
measure the impact of tourism on national economies.
iv. The need to facilitate the movement of tourists within CARIFORUM, and of
international tourism professionals entering the market on a temporary basis.
v. The need to treat tourism as an export industry, including within national taxation.
Finally, the report identifies the following actions whereby regional negotiators could seek to
promote the tourism sector within services trade negotiations:
L. Timing
Despite the fact that international trade negotiations normally move at only a glacial pace,
urgent action is now required by tourism stakeholders to promote the industry’s interests. The
GATS and FTAA negotiations have now reached advanced stages. The deadlines for
completing most of the trade negotiations that CARIFORUM states are engaged in are
colliding around 1st January, 2005. This is also the date for the launch of the regional services
market under the CSME. What this means is that there is now little time to execute the
recommendations outlined in this report. A successful outcome will require a significant
commitment from both the public and private sectors for the next three years. It will be
greatly facilitated if a public-private consensus can rapidly be reached on the objectives of the
proposed recommendations.
Tourism Services Negotiation Issues: Implications for CARIFORUM - August 2003 xii
PART I AN OVERVIEW OF CARIFORUM TOURISM
Some brief highlights of the recent performance of the industry are presented in this
introductory section, and areas of growth and decline are highlighted. Finally, a brief
summary of the global context and regional responses to the current crisis in international
tourism is presented.
The Caribbean is regarded as the most tourism-dependent region of the world, and the
industry is believed to account for one in every four jobs. Some CARIFORUM destinations
are well established in the international market place, such as Antigua, Jamaica and St Lucia.
Others, such as Belize, Guyana, Suriname, and Trinidad and Tobago, have only recently
begun to aggressively promote tourism as a source of economic growth and development. As
one would expect tourism’s importance to national economies differs greatly across
CARIFORUM states.
The pace of tourism sector growth differs substantially across CARIFORUM states. In recent
years it has been the Hispanic Caribbean, led by Cuba and the Dominican Republic, that have
seen the rapid expansion of the tourism sectors through an aggressive pursuit of the mass
tourism market principally through “all-inclusive” packaged holidays. Tourism growth in the
Dominican Republic has outpaced its CARICOM neighbours. A relative latecomer to
tourism, annual international arrivals to the Dominican Republic grew at three times the
Caribbean average at 10%, between 1995 and 20008. The Dominican Republic is the most
price competitive destination with significantly lower operating costs than its CARICOM
neighbours, particularly labour costs.
The OECS states have seen little new investment in their hotel and accommodation sector
during the last decade, as well as a reduction in tour operator generated business. According
to the Caribbean Strategic Tourism Plan, “Major tour operators have all but ceased operating
to the Caribbean, other than Cuba the Dominican Republic and Jamaica. The Eastern
Caribbean countries have been the major casualties of these developments.9”
The three leading markets for CARIFORUM tourism are the US, Europe and Canada. In
2002, Europe was the leading source of tourists for Antigua and Barbuda, Barbados and the
Dominican Republic. In the same year, the US was the principal market for the Bahamas,
Belize, Cayman Islands, Guyana, Jamaica, St Lucia and Trinidad and Tobago. Grenada and
St Vincent and the Grenadines attracted almost equal amounts of European and US tourists.
In all CARIFORUM tourism destinations apart from Guyana, Canada is the third largest
market after either Europe or the US10. Whereas the European market is highly packaged, the
“Free, Independent Traveller”, who is more inclined to package his/her own vacation
8
Source: World Tourism Organisation, http://www.world-tourism.org/market_research
9
Source: Caribbean Tourism Strategic Plan, Revised Draft Report, June 10, 2002.
10
CTO Latest Statistics 2002. April 11, 2003.
According to CTO, the growth in intra-Caribbean tourism slowed in 2001, but this market
remains particularly important for Dominica Guyana, St. Christopher and Nevis, St Vincent
and the Grenadines, Trinidad and Tobago. In these countries, the Caribbean market
accounted for as much as half of the total tourists in 2001.
There are also important structural differences across CARIFORUM tourism destinations, not
least in relation to the size of the industries. For example, in 2001 just over two-thirds of all
tourist arrivals to CARICOM countries (66.5%) were to three countries: the Bahamas,
Barbados and Jamaica11. The issue of scale is further emphasised by a comparison of the
hotel and accommodation tourism sub-sectors within CARIFORUM, particularly room
capacity. In the Bahamas, one foreign owned-hotel has the same number of rooms (2,500) as
the total room inventories of St. Christopher and Nevis (1,754) and Guyana (730) combined.
Yet the Bahamas also contains a small number of locally owned hotels and private villas. In
Belize, the average size of hotel is no more than ten rooms: Belize’s room inventory consists
of 4,000 hotel rooms spread between 400 hotel and lodging establishments.
Levels of foreign ownership within the hotel and accommodation sub-sector also vary
considerably across CARIFORUM, although most larger hotels - more than seventy-five
rooms - have significant levels of foreign capital. Tourism is capital intensive, and requires
large expenditures both to construct and operate hotels. These levels of capital are usually
only available internationally and CARIFORUM companies – with one or two Jamaican and
Dominican exceptions – have difficulty raising these funds in international markets.
In recent years, most CARIFORUM destinations have sought to diversify their product
offerings beyond the traditional “sun, sea and sand” beach tourism. Some destinations place a
stronger emphasis on attracting business tourism (e.g. Trinidad and Tobago) or eco-tourists
(e.g. Guyana, Suriname, Belize) while others are more oriented to all-inclusive holiday
experiences packaged by tour operators (e.g. Bahamas, Dominican Republic, Jamaica).
However, this characterisation is too simplistic as many CARIFORUM destinations currently
offer multifaceted tourism experiences that often combine beach tourism with eco-tourism,
heritage and cultural tourism (e.g. carnivals), and sports tourism (e.g. golf, scuba diving).
The growth of cruise tourism to many CARIFORUM states has recently outstripped the
growth of land-based tourism. For example, Belize experienced a staggering 564% increase
in cruise passenger arrivals in 2002 compared to 200112. In contrast, both Antigua and
Barbuda and St Lucia experienced a decline in the number of cruise passenger arrivals in
2002 of 25% and 21% respectively. The importance of cruise tourism also differs markedly
across CARIFORUM member states. In 2001, the Bahamas received 17.1% (2.552 million
arrivals) of the total number of arrivals of all of Caribbean Tourism Organisation (CTO)
11
CTO statistics for 2001.
12
Source: Belize Tourist Board. This figure compared to a 1.8% increase in tourist arrivals.
While some CARIFORUM states have already developed gaming tourism sub-sectors (e.g.
Antigua and Barbuda 13, Bahamas, Dominican Republic), others are considering carefully the
impact of gaming on local societies and the response of religious communities. The
Association of Caribbean States (ACS) has recently formed a consultative committee on
Multi-destination tourism in the Greater Caribbean14, chaired by the Caribbean Tourism
Organisation (CTO) and multi-destination programmes will be developed in collaboration
with small hotels, regional airlines and regional tour operators.
Cultural tourism, including festival and carnival tourism, is also considered as area of
potential growth for some CARIFORUM destinations. Many CARIFORUM states (e.g.
Jamaica) are already marketing their destinations on the basis of annual programmes of
events relating to the arts, music festivals, and religious festivals. The Trinidad Carnival
received 35,000 visitors in 2003, the highest ever inflow of tourists for a Caribbean festival.
13
In late March 2003, the Government of Antigua and Barbuda requested WTO consultations with the US on
proposed measures, contained in the “Leach Bill”, affecting the cross-border supply of gambling and betting
services. The Bill would criminalise the use of financial instruments, such as credit and debit cards, for debts
incurred in Internet gambling. It would enable state and federal attorneys to request that injunctions be issued to
any party, such as a financial institution or Internet service provider, to prevent this type of crime. Officials in
Antigua and Barbuda maintain that the Leach Bill, if adopted, could result in the closure of 40 Internet casinos
and some 800 job losses, as well as a loss of $2.2million in annual licensing fees. The dispute could escalate
into the first ever WTO challenge under the GATS agreement. (US threatened with WTO Dispute case over
online gambling restrictions, International Trade Daily, March 24, 2003L;United States: Measures affecting the
cross-border supply of gambling and betting services (Brought by Antigua and Barbuda): 27 March 2003,
World Trade Organisation (WTO), WT/DS285/1 S/L/110).
14
Report on the ACS Consultative Committee on Multi-destination tourism in the Greater Caribbean, Port of
Spain, Trinidad and Tobago, February 27 th 2003.
It should be noted, however, that international tour operators also face strong competitive
pressures in their own markets, and it is the highly competitive consumer markets for
package holidays that drive them. So much so that it has been estimated that if prices to one
destination increase in relation to its competitors by 1%, then bookings to that destination
will fall by 3-5% 17. As the table below shows for selected EU states, profit margins for tour
operators are not high. In response, major tour operators have been buying into all elements
of the tourism value chain so as to maximise margins and revenues through vertical
integration. Against this background, the only route for CARIFORUM hotels to obtain
greater control over pricing is to develop a higher quality product and move out of the
commodity tourism market.
BELGIUM GERMANY UK
15
The hoteliers of one resort in the Dominican Republic, Bayahibe, have devised a collective negotiating
strategy in response to pressure from tour operators to lower prices. They have agreed not to lower prices below
specific rates. This collective approach to pricing is probably unique within CARIFORUM.
16
For a discussion of tour operator-led tourism development, see Competitividad del Turismo en Republica
Dominicana, Vial, Brown and Seward, August 2002.
17
The changing structure of international trade in tourism services, the tour operator perspective. Alain Flook,
Secretary General of the International Federation of Tour Operators (IFTO). Presentation delivered to the WTO
Symposium on Tourism Services, Geneva 22-23 February 2001.
18
Ibid.
Tourism is generally considered to be a sector where the linkages to other economic sectors
are low, and the leakages19 of tourism profits high. Estimates vary but tourism leakages have
been reported to be as high as 85 percent for African Least Developed Countries (LDCs), 80
percent in the Caribbean, 70 percent in Thailand, and 40 percent in India (UNEP)20. Yet even
this situation also differs from country to country within CARIFORUM. Some destinations
have had more success than others with integrating tourism with other sectors of their
economies and retaining tourism rents. Jamaica has made some progress in linking domestic
agricultural production with the local market created by international tourism. All chicken
products, fruits and vegetables for tourism consumption are sourced locally in Jamaica.
However, CARIFORUM states have yet to devise a regional strategy to minimise the high
levels of foreign exchange leakage from tourism caused by the levels of foreign ownership of
the sector.
I.7 All CARIFORUM Destinations Preserve Some Tourism Activities for Local
Companies
As well as structural differences among destinations, there are also some commonalities
among CARIFORUM tourism sectors. The most important for the purposes of this report is
that every CARIFORUM state preserves at least some ancillary services for national
companies and local service suppliers. In some countries, the preservation of some tourism
sub-sectors for nationals is enshrined in national legislation for tourism development. In
others, this is unwritten policy.
These services are generally those within the investment capacity of CARIFORUM nationals.
The most common that are preserved for nationals include water-sports services, diving
services, tour guide services, ground handling services, ground transport and marine transport
services, entertainment services, travel agent services, restaurant services, destination
management companies, some retail services related to tourism, and hotel development
services for hotels of 75 rooms or less.
It is not always the same services that are preserved for national suppliers in each country.
For example, not all CARIFORUM states share Trinidad’s interest in preserving marina
developments of 100 berths or less for Trinidadian nationals, which reflects Trinidad’s recent
success in developing a reputation for yacht repair and maintenance services. More
commonly, many CARIFORUM states preserve travel agent services, ground transport
services and tour guide services for local companies. Most CARIFORUM travel agencies
deal with out-bound tourism, including the important “VFR” market (CARIFORUM
nationals visiting friends and relatives), rather than the much greater in-bound tourism
market.
19
According to UNCTAD (1998) “Leakages are a major obstacle to the positive contribution of tourism to
development. Leakage is a process whereby part of the foreign exchange earnings generated by tourism, rather
than being retained by tourist-receiving countries, is either retained by tourist-generating countries or remitted
back to them. Leakages can take the form of profit, income, and royalty remittances; payments for the import of
equipment, materials, and capital and consumer goods to cater for the needs of international tourists; the
payment of foreign loans; various mechanisms for tax evasion; and overseas promotional expenditures”.
20
Using Cluster-based Economic Strategy to minimise tourism leakages, Golub, Hoiser and Woo., 2002.
Paragraph 25. Paper prepared for World Tourism Organisation (WTO-OMT) Working Group on Liberalisation.
With a few notable exceptions, the majority of CARIFORUM service suppliers are Small and
Medium Sized Enterprises (SMEs). CARIFORUM SMEs provide services to the regional
tourism sector (e.g. entertainers, ground and marine transport companies, water-sports and
dive operations, accounting services, security services, plumbing and maintenance services,
garden and pool maintenance services) and also represent a substantial percentage of the
small hotels and lodgings sub-sector. A United States negotiating proposal on “Small and
Medium-Sized Services Enterprises” in the GATS negotiations (TN/S/W/5 of 1 October
2002) defines small services enterprises as having up to a hundred employees, total assets of
up to US$3million and total sales of up to US$3million. Against this definition
CARIFORUM-owned tourism services suppliers would be classified as either “micro”
enterprises or “very small”.
Paragraph 3 of the Guidelines and Procedures for the GATS services negotiations (S/L/93) at
the WTO states that “due consideration should be given to the needs of small and medium-
sized service suppliers, particularly those of developing countries”. It is up to the
CARIFORUM tourism sector to respond to this opportunity by formulating trade negotiating
requests that would take advantage of the willingness of WTO members to address the needs
of SMEs in the GATS negotiations.
I.9 CARIFORUM Destinations Have Little Control over the Product Distribution
Channels
A major issue for the industry is that the distribution channels for the CARIFORUM tourism
product are controlled by a limited number of international companies. The number of
intermediaries who control these channels has been steadily decreasing due to mergers and
market consolidation in the main markets for CARIFORUM tourism: Europe, the US and
As a consequence, most CARIFORUM tourism service providers have only indirect market
access through wholesalers or intermediaries to the principal tourist generating markets. This
is a major constraint to the increase of tourism exports via Mode 1, “cross-border supply”.
Although the Internet has provided an alternative and cheaper distribution channel for the
supply of tourism services, where better prices can be obtained by cutting out commissions to
intermediaries and wholesalers, the number of online bookings by foreign tourists is still
small compared to tourism products packaged by international tour operators.
Tourism is already the most liberalised economic activity within CARIFORUM states.
Governments have introduced a wide range of incentives and concessions to attract foreign
investors (e.g. duty free exemptions for certain tourism inputs, tax holidays etc). These
government incentives go far beyond the commitments required under the GATS agreement.
They also mean that in some cases, larger international investors receive more preferential
treatment from government, in the form of incentives, than smaller locally owned companies:
an inversion of the normal situation regarding “national treatment”.
It is a paradox that despite the liberal nature of the sector, government remains at the heart of
all decision-making regarding new entrants into the CARIFORUM tourism sector. The sector
is heavily regulated in CARIFORUM states. Governments control the entry of new foreign
companies into CARIFORUM markets through the issuance of licences or permits (e.g. in
Trinidad and Tobago, any investment over one acre requires a licence), or other forms of
regulatory control such as economic needs tests. Within a WTO context, many of these
restrictions have not been inscribed in the GATS schedules of CARIFORUM WTO
members.
A review of the GATS commitments of CARIFORUM WTO members also shows that
CARIFORUM states did not adopt a common regional approach to scheduling in the
Uruguay Round services negotiations. CARIFORUM WTO members have also made
21
This has led to calls for the development of a regionally-owned tour operator or wholesaler. However, serious
doubts have been expressed about the viability of this proposal.
22
According to ICAO, “There were more than a dozen major CRS vendors in 1993, now there are only four
mega-CRSs” (Source: ICAO presentation at WTO Symposium on Tourism Services, 22-23 February 2001.
I.11 The Global Context for Caribbean Tourism and the Regional Response
Recent global developments have emphasised the fragility of the Caribbean tourism sector to
external economic shocks. The WTTC suggested that September 11 th alone caused a loss of
365,000 jobs in the Caribbean. Levels of global insecurity increased again during the build-
up to the war in Iraq and the terrorist attacks in Kenya and Bali, two leading developing
country tourism destinations. These events have further undermined global confidence in air
travel, with disastrous consequences for international airlines and the tourism industries that
they service, including the Caribbean. In parallel, weak economic growth, recession and
stagnating equity markets in the United States, Europe and Canada have continued to dampen
the demand for Caribbean tourism in the main tourist-generating markets.
The response of the Caribbean tourism industry to the sequence of external shocks that began
with 9/11 has been to cut costs, discount rates - and margins - and accelerate the introduction
of promotional campaigns such as “Great Places of the Caribbean” and “Life needs the
Caribbean”. Efforts have also been made to market the region as a safe tourism destination in
the hope that this will offset the downturn.
At a public policy level, the major regional response was the agreement on a new regional
Caribbean Tourism Strategic Plan. The plan was mandated by CARICOM Heads of
Government at the December 2001 Regional Summit on Tourism in The Bahamas. At that
Summit, Heads of Government and the regional private sector recognised the need for a ten
year (2002-2012) Caribbean Tourism Strategic Plan to re-position the Caribbean hospitality
industry through a combination of priority short-term recovery actions and long-term
development measures with appropriate funding. A key element of the Plan was an
agreement to market the Caribbean as a single destination. The objectives of the Plan are
listed in an Annex to this report.
Surprisingly, the Caribbean Tourism Strategic Plan made no mention of international trade
negotiations on services, including tourism services. As this report will show, this may have
been an oversight given that many of the negotiating recommendations proposed on tourism
services could help to attain the ten agreed objectives.
The WTO negotiations on services under the GATS Agreement began in February 2000. The
“request-offer” process began with the deadline of 30 June 2002 for the submission of
negotiating requests by WTO members. The deadline for making initial offers in response to
these requests was 31 st March 2003. However, these deadlines have been missed by a
majority of the WTO membership. By early April 2003, only 30 developing countries had
presented their services requests. None had presented offers.
During the initial phase of the GATS services negotiations (January 2000 – June 2002),
several WTO members presented general negotiating proposals on tourism services. Almost
all recognised the inadequacy of the current definition of tourism under the GATS. The
GATS uses the Services Sectoral Classification list (MTN.GNS/W/120). Category 9 of this
defines “Tourism and Travel Related Services” as: “A. Hotels and restaurants (including
catering), CPC 641-643”; “B. Travel agencies and tour operators services, CPC 7471”; “C.
Tourist guides services, CPC 7472”; and “D: Other”.
This section of the report is divided into four parts: a summary of the negotiating proposals of
WTO members in the GATS negotiations; an overview of the responses of WTO members to
the Dominican Republic’s GATS tourism Annex proposal; an assessment of the some of the
issues raised by the Annex proposal; the negotiating options for CARIFORUM on tourism in
the GATS negotiations.
The following is a summary of these proposals, beginning with the Dominican Republic-led
proposal for a new GATS Annex on Tourism, and the EC’s response to this.
Towards the end of the preparatory process for the Seattle WTO Ministerial Conference, the
Dominican Republic, El Salvador and Honduras tabled a proposal on “the need for an Annex
on tourism” on 14th October 1999 (WT/GC/W/372, S/C/W/127). The proposal noted that the
World Tourism Organisation (WTO-OMT) had called for a GATS Annex on Tourism “that
could better handle the specificities of the sector during and after the next round of services
negotiations”. The co-sponsors submitted a draft text for a new GATS Annex on tourism. In
addition, the following rationale was provided:
- the current GATS definition made it impossible to deal with tourism as a cluster in
line with the wider definitions of tourism adopted by the United Nations and WTO-
OMT;
- it was not possible to monitor liberalisation nor compliance with commitments to
meet GATS Article IV on “Increasing Participation of Developing Countries”;
- a GATS “request-offer approach would fail to eliminate the barriers to the trade in
tourism services especially in related services areas such as transportation services
and travel distribution services;
- new GATS provisions were needed to deal with the trade implications of anti-
competitive conduct in the tourism sector.
The European Communities (EC) (S/CSS/W/5 of 28 September 2000) was the only WTO
member to formally submit a reaction to the proposed Annex. Although the EC stated is
support for “the main intentions” of the proposal, it did not explicitly endorse the
establishment of a new Tourism Annex to the GATS. The EC agreed with the treatment of
tourism as a cluster “so long as the cluster approach is seen as a “checklist” to be used in the
negotiations to assist negotiators in identifying optimum proposals for effective and
complementary liberalisation related to the sector”.
The EC therefore attached a shorter “tentative checklist” to its submission entitled “Core
Tourism and Tentative Tourism Checklist”. This listed thirty-two services sectors, in addition
to the four “core tourism sectors and sub-sectors” which are the existing GATS classification
for tourism (W/120, Chapter 9). It suggested that WTO members should use this as an Aide
Memoire to guide them in the GATS negotiations. The EC viewed the listing of sectors put
forward by the sponsors of the Annex proposal as “too broad”. It also noted that air transport
services was currently excluded from the GATS negotiations, and that some of the issues
raised by the sponsors could be better addressed in the WTO’s Working Party on Domestic
Regulation (WPDR).
The EC did suggest, though, that two issues raised by the sponsors should be further
considered: tourism and sustainable development, and competitive safeguards. On
competitive safeguards, the EC suggested assessing the “basic telecommunications additional
commitments” and their relevance to the “core tourism sector”. On sustainable tourism
development, the EC stressed the importance of access to high-quality environmental services
– a key offensive negotiating interest for the EC (and US) in the GATS negotiations.
The Dominican Republic, El Salvador and Honduras responded to the comments received
(S/CSS/W/9 of 27th October 2000), and expanded on several areas of their proposal. On
competitive safeguards, they defended their proposal by referring to the “bewildering series
of mergers and take-overs of tour operators and airlines” that had placed tourism destinations
“at the mercy of abuse of a dominant position”. They were proposing a “sectoral solution
closely based on the precedent set by basic telecommunications”. On sustainable
development, the sponsors re-affirmed their proposal that WTO members take binding
commitments to apply internationally agreed standards on sustainable tourism development.
The sponsors also noted that “a large number of delegations have expressed concern at the
extensive sectoral coverage” that was proposed. In response, the Dominican Republic, joined
by El Salvador, Honduras, Panama and Nicaragua (S/CSS/W/19), submitted a further
communication two months later entitled “The Cluster of Tourism Industries”. This listed
Almost two years after the original proposal had been tabled, the Dominican Republic, El
Salvador and Honduras were joined by new co-sponsors Bolivia, Ecuador, Panama, Peru and
Venezuela in tabling a revised proposal for a “Draft Annex on Tourism” (S/CSS/W/107 of 26
September 2001). The Appendix to the proposal was entitled “The Tourism Industries”.
Again the list of ninety-four “tourism characteristic products” was set out, this time with
their United Nations Central Product Classification Codes (CPC).
New emphasis was placed on safeguards to prevent anti-competitive practices such as the
discriminatory use of information networks, abuse of dominance through exclusivity clauses,
or misleading or discriminatory use of information.
The United States tabled a negotiating proposal on “Tourism and Hotels” (S/CSS/W/31) on 18
December 2000. The focus of the US proposal was to “focus on ways to help generate
investment for tourism by removing obstacles to the establishment and operation of hotels
and other lodging places; and by reducing the problems faced by organisers of international
conferences and conventions”. The US invited WTO members to inscribe in their schedules
“no limitations” on market access and national treatment under “A. Hotels and Restaurants”.
The proposal also suggests that all WTO members should “consider undertaking additional
commitments relating to travellers and international conferences”. The US also proposed that
“a reference paper” be drafted to “address problems faced by travellers and organisers of
international conferences and conventions to make it easier for travellers to visit and make
purchases in other countries; and to reduce the problems faced by organisers of international
conferences and conventions”.
The main body of the US proposal is a list of thirty obstacles to the trade in tourism and hotel
services. The first obstacle listed is “overly burdensome exit fees or fees, or similar
restrictions on the departure of outbound travellers”. Others listed include: “unavailability of
information for travellers on applicable duty-free allowances for returning residents”;
“limitations on the purchase or rental of real estate for this sector”; “lack of national
treatment for financing arrangements for construction and operation of hotels and lodging
places”; “denial of access to government programs available to domestic service providers”;
“denial of full consumer access to electronic means for making hotel reservations”; “lack of
means to facilitate temporary entry and exit of event organisers and specialised skilled
personnel needed to conduct international conferences and conventions efficiently”.
23
The Tourism Satellite Account (TSA) attempts to measure tourism-related activity by determining what
percentage of each industry is accounted for by tourism. Under the TSA, “tourism characteristic products” are
defined as those for which the level of consumption would be significantly reduced in the absence of tourists.
Four intergovernmental organizations developed the standards contained in the Tourism Satellite Account or
TSA: the United Nations; the World Tourism Organization; the Organization for Economic Cooperation and
Development (OECD) and the European Commission. The United Nations Statistical Commission approved the
TSA on 1st March 2000.
The European Communities (EC) tabled a proposal on “GATS 2000: Tourism Services”
(S/CSS/W/40) on 22nd December 2000. The EC placed particular emphasis on eliminating
restrictions to foreign direct investment. The EC noted that the “few classifications problems
arising from the current GATS classification are not obstacles to dealing with the tourism
sector in a comprehensive way”. However, the proposal also recognised that “the
classification does not reflect the broad dimension of this sector”. To address this, the EC
proposed “a cluster regrouping all tourism related services which could be used as a
checklist”.
The EC also identified “exceptions” that may be accepted. These relate to the “protection of
areas of particular historic and artistic interest”, as well as retaining controls for consumer
protection purposes Finally, the EC identified horizontal restrictions affecting the tourism
sector: unspecified approval requirements, unspecified economic needs tests, limitations on
the purchase or rental of real estate, restrictions on equity holdings and residency
requirements.
Colombia also proposed that the “competent authorities should take account of professional
qualifications related to tourism services acquired in the territory of another Member, on the
basis of equivalency of education and using qualification recognition methods”. The
Colombian proposal noted that “anti-competitive behaviour by dominant operators can result
in imbalances in the framework of liberalised trade in services”, but suggested that this
should be dealt with “in a general manner” if competition is added to the Doha Agenda.
Lastly, Colombia supported the revision of the “existing classification of trade in tourism and
travel-related services” to include “all services characteristic of this sector”.
Canada proposed that WTO members focus negotiations on the W/120 (existing)
classification of Tourism and Travel related services “with the objective of liberalising
remaining restrictions to the extent possible. It also proposed that, in order “to accommodate
the cross-cutting, multi-industry nature of Tourism services”, WTO members should “create
and utilise their own tailored checklists to assist in the negotiation of tourism related sectors
that are of particular interest to them”.
Switzerland also presented a proposal (S/CSS/W/79) entitled “GATS 2000 : Tourism Services”
on 4th May 2001. The introduction recognised that “since tourism is extremely labour
intensive, the developing countries have a strong potential comparative advantage”.
Switzerland also commented that “it is difficult to define with any precision what the tourism
services sector actually covers”, and that “the Tourism Satellite Account has shown that
many services which initially appear not to be specific to tourism can, in fact, be included in
the tourism sector, at least partially.” Switzerland proposed that restrictions under Modes 1-3
should be removed but Mode 4 restrictions only “evaluated”.
The Swiss proposal invited WTO members to reflect on the commitments they wish to make
under “D. Other”. The proposal notes that some WTO members have made commitments
under “D. Other” in areas such as “tourism management services”, “tourism transport
services”, and “tourism convention services”. Switzerland suggest that the range of
commitments under “D. Other” could be widened to include services mentioned in the
“cluster” proposal of the Dominican Republic, El Salvador and Honduras. Switzerland also
suggests that “it is not the right moment to draw up multilateral disciplines concerning
competition-related issues” but that “it is important to ensure that the principles of sustainable
development of tourism are respected”.
The purpose of MERCOSUR’s proposal was to “promote the liberalisation of this important
sector in order to increase developing countries’ revenues from tourism services and to
contribute to increasing the participation of developing countries in trade in services”.
Mercosur noted that the World Tourism Organisation is not satisfied with the current
classification of tourism services, and would like it revised in the GATS negotiations.
Mercosur listed examples of the type of trade restrictions that still exist in the tourism sector,
such as the requirement of establishment or commercial presence in particular for tour
operators, licensing, economic needs tests and barriers to the presence of natural persons
under Mode 4.
Furthermore, the Cuban proposal underlined that “the natural dovetailing of local culture with
the provision of international tourism services should be respected”. Under “expected
outcome of the negotiations”, Cuba proposes that developed countries make commitments
which allow for the effective implementation of Article IV; that developing countries should
make commitments in line with Article XIX.224; and that the negotiations on market access
and national treatment should take place on the basis of the outcome of the assessment of
trade in services “which demonstrates developing countries that they will directly benefit
from any commitments to be made”.
II.2 The Responses to the GATS Proposal for a New Tourism Annex
The proposal for a new GATS Tourism Annex was discussed at length in Geneva from early
2000 until the end of 2001. Although widely welcomed by WTO members, it failed to gain
the support of a majority – or even substantial minority – of WTO members. Much of the
24
Article XIX of the GATS is entitled “Negotiation of Specific Commitments”. Paragraph 2 states that “The
process of liberalisation shall take place with due respect for national policy objectives and the level of
development of individual Members, both overall and in individual sectors. There shall be appropriate flexibility
for individual developing country Members for opening fewer sectors, liberalising fewer types of transactions,
progressively extending market access in line with their development situation….”
Within the “Q uad” of WTO members, only the EC offered qualified support for enhanced
treatment for tourism under the GATS. Both the US and Japan opposed the Annex proposal.
In their formal negotiating proposals, both the EC and Canada proposed tourism “checklists”
of tourism-related services to guide individual WTO members in services liberalisation
negotiations at the WTO. Importantly, these “checklists” would be used for reference
purposes and would not imply any amendments or additions to the text of the GATS.
In addition to the nine co-sponsors, only Morocco, Kenya and Sri Lanka expressed outright
support for the proposal. One of the main concerns of other WTO members was the “cluster
approach” to services liberalisation that was originally proposed by the co-sponsors of the
Annex proposal. A common developing country view was that the “clustering” of various
tourism-related service sectors could lead to pressure for accelerated liberalisation. Several
developing country WTO members feared that the “cluster approach” would signal a move to
a “negative list” approach to liberalisation, thereby reducing the ability of developing
countries to undertake no or minimal liberalisation in specified service sectors, as is permitted
under the “positive list approach25”.
In late 2001, one CARICOM WTO member also voiced concern that the proposed “cluster
approach” was too comprehensive, and could hamper the ability of CARICOM WTO
members to negotiate on a sector-by-sector basis. In general terms, developed country WTO
members showed more enthusiasm for the negotiating in services “clusters”, as for them this
would be a means to achieve more rapid liberalisation in areas of strategic interest to them. In
this respect the EC, US and Australia all highlighted energy and environmental services.
In response to developing country concerns regarding the proposed “cluster approach”, the
Dominican Republic removed all references to the “tourism cluster” in its revised proposal of
September 2001. Instead they proposed the same list of services but under a different title,
“tourism characteristic products”.
Throughout the discussions on the Annex proposal, the Dominican Republic maintained that
the Annex “was the only way to ensure equitable trading conditions for the trade in tourism
services, consistent with Article IV and XIX and with the needs of sustainable
development26”. The Dominican Republic stressed that while the volume of tourists entering
developing countries was increasing, the revenues per tourist retained by the receiving
countries were decreasing, largely as a result of anti-competitive practices.
The most controversial element of the proposed Annex were the provisions to prevent anti-
competitive practices in the tourism sector, particularly regarding air transport services. Air
transport services – including the so-called “hard rights” or passenger rights – are currently
outside the scope of the GATS Annex on Air Transport. Almost every developed country
WTO member objected to the inclusion of references to anti-competitive practices in the air
25
The “positive list” approach to services liberalisation under the GATS is viewed by most developing countries
as offering more flexibility in making commitments. Countries are free to make commitments in any services
areas of interest to them, rather than having to make commitments in all services areas except those specifically
excluded, as in the “negative list” approach.
26
S/CSS/W/107 of September 26, 2001. Point 2.35.
Within the tourism industry, the World Tourism Organisation (WTO-OMT)28 has strongly
supported the proposed Annex on Tourism. Both the WTO-OMT and UNCTAD were
instrumental in the drafting of the draft Annex. The proposal has received qualified support
from the World Travel and Tourism Council (WTTC), and provoked a strong negative
response from the International Air Transport Association (IATA), who maintained that the
proposed Tourism Annex “would eviscerate the GATS Annex on Air Transport.” 29
There are three particular issues raised in the Annex proposal that warrant greater analysis
before CARICOM can make a determination whether to support the proposal. These relate to:
competitive safeguards; sustainable tourism development; and the classification of tourism
services under the GATS.
The first important consideration is that CARICOM has yet to develop a regional competition
policy. Article 30 of Protocol VII (Protocol Amending the Treaty establishing the Caribbean
Community) on “Competition policy, Consumer Protection, Dumping and Subsidies”
envisages the establishment of a regional Competition Commission. However, it is unclear
when this will be operational. Until this is in place, CARICOM states will not have the
legislative means to implement, on a regional basis, any new multilateral WTO provisions on
anti-competitive practices in the tourism sector.
The second important consideration is the extent to which CARIFORUM tourism services
providers are victims of anti-competitive practices. In this respect, there is certainly anecdotal
evidence within CARIFORUM that some major service suppliers (e.g. cruise ships, tour
operators) do engage in activities related to “tied sales”, “predatory pricing” and “refusal to
deal”. For example, industry observers have indicated that some cruise ships operating within
27
There are already provisions on anti-competitive practices in two WTO Agreements: the “Reference Paper on
Telecommunications” and the TRIPS Agreement.
28
The 141 members of the World Tourism Organisation includes only three CARIFORUM states: Dominican
Republic, Haiti and Jamaica. (Source: www.world-tourism.org/frameset/frame_members.html)
29
Source: IATA’s (Richard Smithies) presentation on Airline views on the proposed Tourism Annex to the
GATS, WTO Symposium on Tourism Services, 22-23 February 2001.
What is certainly true is that the potential for anti-competitive practices in the tourism sector
is increasing as a result of acquisitions and mergers in a fiercely competitive international
marketplace. Industry experts predict that this trend will continue as weak equity markets
combined with a global tourism downturn reduce the share prices of tourism and travel
companies below asset values. Further market consolidation will concentrate the ownership
of the distribution channels for the CARIFORUM tourism product in the hands of an ever-
decreasing number of developed country companies in Europe, the US and Canada. This
reinforces the need for competitive safeguards at the multilateral WTO level to counter the
potential anti-competitive effects of this trend.
According to Souty (2002)30, the development of multiple -retailer systems and chains in the
1990s brought a new category of business conduct to the attention of competition policy
authorities and analysts: situations of abuse of buying power or abuse of a situation of
dependency of a seller from its buyer. In a tourism context, a similar situation would arise
when a small hotel is confronted with the market power of major operators and has to accept
the pricing policies of the tour operators or be “black-listed”. This scenario will be familiar to
many CARIFORUM hoteliers. Souty notes that a 1999 OECD Roundtable, attended by all
the major competition agencies of the world, “remained ambiguous to a large extent because
there is no unanimity among these agencies about how to deal with these alleged abuses”. He
later emphasised that “the presence of monopolies and dominant firm positions in markets is
not illegal per se almost anywhere”.
30
Passport to Progress: Competition Challenges for World Tourism and Global Anti-competitive Practices in
the Tourism Industry, Francois Souty, 2002.
The impact of the consolidation of EU tour operators on developing country tourism suppliers,
rather then EU consumers, has never been explored, and could be raised in either the WTO or
CARIFORUM-EU negotiations. One approach, informally suggested by a leading WTO trade
lawyer consulted for this assignment, is that CARIFORUM destinations could argue that the
consolidation of the European tour operator market has restricted European consumer choice by
limiting the number of hotels that are presented in tour operator brochures.
Competition is not the only area where the proposed Tourism Annex goes beyond the current
coverage of the GATS. The other is sustainable development. Article 2.56 of the revised
proposal is entitled “Co-operation for sustainable development of tourism”. The provisions
urge WTO members to encourage and support co-operation efforts for the sustainable
development of tourism, and to encourage all persons in the tourism industries to comply
with environmental and quality standards established by relevant international organisations.
Both environmental and cultural resources are key factors of production for CARIFORUM
tourism exports. They represent a vital asset in terms of the attractiveness and
competitiveness of the region’s tourist destinations. At present, the GATS deals only vaguely
with environmental concerns under “general exceptions” and “exhaustible natural resources”
under Articles XIV and XX. New provisions to promote the sustainable development of
tourism within the GATS are clearly in CARIFORUM’s interest. The rationale for including
sustainable development considerations in the GATS is the imperative of safeguarding the
environmental and social assets on which tourism thrives. The importance of this issue was
recognised at the regional level when the 2002 Caribbean Tourism Strategic Plan listed as an
objective the need to “minimise the adverse impacts [of tourism] on the socio-cultural and
natural environment and other touristic assets.”
The major asset of the CARIFORUM tourism product is perhaps the Caribbean sea itself. In
this respect, some tourism activities have recently caused concern within the regional
industry, such as the environmental practices of cruise ships and anchor damage to coral
The environmental risk from certain tourism related-practices reinforces the need for
provisions to promote sustainable tourism development in all international trade agreements.
Unlike the competition issues previously discussed, CARIFORUM states are already party to
a regional policy platform on sustainable tourism development. The Convention on
Sustainable Tourism Zone of the Caribbean31 (STZC) was signed at the 3rd Ministerial
Conference of the Association of Caribbean States (ACS) in December 2001, in Margarita,
Venezuela. The ACS grouping could also form a ready-made coalition of twenty-six WTO
members in support of the inclusion of provisions relating to sustainable tourism
development within the GATS. The elements of the Dominican Republic’s Annex proposal
relating to sustainable tourism development were not opposed by WTO members.
Box 1.3: An example of how GATS may undermine sustainable tourism development
Of all the countries that have made market access commitments on tourism, only Eygpt has noted
that some tourism sites may not have an infinite capacity for commercial activity. Eygpt states that
tours down the Nile river are subject to the river’s carrying capacity. However, the EU has
requested that Eygpt “remove licensing requirements and limitations on the total number of
service operations” for “Hotels and Restaurants” in the GATS negotiations. As Font and Bendell
(2002) have noted “it is very questionable whether such a request is in line with the commitments
of all states mentioned, including those of the EU, at international fora such as the Commission on
Sustainable Development (CSD).”
Source: Standards for Sustainable Tourism for the purpose of Multilateral Trade Negotiations,
Xavier Font, Jem Bendell, 2002.
The Dominican Republic-led initiative to have the WTO membership recognise the “specific
and heterogeneous nature” of tourism demonstrated how difficult it is to define tourism
adequately. As one might expect, WTO members quickly became bogged down in detailed
definitional discussions. The problem is that an almost infinite list of services can, at least
partially, be attributed to tourism. The proponents of the Annex argued that the definition of
“tourism characteristic products”, as defined by the Tourism Satellite Account (TSA), had
been agreed multilaterally by the United Nations Statistical Commission. Despite these
efforts, WTO members did not reach agreement on whether the GATS definition of tourism
should be expanded.
CARIFORUM WTO members would be in a stronger position to push for changes to the
definition of tourism at the multilateral level if they had agreed an expanded definition for
tourism within their own region. This would be a better place to start. While the rationale for
a precise tourism definition at the regional level is clear – namely to ensure coherent public
policy planning that recognises the diversity of the sector, it is less clear for the purposes of
31
The text of the Convention establishing the Sustainable Tourism Zone of the Caribbean (STZC) can be
located at www.acs-aec.org
One negotiating option worth considering would be for CARIFORUM states to propose a
“Reference Paper” on Tourism Services, similar in purpose to the Telecommunications
Reference Paper that was agreed in April 1996. Attached to this would be a list of “tourism-
characteristic products” to ensure that the crosscutting nature of tourism is adequately
recognised at the WTO level, without having to re-classify some of these services as Tourism
and Travel Related Services. Within the Reference Paper, CARIFORUM could also refer to
GATS Article XIX:2 – which enables developing countries to open fewer sectors - to ensure
that this action does not lead to pressure for increased liberalisation across all tourism
characteristic products. Indeed, many of the services listed as “tourism characteristic
products” are among the services that CARIFORUM states currently preserve for local or –
once the CSME is implemented – regional services suppliers.
Achieving multilateral recognition that tourism consists of more than the four sub-sectors
within the current classification would be in CARIFORUM’s interest, given the region’s
increasing dependence on the sector. It would also help to inform tourism policy planning at
the regional and national levels within CARIFORUM states. The Reference Paper approach
would appear to be the most realistic means to achieve this.
Within the CARIFORUM private sector there have been recent calls to change the
classification of cruise ships services under the GATS from “maritime transport services” to
“tourism and travel-related services”. This report recommends that cruise ship services
should be re-classified under the GATS as a “tourism and travel related service”, given the
increasing importance of cruise ships to Caribbean tourism economies and the impact of their
activities on land-based tourism sub-sectors (e.g. hotels, tours, attractions, entertainment etc).
Cruise ships compete directly with the land-based hotel and accommodation sub-sector. They
also control access to the tourist for many tourism services and goods suppliers in
CARIFORUM states (e.g. tour guides, entertainers, arts and crafts salesmen, retail outlets
etc.) either by selling of these goods and services onboard or directing passengers to preferred
retail outlets or service providers onshore. While there are diverging views on the benefits of
cruise tourism to CARIFORUM destinations, it is evident that cruise tourism is a key element
of the Caribbean tourism economy. The re-classification of cruise ships as a tourism and
travel related service is therefore recommended.
The cruise ship sub-sector is the only economic sector where the Caribbean is the leading
global market. The Cruise Lines International Association (CLIA) noted in 2002 that “the
Caribbean represents the number one destination with almost 47% of capacity placement”,
followed by Europe, the Mediterranean, Alaska, Mexico, Hawaii and South America. CTO
statistics32 for 2002 show the leading destinations for cruise arrivals in 2002 were the
Bahamas (2.8 million arrivals, up 9.8% from 2001), the Cayman Islands (1.57 million, up
29.6% from 2001) and Jamaica (0.86 million, up 3% from 2001).
32
Latest Statistics 2002, Caribbean Tourism Organisation, April 11, 2003.
In addition to seeking the re-classification of cruise ships services under the GATS,
CARIFORUM could seek to clarify in the current negotiations where the regulatory authority
for cruise ships lies. This is a complex issue as many cruise ships choose to register or “flag”
their ships outside their country of origin. The CARIFORUM land-based tourism industry
has indicated that this allows them to reduce tax liabilities, use non-domiciled and often non-
unionised crews, and compounds problems with environmental monitoring and control.
A recent US court case involving a cruise ship demonstrates the anomalous situation of cruise
ships within the world trading system. In March 1998, during a criminal trial in Miami
concerning the falsification of records and the intentional bypassing of pollution control
equipment, Royal Caribbean Cruises Ltd argued that the US lacked jurisdiction in the case
because the Sovereign of the Seas was flagged in Liberia. Royal Caribbean attorneys
produced a diplomatic note from the Liberian Embassy in the US asserting that Liberia had
primary jurisdiction33. The US court rejected Liberia’s claim on that occasion.
33
See Ocean Conservancy report, Cruise Control, page 8. This issue is complicated by the fact that five
CARIFORUM states currently offer flags of convenience: Antigua and Barbuda, Bahamas, Barbados, Belize
and St Vincent and the Grenadines.
CARICOM WTO members have yet to submit any formal proposals on tourism services
within the GATS negotiations.
a. Support the Dominican Republic-led proposal for a new GATS Tourism Annex.
Given the failure of a majority of WTO members to endorse the Annex proposal during
almost two years of discussions within the WTO’s Council for Trade in Services, reviving
this proposal would be a difficult negotiating objective. Furthermore, WTO members are
unlikely to respond differently to the same proposal even if it had the additional support of
CARICOM WTO members. Despite this, the Annex does highlight several issues that are in
the interests of the CARICOM tourism industries, namely competitive safeguards, sustainable
tourism development, and the definition of tourism under the GATS.
b. Present an amended version of the “Model Request on Tourism and Travel Related
Services”.
In late 2002, the Dominican Republic – with the assistance of UNCTAD – drafted a “Model
Request on Tourism and Travel Related Services”. This aimed to provide “a mechanism for
effective implementation of Articles IV and XIX:2 of the GATS”. The Model Request aims
to secure specific GATS commitments from other WTO members – under the “additional
commitments” column of their schedules – in areas that are in CARICOM’s interest. These
are “A. Strengthening the competitiveness of developing countries, “B. Liberalisation of
market access to developing country suppliers”, and “C. Cooperation for the Sustainable
Development of Tourism”.
The Model Request also offers CARICOM WTO members a template that they could tailor
to suit the specificity of the export interests of the regional tourism sector. For example, the
Dominican Republic has listed “fishing licence services” and “hunting services” and “spa
services” under “D. Other”. CARICOM states could list any services sectors of particular
interest to them, such as entertainment services or water-sports services. CARIFORUM could
also list specific measures to strengthen SMEs in order to further their participation in
tourism originating markets. However, CARIFORUM should exercise caution when
requesting full commitments without limitations in Mode 4, as proposed by the Model
Request from the EC, US, and Canada. A more realistic approach may be to request that
specific types of tourism professional be included within the Horizontal commitments of
these three WTO members.
c. A “Reference Paper” on Tourism and Travel Related Services that would establish
regulatory principles for trade in tourism services.
In 2000, the US proposed that a “reference paper” be proposed to address the problems by
travellers to, and organisers of, international conferences. The purpose of the 1996 Reference
Paper on Telecommunications was to provide WTO members with a series of regulatory
principles for a specific services sector. This amplified and clarified some of the provisions of
the GATS as they applied to this sector. Over 60 WTO members have now attached it to their
GATS schedules of commitments, making adherence to its regulatory principles legally
binding.
A Reference Paper on tourism can seek to ensure that WTO members recognise the
crosscutting nature of tourism in the national regulations, by including the list of “tourism
characteristic products”. It could also emphasise the elements of the international tourism
trade that are particularly important for developing countries, such as sustainable tourism
development and the need to implement GATS Article IV in the tourism sector. Lastly, the
Reference Paper could propose specific measures to address the problems of SMEs in the
tourism sector, principally the difficulties they have in gaining direct market access to
consumers in tourist-generating markets. Special emphasis could be placed on increasing the
export opportunities of SMEs in the tourism sector, a priority according to the GATS
negotiating guidelines (Paragraph 3 of S/L/93). These could include regulatory measures to
address the difficulties tourism SMEs have in gaining direct market access to consumers in
tourists-generating markets. This option would require CARICOM/CARIFORUM to engage
in coalition-building at the WTO, possibly through the establishment of a “Friends of
Tourism Services” informal working group. A “Friends of Energy Services” working group
already exists in Geneva.
Box 1.4: The 1996 WTO Reference Paper on Telecommunications: a model for tourism?
The WTO's Reference Paper on Telecommunications set out a series of principles for WTO members to
follow in order to create the conditions for a fair and liberalised telecommunications market. These are
legally binding only for those WTO members who have included the Reference Paper in their GATS
schedules of commitments. So far, over half of the WTO membership have done so. The principles cover:
Competitive safeguards, Interconnection, Universal Service, Public Availability of Licensing Criteria,
Independent Regulators, and the Allocation and Use of Scarce Resources. The Reference Paper also
includes a section on “definitions”. The Paper was the first effort by WTO members to adopt a set of
regulatory principles for one specific services sector, telecommunications. A similar approach could be
followed for tourism.
All CARIFORUM WTO members have received requests34 from other WTO members as
part of the “request-offer” stage of the GATS negotiations. In at least one case, a WTO
member - the EC – have presented tailored requests to each CARIFORUM WTO member
taking into account the varying levels of CARIFORUM commitments on Tourism and
Travel-Related Services.
The EC’s sectoral requests to CARIFORUM states on Tourism and Travel Services are
relatively benign. Most simply request that CARIFORUM WTO members “take
commitments” in areas where they have not yet done so. In some cases, the EC requests
clarification of existing GATS commitments. The EC is not requesting that CARIFORUM
WTO members eliminate existing restrictions for Tourism and Travel Related Services, or
even suggesting that CARIFORUM states “consider taking full commitments, i.e. schedule
none under MA and NT”, as it is requesting in other services sectors (e.g. news agency
services). Therefore, CARIFORUM states would be able to satisfy the EC’s requests on
tourism services easily by simply listing in their schedules additional market access and
national treatment limitations in the four sub-sectors of Tourism and Travel Related Services.
Doing so would not imply any legislative changes or further liberalisation in the tourism
sector.
In many services sectors, the actual market environment of WTO members is significantly more liberal than
indicated by their GATS schedules of commitments. The developed countries, led by the US and EC, are
hoping that the GATS negotiations will be a means of locking in these levels of liberalisation across all
services sector. The effect of making a legally binding and irreversible GATS commitment is that it limits
policy flexibility for governments in the future. According to UNCTAD, “Because markets are not perfect…it
is important to preserve a “policy space in the new international environment. They [developing countries]
should, for instance, keep room for manoeuvre when negotiating international investment agreements in order
to ensure that they are able to further national economic interests” (UNCTAD, 2000, p26-7).
WTO officials counter this argument by pointing out that increased policy flexibility has a price. They note
that the existence of GATS commitments in tourism-related sectors can help promote both dom estic and
foreign direct investment, by ensuring greater stability and predictability of government regulations and
policies affecting tourism. They argue that if a market access or national treatment measure is bound in a
Member’s GATS Schedule, investors will realise that sudden policy changes are far less likely. But the
importance of GATS commitments to investment decisions is often overplayed by WTO officials: the
existence of GATS commitments is just one of many factors that will encourage a foreign ni vestor to enter the
market. Arguably more important factors are return on investment, political risk, currency fluctuations, foreign
34 exchange controls and the ability to repatriate profits, revenue per available room (RevPAR) and operating
The consultant for this assignment did not have sight of all the confidential GATS negotiating requests
costs, security,
presented labour costsWTO
to CARIFORUM and productivity, national
members. Hence, taxation,
only the ECand
andincentives offered
US requests are by governments.
discussed.
“We request full commitments for market access for tourism and travel services in Modes
1, 2 and 3 ”.
The following approach is advised for CARIFORUM WTO members states when responding
to negotiating requests from WTO trading partners:
i. Make “full” commitments (i.e. schedule “none”) in areas where further investment
is required from trading partners such as large hotels, or where access to high
quality services is required by the tourism sector. For example, the former could
be achieved by listing “none” for Mode 3 commitments for hotels. One example
of the latter is environmental services, a key area of offensive negotiating interest
for the US and EC. Access to these services is essential for sustainable tourism
development, and CARIFORUM has limited capacity in this services sector.
ii. Make “defensive” commitments – in the form of listing additional market access
and national treatment limitations – in tourism services sectors that are currently
preserved for national or, after 2005 and the launch of the CSME, regional
services suppliers. These include five sub-sectors included in the GATS
classification list for Tourism and Travel services (W/120, 9 A-D): travel agent
and tour operators services, the construction and development of small hotels,
certain types of restaurants, and tourist guide services.
A further important consideration relates to the CARICOM regional market for trade in
services under the CSME, which is due to come into force on 1st January 2005. The CSME
will mean that CARICOM states will no longer be able to preserve tourism sub-sectors for
nationals and local companies. Instead, they will be opened to regional suppliers from
CARICOM member states signed up to the CSME. In this way, the CSME is providing the
regional tourism sector with its first trade-related adjustment through the creation of a single
market for the trade in services within CARICOM. CARICOM states are currently
committed to the removal of existing restrictions to liberalise the trade in services on a
regional basis within the CSME. Any premature market opening to suppliers from third
countries such as the EU, US and Canada would deny regional tourism services suppliers a
transition period to first adapt to increased competition within CARICOM.
Box 1.6: The removal of restrictions on tourism services within CARICOM for the CSME35
Barbados Restaurant Services (Modes 3&4), Lodging and Food and Beverage Services
(Modes1-4), Car Rental Services (Modes3&4), Taxi Services (Modes3&4), Travel
Agency Services, Tour Operator Services, Tourist Guide Services (Modes1-4),
Watersports Services (Modes 3&4)
Dominica Travel Agency Services (Modes 3&4)
Grenada Hotel and Motel Lodging Services (Modes 3&4)
Jamaica Lodging Services of Hotel and Motels (Modes 3&4), Travel Agency Services and
Tour Operator Services (Modes 3&4), Tourist Guide Services (Modes 3&4)
St Lucia Hotel and Lodging Services (Mode 3)
St Vincent Hotel Services (Mode 3), Amusement Park Services (Modes 3&4)
and G.
Trinidad Accommodation Services under 21 rooms (Modes 3&4), Tour Operator Services
and (Modes 3&4), Destination Management Services (Modes 3&4)
Tobago
This section of the report will discuss the regulatory barriers faced by CARIFORUM tourism
services exporters in the EU, US and Canada. The basis for this analysis is the restrictions
listed in the GATS schedules of those WTO members, and their initial GATS offers. The
most restricted Mode of Supply within these markets is Mode 4, when CARIFORUM
nationals seek to enter these markets to sell tourism services. All three WTO members retain
significant “horizontal” restrictions on this mode of supply, which are discussed below. Also
discussed below are the sectoral restrictions specifically in place for Tourism and Travel
Related Services in these markets across all modes of supply.
However, it should be noted that the commercial barriers to entry in these markets are just as
onerous, if not more so, that the regulatory barriers as recorded in GATS schedules of
commitments. These include the high cost of marketing in these markets, which is beyond the
means of all but the largest CARIFORUM hotel groups, and the difficulties that
CARIFORUM tourism suppliers have in gaining access to the distribution channels that place
tourism products on the EU, US and Canadian markets (e.g. tour operators, airlines, CRS or
GDS systems).
In terms of the export profile of CARIFORUM tourism services suppliers, only a handful of
companies sell their services by establishing a “commercial presence” in overseas markets,
Mode 3. During the consultations undertaken for this assignment, there were no suggestions
that any regulatory barriers (Mode 3) have been encountered by CARIFORUM tourism
companies in the EU, US or Canada. Most sell their services through a combination of Modes
1, cross-border supply (e.g. through Internet reservation systems, via a GDS, or through a
tour operator), and 4, by visiting these markets to meet clients (e.g. at international tourism
trade fairs). Because most CARIFORUM tourism services suppliers “export” their services
35
Source: Programmes for Removal of Restrictions-Protocol II, CARICOM Secretariat, 2002. It should be
noted this document does not contain all the restrictions currently applied within CARICOM. For example,
Belize current restricts tourist guide services for Belizean nationals, yet this is not included here.
III.18) Within the sectoral Mode 4 commitments on Tourism and Travel Related
Services(W/120, 9 A-D), these three WTO members have marked their schedules “unbound,
except as indicated in the horizontal section”. In their initial GATS offers – presented in the
GATS services negotiations between March 31 and April 31, 2003 - the EU, US and Canada
have repeated this. The following is a brief summary of the Mode 4 horizontal commitments
contained in their initial offers:
i. The EU has three types of service provider that are able to enter the market on a
temporary basis: (i) Intra-Corporate Transferees (ICTs) which can be either (a)
Managers, (b) Specialists or, a new category, (c) graduate trainees. Entry and stay is
limited to a maximum of three years in the case of (a) and (b), and to 12 months for
(c). The second category (ii) is Business Visitors (BV) who are permitted to stay for
up to 90 days in any 12 months, The EU has expanded the third (iii) category:
Contractual Service Suppliers (CSS) in its offer. These can be either (a) Employees of
Juridical Persons (EJP) or (b) Independent Professionals (IP), for which “numerical
ceilings”, or in other words quotas, will be established. To enter under category (iii),
persons must have a university degree or equivalent. Under the EJP category, the EU
presents a list of “activities” for the performance of “service contracts” including
“Travel Agencies and Tour Operator Services” although this is left unbound for seven
EU member states, including the UK. Entry and stay is a maximum of 12 months
under this category. It should also be noted that regulatory authority regarding Mode 4
entry remains with EU member states, and not with the European Commission.
ii. The US’s initial offer on Mode 4 contains four types of persons who are allowed to
enter the market on a temporary basis. Firstly, Services Salespersons, who are
allowed to enter the market for 90 days. For Intra-Corporate Transferees such as
“Managers”, “Executives” and “Specialists”, entry is limited to 3 years that may be
extended for a further 2. Personnel Engaged in Establishment must present proof of
their acquisition of physical premises within one year of their entry to the market,
thereby confirming a link between Mode 4 access and Mode 3 (a link that developing
countries have sought to break). Finally, a quota of 65,000 Fashion Models and
Specialty Occupations are permitted entry for a maximum of three years.
iii. Canada’s initial GATS offer contains four types of natural persons who are permitted
temporary entry to the market. Canada has offered to extend entry for Business
Visitors from 90 days to 6 months. Intra-Corporate Transferees such as “Executives”,
“Managers” and “Specialists” must have been employed by a juridical person in
another WTO member state for at least a year. For the first two sub-categories, entry
and stay is for “an initial period equivalent to the period of the transfer”, for
“Specialists” it may not exceed 5 years. Canada also includes an amended list of nine
“Professionals” who require work permits and who are permitted entry for a
maximum period of one year. No tourism-related profession is included within this
The first important observation regarding the initial GATS offers of the EU, US and Canada
is that they do not improve access for lesser skilled service providers, a key area of export
interest for CARIFORUM states. All three offers demonstrate a general bias towards
qualified labour. This report proposes that CARIFORUM negotiators seek to submit
ambitious Mode 4 requests on tourism services – in the form of Hospitality Service Providers
Programmes at both skilled and lesser skilled levels - in regional and hemispheric trade
negotiations rather than at the WTO. There would be little value in pursuing this request in
multilateral negotiations as the benefits of such programmes would be lost if developed
countries introduced them on an MFN basis (i.e. open to all WTO members). However, it
would be in CARIFORUM’s interest to request at the WTO that qualified tourism
professionals from UWI, PUCMM and the national hospitality training institutes within
CARIFORUM are included within the EU’s category of Contractual Service Suppliers (CSS),
within Canada’s list of “Professionals”, and within the US horizontal commitments on Mode
4.
Early clarification should be sought from the EU, US and Canada of the criteria for refusing
entry to persons on the basis of security concerns. This threatens to become a non-tariff
barrier for the temporary movement of CARIFORUM hospitality service providers to these
markets. With the heightened level of security in the US, many CARIFORUM tourism
professionals have increased difficulties in entering the US market. Some have commented
that this market is essentially “closed” for the time being. Finally, CARIFORUM
professionals have not encountered regulatory difficulties in obtaining visas to enter the EU
or Canadian market to attend trade fairs or to meet with clients as “business visitors”.
However, in all three markets, CARIFORUM hospitality trainees or students have been
denied visas when seeking to enter these markets to gain work experience within the hotel
and accommodation sectors.
Compared to other economic sectors, there are relatively few limitations on market access or
national treatment in GATS schedules of the EU, US and Canada for Tourism and Travel
Related Services. In particular, there are no limitations on market access and national
treatment under Modes 136 and 2. Below, the most important limitations are highlighted.
The EU’s commitments on Tourism and Travel Related Services include limitations on Mode
3 market access in three states for “A. Hotels, Restaurants and Catering”, where
“authorisation can be denied to protect areas of particular historic and artistic interest” in
three member states. Canada has offered to remove some limitations on Mode 3 market
access in the form of residency requirements for the sale of liquor under “A. Hotels and
Restaurants”, but has also retained some (e.g. in Québec). Also, Canada has maintained a
Mode 3 national treatment limitation for non-residents who are required to pay a 20% land
36
The EU has left Mode 1 “unbound” for Hotels and Restaurants because, according to the EU, “a commitment
on this mode of supply is not feasible”.
III.23) Canada has not offered to remove its Mode 1 limitation on market access in Ontario
and Québec, where these services must be supplied through commercial presence. Ontario
and British Columbia will also retain residency requirements under Mode 1. The US has not
offered to remove a Mode 3 market access limitation that “official tourism offices with
diplomatic status are not permitted to operate on a commercial basis” under Mode 3. The EU
has offered to eliminate a Mode 3 market access limitation on non-EU nationals wishing to
establish travel agencies in the territory of the EU. This limitation was present in three
countries only.
Canada has not committed this sector. The US’s initial offer maintains a Mode 3 market
access limitation that “the number of concessions available for commercial operations in
federal, state and local facilities is limited”. The EU retains Mode 4 limitations on market
access in this sector, in the form of nationality requirements in five member states37.
Negotiations are also ongoing within the WTO Working Party on GATS Rules to agree on
new multilateral rules for services subsidies. These negotiations – which are outside of the
mandate of the Doha Round – are scheduled to be completed by “prior to the conclusion of
the services market access negotiations”. For CARIFORUM, it will be important to monitor
these negotiations so that any new rules for services subsidies are sufficiently flexible to
permit CARIFORUM states to offer their tourism sectors with a wide range of incentives.
The worst-case scenario is that the new GATS disciplines on subsidies will make some of the
subsidy and incentives currently offered by CARIFORUM governments to the tourism sector
“GATS-incompatible”. A list of some of the subsidy measures that WTO members –
including CARIFORUM states - have introduced for tourism is attached in an Annex to this
report.
A further essential issue that requires careful monitoring is the WTO negotiations within the
Working Party on Domestic Regulation (WPDR). Article VI:4 of the GATS calls on the
WPDR to develop disciplines to ensure that domestic regulations relating to licensing
requirements and procedures, technical standards and qualification requirements and
procedures do not constitute unnecessary barriers to the trade in services. Paragraph 7 of the
GATS negotiating guidelines states that work under Article VI:4 should be finished before
negotiations on specific commitments are concluded, which is the deadline for the overall
round of 1st January 2005. Of particular relevance for the CARIFORUM tourism sector are
37
France places restrictions on European tour guides who are trained in other member states. The European
Commission recently publicly stated that it believes the French restrictions contravene the rules for the freedom
of movement in Europe
It is assumed that the final agreements on services resulting from the FTAA, CARIFORUM-
EU and CARICOM-Canada negotiations will contain two elements: a set of guidelines and
priorities between the contracting parties; and a schedule of specific commitments. Of these,
the FTAA negotiating process is by far the most advanced and is scheduled to conclude by
January 2005. Within the Draft FTAA Chapter on Services (FTAA.TNC/W/133/Rev.2 of November
2002), tourism is only mentioned twice, and on both occasions in footnotes.
One of the major constraints to the sustainable growth of CARIFORUM tourism is the lack
of incoming airlift. This problem is particularly acute for the OECS destinations. Low air
traffic density, which reduces the profitability on “thin” routes, and insufficient demand in
tourist-generating markets have both been contributory factors. As a result, some
CARIFORUM governments are now in the enviable situation of having to offer incentives –
often in the form of seat guarantees – to scheduled airlines and air charter companies. As one
CARIFORUM transport official stated “if we want an additional charter service, we ha ve to
pay for it”. That CARIFORUM governments are now contributing to the profits of developed
country air transport service providers in the EU and US– and therefore indirectly to
developed country treasuries – is an issue that should be raised in international trade
negotiations38.
Passenger rights, so-called “hard rights”, are currently excluded from the WTO and FTAA
services negotiations on air transport services39. Given the relatively advanced status of these
negotiations, it may be too late to introduce a discussion on passenger rights. However,
CARIFORUM could propose to the EU and Canada that negotiations on air transport
38
Further consideration is needed to assess whether this issue should be raised within the WTO discussions
relating to “credit” for autonomous services liberalisation.
39
The GATS Annex on Air Transport Services covers only aircraft repair and maintenance, computer
reservations systems, and selling and marketing by airlines. The current GATS negotiations on Air Transport
Services are taking place on these three issues. Some WTO members, such as the EU, have also been seeking to
negotiate on two additional areas: ground handling services and airport management services.
The “Community of Interest Principle”, as established in Article 83bis of the ICAO Chicago
Convention, could be used for CARIFORUM/CARICOM to negotiate on behalf of regional
carriers. The 1998 CARICOM Multilateral Air Services Agreement (MASA) has also created
a regional policy platform for CARICOM to negotiate on air transport services. Given the
fundamental importance of airlift to the regional tourism industry, this proposal is worth
exploring further. A thorough consideration of the costs and benefits is required, as is
consultation with regional airlines.
The following are a series of “offensive” negotiating requests on tourism services that could
be submitted by regional negotiators in the FTAA, CARIFORUM-EU or CARICOM-Canada
negotiations. These requests deliberately go beyond the scope of negotiating requests being
submitted by WTO members in the GATS negotiations, and as far as possible, attempt to
resolve the major trading problems of the CARIFORUM tourism sector in international
markets. The requests are presented as:
- Horizontal requests affecting tourism services;
- Sector specific requests on tourism services;
- Negotiating requests to implement Article IV of the GATS on “Increasing the
participation of developing countries;
- Development assistance and technical cooperation requests; and
- Other requests to address some specific trading problems.
a. Reduce costs and facilitate access to visas for the temporary entry of CARIFORUM
tourism professionals wishing to enter the EU, US and Canadian markets to supply
services.
The costs (over US$100) and time associated with obtaining visas for temporary entry into
the EU, US and Canada represent a market access barrier to the export of CARIFORUM
tourism services. For example, a Caribbean tourism professional from Barbados wishing to
travel to Germany for the ITB trade fair may have to send his/her passport to the German
Embassy in Trinidad and Tobago. This is a unique constraint for small-island developing
states, many of which are too small to warrant diplomatic representations for the purposes of
processing visas.
Although Shengen visas are available to CARIFORUM nationals visiting the EU, they are
sometimes not easily accessed for some islands in the Caribbean and the costs are high. This
b. Include tourism professionals, with tertiary level hospitality qualifications from UWI,
PUCMM and national hospitality institutes, within criteria established for the
temporary entry of “professionals” or “business visitors”.
Regional negotiators should aim to ensure that suitably qualified tourism professionals from
CARIFORUM are included within the lists of “professionals” or “business visitors” for the
purposes of horizontal mode 4 commitments made by the EU, US and Canada in the EPA,
FTAA and Canada-CARICOM trade negotiations. Within the NAFTA agreement, “Hotel
Manager” is the only tourism “professional” permitted to enter the markets of NAFTA
signatories without the necessity of the application procedures commonly required for
employment authorisations40. CARIFORUM negotiators should ensure that regional hotel
managers, and other tourism professionals (e.g. catering specialists) receive at least
equivalent treatment in the FTAA and Canada-CARICOM negotiations.
The negotiation of such programmes is an essential precursor for increasing the export of
CARIFORUM tourism services via Mode 4. Issuing authorities for visas and work permits in
the EU, US and Canada are more likely to facilitate the temporary entry of CARIFORUM
tourism professionals if a prior agreement exists to recognise the tourism qualifications
obtained in CARIFORUM states.
The Caribbean Tourism Human Resource Council (CTHRC), managed by CTO, should be
consulted on this issue. The CTHRC brings together key stakeholders from business, labour,
40
NAFTA Professional Job Series List. USA Immigration Services website (www.uais.org)
41
A reciprocal recognition agreement already exists for all National Vocational Qualifications within the
Commonwealth.
a. Review EU42, US and Canadian legislation relating to health and safety standards in
the hospitality sector that are applied to CARIFORUM hoteliers (Mode 1).
Industry representatives have indicated that they fully support the development of appropriate
health and safety regulations to protect international consumers of tourism services visiting
the region. But they also point out that some standards are inappropriate for the Caribbean
climate, and the location, design and architecture of Caribbean hotels. In particular, the huge
costs of compliance with EU standards – in the form of national regulations implementing the
EU Package Travel Directive43 - are a major issue for CARIFORUM hoteliers.
For example, some CARIFORUM properties have to introduce elaborate evacuation systems
more suited to high-rise buildings when they have only two or three floors. These standards
need to be refined to suit the Caribbean region. A review of all national consumer regulations
within Europe affecting Caribbean hoteliers could help to reduce these costs by avoiding any
unnecessary alteration to CARIFORUM properties receiving European tourists. This review
should take into account tourism health and safety standards developed within
CARIFORUM, such as the Quality Tourism for the Caribbean (QTC) programme 44.
Regional negotiators may wish to consult further with the regional tourism sector to assess
whether similar issues exist with US and Canadian legislation.
Under the EU Package Travel Directive, the interests of European consumers received
special attention. In contrast, the impact of the Directive on the suppliers of tourism products
and services – such as CARIFORUM hoteliers – were not considered within the scope of the
Directive. For example, there are no provisions to mitigate the impact on tourism suppliers in
the event that a European tour operator or travel agent becomes insolvent. Some destinations
within Europe – led by Greece – have sought to address this by proposing that the European
Commission issues a similar Directive to protect suppliers of tourism products and services.
CARIFORUM negotiators could raise this issue with the EU in the EPA, FTAA and Canada-
CARICOM negotiations to ensure that adequate provisions are introduced to protect
CARIFORUM suppliers if a tour operator or travel agent from those markets enters
bankruptcy proceedings.
42
In May 2003, the European Commission extended its Eco-labelling scheme to services, with tourist
accommodation the first service sector for which ecological criteria has been developed.
43
EU Council Directive 90/314/EEC on Package Travel, Package Holidays and Package Tours.
44
The Caribbean Tourism Health, Safety and Resource Conservation Project established the QTC programme.
It was a joint venture between the Caribbean Alliance for Sustainable Tourism (CAST), the Caribbean
Epidemiological Centre (CAREC), and was funded by the Multilateral Investment Fund of the Inter American
Development Bank (IDB/MIF), the Caribbean Development Bank (CDB), CAREC and CAST/CHA. The final
report was presented in January 2003.
This proposal would assist in attracting more business visitors to CARIFORUM destinations.
Under a provision of the Caribbean Basin Economic Recovery Act (CBERA), US taxpayers
are able to deduct legitimate business expenses incurred attending a business meeting or
convention in a qualifying CBERA country. A qualifying CBERA country must have a tax
information exchange agreement in effect with the US. Within CARIFORUM, the following
countries do not benefit from this scheme45: Belize, St Christopher and Nevis, St Vincent and
the Grenadines, Suriname. CARIFORUM has several excellent facilities to accommodate
business meetings and should push for a similar scheme to be introduced by the EU and
Canada in the EPA and Canada-CARICOM negotiations. This will increase the export of
business convention services, a priority area of future growth for many CARIFORUM
destinations. The per capita spending of business visitors is generally higher than for other
tourists (although the length of stay is generally lower than leisure tourists).
c. Reduce travel taxes imposed on EU, US, and Canadian tourists travelling to
CARIFORUM states to consume tourism services (Mode 2).
For the tourism sector, “consumption abroad” under Mode 2 is arguably the most important
mode of supply. GATS commitments under this mode of supply concern the restrictions
imposed by WTO members on their own consumers, or in this case tourists, travelling
abroad, to consume tourism services. The World Tourism Organisation (WTO-OMT) lists the
possible restrictions under Mode 2 for tourism as:
“Exit visa (passport formalities, exit taxes and charges, whether independent or attached to
specific services (e.g. airport taxes), currency allowances and means of payment, export of
personal effects, including personal vehicles (as well as fuel, spare parts, etc), customs
formalities relating to non-personal effects (articles whose character and number exceeds the
quantity which may be considered as corresponding to personal use), insurance formalities,
health formalities etc46”.
This wide definition of restrictions under Mode 2 currently goes beyond the scope of WTO
members’ commitments in the GATS services negotiations. Accordingly, some WTO
members have stated “none” under Mode 2 even though the restrictions listed above are in
place. This is because the elimination of “frontier formalities” of the type listed above is not
currently considered within the remit of the GATS negotiations. CARIFORUM could
therefore seek to remove the restrictions listed above under Mode 2 in regional or
hemispheric trade negotiations.
The Caribbean Tourism Organisation (CTO)47 has recently estimated that US per capita ticket
taxes currently amount to US $42.40 for all persons travelling to and from the US by air (see
45
On April 8, 2003 Antigua and Barbuda signed a Tax Information Exchange Agreement with the US and
became the latest CBERA country to be considered as part of the “North American area” for the purposes of
determining whether US taxpayers may deduct expenses incurred in attending conventions, business meetings
and seminars. (http://www.ustreas.gov/press/releases/js165.htm).
46
Understanding of Consumption abroad under GATS with respect to tourism , Revised draft note prepared by
the WTO/OMT Secretariat, Working Group on Liberalisation, January 2003
47
Concept Paper, Proposal for Revenue Sharing of Per Capita Ticket Tax on USA originating visitors to the Caribbean, L.
Miller, presented to the CARICOM Joint Meeting of Ministers of Finance and Tourism, 12 th February 2003, Port of Spain,
Trinidad and Tobago. The CTO has proposed that revenue from US taxes should be re-directed to the region to fund the
According to the President of the World Travel and Tourism Council (WTTC), the combined
taxes on outgoing air travel from Europe is as high as 30% of the total value. It should be
noted that each EU member state currently levies different types and levels of taxes on air
travel such as Security Charges, Embarkation Taxes, Air Service Charges, Passenger Fees
and Departure Charges. Some EU member states are considering the introduction of
environmental taxes on departing flights from the EU with differential rates for short-haul
and long haul destinations. CARIFORUM could propose that some of the revenue from long-
haul flights to the CARIFORUM states be re-directed to a CARIFORUM Sustainable
Tourism Fund.
The proposal will have to be considered carefully, in view of the heightened security
measures -and their associated costs- currently in place at international airports in the EU, US
and Canada. Furthermore, CARIFORUM states should resist any requirements for reciprocity
on the basis of their narrow taxes bases and their states as small vulnerable states and as a
special and differential treatment measure. Despite this, any reduction on air travel and
airport taxes for outgoing flights to CARIFORUM states would provide a much-needed
stimulus to international carriers to operate in the region.
d. Increase duty -free exemptions for EU, US and Canadian returning residents, and
make information available to all tourists, including cruise ship passengers, making
purchases in CARIFORUM states for personal or household use (Mode 2).
The aim of this proposal would be to increase per capita tourist expenditure in CARIFORUM
states. This proposal would benefit retailers within airport facilitie s as well as other regional
retailers. Limits on duty free purchases and purchases made by returning residents are another
example of restrictions placed by countries on their nationals consumption abroad under
Mode 2. The importance of duty free exemptions is evident from the experience of the USVI,
where the exemption for returning US from the USVI (US$1,200 per person) is significantly
higher than from other CARIFORUM states (US$800 per person). Accordingly, US cruise
ships normally direct their passengers to make all their purchases in the USVI, rather than
other CARIFORUM states, because of the higher duty free exemptions. This has led to the
growth of retail tourism in the USVI from cruise ships. The current customs/duty free
exemptions are as follows:
Box 1.8: Customs Duty Free exemptions for the EU, US and Canada
Caribbean Tourism Strategic Plan. The rationale for this proposal was that the total revenue to the US could actually increase
if the reductions resulted in an increase in the number of persons travelling to the 31-CTO member states. No agreement has
been reached between CHA and CTO on this issue.
A variation on this proposal could be that higher limits are introduced for goods produced in
CARIFORUM states, such as tobacco products and distilled spirits. Ensuing that information
regarding these duty free exemptions are publicised may also stimulate additional
expenditure by cruise passengers in CARIFORUM states.
e. The negotiation of regional Hospitality Service Providers Programmes with the EU,
US and Canada (Mode 4).
The aim of the Hospitality Service Providers Programmes would be to ensure that
CARIFORUM nationals are guaranteed work permits for the purpose of temporary contract
work. There is already a demand for the skills of qualified CARIFORUM tourism
professionals in the EU, US and Canadian markets. For examples, a UK recruitment agency
has recently visited the region to recruit graduates from national Hospitality Training
Institutes within CARIFORUM under the UK’s Working Holidaymaker Scheme available to
Commonwealth nationals. Similarly, a Canadian hotel chain has been actively seeking to
recruit lower skilled hotel workers from CARIFORUM states. At the national level, only
Jamaica has a formal mechanism for the temporary export of tourism workers. Jamaica has
benefited from the United States Overseas Hotel Employment (H2B) Programme since 1968,
managed by the Jamaican Ministry of Labour. The programme operates as a seasonal quota
for as many as 4,600 persons per year.
The case for such a programme could be built by matching the labour surpluses in the
CARIFORUM hospitality sector (between April and November) with the labour deficits in
the EU 50, US and Canadian hospitality sectors. Further research is needed to achieve this. The
programme could cover the temporary movement of both lesser skilled and skilled tourism
professionals with appropriate credentials or qualifications. It could be designed to suit the
seasonality of the CARIFORUM tourism sector, to ensure there are no labour shortages
during the high season (November-April) for CARIFORUM tourism. Gaining direct
exposure to the hospitality industries of the EU, US and Canada could raise the service
standards and practices of the regional tourism industry, and could enable a transfer of skills
and expertise to CARIFORUM hospitality workers. In the case of Canada and the EU51, these
programmes would also facilitate a transfer of language skills.
48
Travelling in Europe 2003, European Commission.
49
US customs service website (http://www.customs.ustreas.gov/). Section on Duty Free Exemptions in Know
before you go! - online brochure.
50
The “Hotel and Catering Sector Panel” of the UK’s Home Office concluded in their February 2002 meeting
that there was a shortage of kitchen porters, waitresses and waiters, cleaners and chefs of all skill levels in the
UK’s hospitality sector.
51
According to the EU’s list of MFN exemptions under the GATS, a similar programme exists for the EU hotel
and catering sectors for seasonal workers from Russia, Ukraine, Belarus, Georgia and Mediterranean countries.
The design of such a programme will require careful consideration. The lack of skilled
human resources is one of the main overall constraints to CARIFORUM services exports in
general. It would be disastrous for the tourism industry if this proposal resulted in the
permanent migration of the most highly qualified tourism professionals. It is therefore
proposed that these programmes are introduced on a small scale at first.
The design of the programme will also require significant input from the private sector. Some
of the larger CARIFORUM hotel groups invest substantial resources in the training of their
staff, and may be reluctant to promote the temporary export of tourism services in this way52.
In the case of the Jamaican programme, there have been complaints that the Jamaican
programme actually causes major personnel management problems for local hoteliers. For
example, one hotel had to cope with a sudden loss of personnel after fifteen workers decided
to leave for the US at short notice during high season. It has been suggested that the
programme should begin on the basis of an annual quota, but consultations are needed
regarding the whether a public or private agency should manage this. Appropriate measures
will also have to be factored in to limit the potential for illegal overstayers. This would also
ensure that the temporary movement of tourism professionals to overseas markets does not
become permanent, thereby causing a reduction in the levels of human capital in the
CARIFORUM tourism sector (“brain drain”).
When presenting these negotiating requests to the EU, US and Canada, CARIFORUM
negotiators should highlight that tourism, specifically the hotels and catering sub-sector, is
one of the main sectors for illegal labour in OECD countries53. In this way, this negotiating
request could result in a net gain for all parties, as it would help developed countries to
regulate their labour markets more effectively by reducing the amount of illegal labour
activity in the tourism sector.
52
It has been suggested that the major hotel groups in the region should view training as a business offshoot. For
example, if the agency placing the workers within such a programme was a subsidiary of a CARIFORUM hotel
chain (e.g. Sandals), they could benefit as for each trainee accepted the placement agency would receive a
commission.
53
Where do illegal migrants work? OECD Observer, February 24th, 2000.
Within CARIFORUM states, there are several internship programmes for tourism students
from national hospitality institutes and the UWI to travel abroad to gain work experience.
However, in some cases, the visa issuing authorities in developed countries have denied entry
to these students. This recently occurred in the Dominican Republic where the Pontificia
Universidad Católica Madre y Maestra (PUCMM)54 in Santo Domingo had negotiated an
agreement for an internship programme with the Delta Hotels Group in Canada. Under this
programme, between fifteen and thirty students from the PUCCM’s tourism school would
travel to Canada for summer internships. However, the Canadian government rejected the
visa applications for these students, with the result that the agreement has never been
implemented. CARIFORUM negotiators should therefore request that OECD governments,
particularly the EU, US and Canada, introduce streamlined visa approval arrangements to
facilitate this type of temporary movement for student internships in the hospitality sector.
The full implementation of GATS Article IV by the EU, US and Canada would greatly assist
the development of the CARIFORUM tourism sector. Eight years after its entry in force, it
has not been implemented by developed country WTO members. Under Article IV, WTO
members committed themselves to increasing the participation of developing countries in the
global services trade by strengthening services capacity and competitiveness, improving
access to distribution channels and information networks, and facilitating greater market
access in areas of special interest. To date, the only response of developed country WTO
members has been to introduce “contact points”. Although these are intended to facilitate the
access of developing country members' service suppliers to information, they contain no
information of practical value for CARIFORUM tourism service suppliers. CARIFORUM
negotiators could therefore submit the following negotiating proposals during the FTAA,
ACP-EU and CARICOM-Canada negotiations to implement the Article IV of GATS in the
tourism sector.
a. The introduction of market access contact points for the Mode 4 export of
CARIFORUM tourism services in the European, US and Canadian markets.
CARIFORUM should propose that “single desk” contact points are established in these
markets to provide information on temporary employment opportunities in the hospitality
sectors of those markets, monitor hospitality labour market developments, and to facilitate
visa processing. The proposal could be implemented on a stand-alone basis, or in parallel to
the Hospitality Service Providers Programmes.
54
Interview with Dr Guillermo Graglia, PUCMM, Santo Domingo, 2 nd May 2003.
Both Air Jamaica and BWIA use Sabre. The subscription fees for using this service are
prohibitively high for small carriers. Negotiators should propose that GDS introduce
differential pricing for small carriers from tourist-dependent regions.
The development of “Caribbean storefronts” for all online reservation systems would
enhance the visibility of Caribbean tourism products. The above two negotiations requests -
10 and 11 – touch on major areas of debate in the WTO negotiations, such as how to increase
developing country access to technology through the WTO Work Programme on Electronic
Commerce, and the implementation of GATS Article IV. Even so, it remains to be seen
whether trade negotiating requests in government-government services negotiations can
change the policies of GDS and online reservation systems. This would require some form of
government intervention in the commercial practices of the private companies that control
these distribution channels. Despite this, these are critical issues for the CARIFORUM
tourism sector and should be raised in external services negotiations, particularly with the EU
and US, the origin markets of the main GDS and online booking engines.
The aim of these would be to identify new market access opportunities for CARIFORUM
tourism suppliers within Europe, the US and Canada on a rolling basis, anticipate new trends
in tourist generating markets, and provide information on tourism industry developments.
This would encourage the direct Mode 1 supply of tourism services by CARIFORUM SMEs
to those markets. One CARIFORUM state, the Bahamas, is currently working to devise
strategies to increase direct cross-border sales of tourism services to consumers in tourist
generating markets before they travel to the region, rather than rely on intermediaries (e.g.
cruise ships) who take a commission on any tours or services provided to their passengers in
CARIFORUM states during their vacations.
This negotiating request would aim to create an obligation on the part of the authorities in the
EU, US and Canada to consult CARIFORUM governments prior to the issuance of travel
warnings. Since the events of September 11 th, 2001, government-issued travel advisory
warnings have caused major damage to several tourism destinations in both developed and
developing countries. This has led one destination, Kenya, to call for a review of the
Box 1.10: Information technology and Tourism: CRS, GDS and the Internet
The rapid expansion of information technology has had an immense impact on the tourism and travel industry. IT
applications are now fundamental to tourism product marketing and distribution. Computer Reservation Systems
(CRS) were the pioneers of computer applications in the 1960s. These are distribution platforms – in the form of a
mainframe computer with a massive database attached – through which airlines sell tickets to travellers via
traditional travel agents.
CRSs have evolved into Global Distribution Systems (GDS). GDS connect many supplier CRS systems with end
users, and are the “macro” version of CRS. Over time, GDS have expanded their operational reach to include
airlines, hotels, cruises, car rental companies, tours and other tourism services. Market consolidation has left four
main GDS: Sabre, Amadeus, Galileo and Worldspan. The Financial Times (Travel vendors embrace the Internet,
March 13, 2002) recently described GDS ownership as a “cosy oligopoly that has long raised the suspicion of
users and anti-trust bodies”. The competition effects of GDS consolidation on supplier destinations such as
CARIFORUM have never been explored.
In the past, the four GDS systems were wholly owned by the airlines, but that is now changing. Sabre became the
first GDS to become completely independent of airline control in 2000, when American Airlines’ holding
company, AMR, sold its shares to the public. Galileo is now owned by Cendant, a US lodging and car rental
group. Three European airlines still have majority ownership of Amadeus: Air France, Iberia and Lufthansa.
Worldspan is the only GDS still completely owned by US airlines: American Airlines, Delta and Northwest.
With the growth of online reservations via the Internet, the owners of GDS feared that they would become “dis-
intermediated” by cheaper Internet solutions to tourism marketing and product distribution. To avoid this, some
have bought into the online distribution sector. For example, Sabre, a US-owned GDS, now owns 70% of
Travelocity. A further threat to the GDSs central role of commercial intermediary is direct online selling by
independent airlines (e.g. Easyjet).
CARIFORUM tourism companies have long complained about the high costs of GDS subscription fees, but there
is no real alternative if their products are to be widely distributed. This is a major commercial issue affecting the
Mode 1 supply of CARIFORUM tourism services. Many of the larger CARIFORUM tourism companies and
airlines use Sabre. Tourism SMEs are effectively shut out from these distribution channels because of the high
fees. Industry experts predict that GDS will be superseded completely by Internet reservation systems within ten
years. Even so, the bargaining power of CARIFORUM suppliers with the newer online reservation systems is
likely to be as weak as with GDS. This is because smaller tourism suppliers in CARIFORUM states will always
face prohibitively high fees due to their inability to generate volume sales.
The CHA has established presences with GDS and online reservation systems to provide access to these
distribution channels for their memberships. The CHA Charitable Trust’s Go Caribbean online reservation
system is currently paying a monthly subscription fee to Expedia, owned by USA Interactive Inc., to link into
their system. CHA has established a reservation system, CHARMS, to facilitate the access of small hotels to GDS
systems at a reduced price. CHARMS uses Utell’s GDS identifier to gain access to GDS, thereby allowing small
hotels to benefit from Utell’s volume discount for listing. Utell is a US reservations service that provides hotel
inventory to the GDS systems for their member hotels.
55
Travel warnings are bad for business, by Stephen Kalonzo Musyoka, Foreign and International Affairs
Minister of Kenya, The Spectator, 7 June 2003
56
In December 2002, the British government warned that Trinidad and Tobago was at increased risk of terrorist
attack, prompting one cruise company to cancel visits.
Although the public position of the European Commission (EC) is that the EPA negotiations
with ACP states will not have a budget attached to them, it is highly likely that
CARIFORUM will have the opportunity to present development assistance requests to the
EU for European Development Fund (EDF) resources. The following are some initial
proposals, pending further consultations between CTO and CHA on the development needs
of the CARIFORUM tourism industry.
a. A programme of assistance for Internet marketing strategies for small hotels (or 75
rooms or less).
The Internet is set to dominate tourism marketing, and it has many advantages as a marketing
tool for those SMEs that cannot access the main international distribution channels (e.g. tour
operators, GDS). As part of this programme, the EU, US and Canada could be requested to
encourage partnerships between CARIFORUM tourism SMEs and technology suppliers. It
could also promote best practices on new technology applications involving tourism SMEs.
The objective of this proposal is to share hospitality training best practices, as well as
encourage the development of student exchanges between hospitality institutes.
57
In April 2003, the CHA signed a three-year cooperation agreement with the WTTC. As part of this agreement,
the WTTC will produce a regional Tourism Satellite Account (TSA) for the Caribbean. EU member states are
now implementing Tourism Satellite Accounts, with the Commission offering financial support to introduce
TSAs (see Commission Communication to the Council, the European Parliament, the Economic and Social
Committee and the Committee of the Regions, Working Together for the Future of European Tourism, Brussels
13.11.2001 COM (2001) 665 Final.)
Listed below are three further trading issues that are constraining the future development of
the CARIFORUM tourism sector. These are the lack of incoming airlift to supply
CARIFORUM destinations; the insurance problems facing CARIFORUM hoteliers; and the
dumping of US food exports on the CARIFORUM tourism sector. These issues could be
raised in regional or hemispheric trade negotiations on services in order that solutions can be
identified.
This proposal may be particularly relevant for the EPA negotiations with the EU, and
CARIFORUM negotiators could propose that unallocated EDF resources be set aside for this
purpose. This would ensure that it is European, not CARIFORUM, public funds that support
the air services of European carriers to CARIFORUM destinations. Such a programme could
be designed in a similar manner to the US Essential Air Services System (see Box 1.11), with
EDF resources providing payments to airlines willing to provide services on “thin routes”
under special licences. The proposal could also be raised in the Canada-CARICOM
negotiations.
b. Request that the US exercises stronger oversight control over US food exports for the
CARIFORUM tourism industry to ensure that old stocks are not being dumped on
CARIFORUM tourism markets.
Two CARIFORUM destinations, Jamaica and the Dominican Republic, believe that old
stocks of US food items are being dumped on the tourism markets of these two countries.
Many hoteliers have found that food imports, particularly perishable items, have a very
limited shelf life. CARIFORUM negotiators should therefore request in the FTAA.
negotiations that US
Box. 1.11: A proposal authorities
to increase investigate
incoming this issue and
airlift into CARIFORUM statesensure that there is sufficient
oversight authority toAir
At the Worldwide prevent such practices
T ransport ConferencebyinUS food exporters.
Montreal, Canada (24-29, 2003), the World Tourism
Organisation tabled a proposal to address “aviation market failure, and with it tourism market failure”, in
the world poorest countries, the Least Developed Countries (LDCs). The WTO-OMT called for “any
practical measures to increase air transport service levels and decrease price levels in developing state
markets”. The proposal referred to existing national and regional programmes in the EU and US to
strengthen “distressed market failure regions,” such as the US Essential Air Services System. These were
based on the provision of substantial central funds for “supplemental payment to airlines willing to operate
under special licenses to such regions”. The proposal emphasised that the aim of this was “to increase
services, not to support airlines”. CARIFORUM should propose that a similar system be introduced in the
EU negotiations, using unallocated EDF resources. Source: Liberalisation with a human face: The Aviation
Dimension, presented by the World Tourism Organisation (WTO-OMT) at the Worldwide Air Transport
Conference, 24-29 March, 2003. (ATCONF/5-WP/32).
The costs of insurance policies for CARIFORUM hoteliers and tourism service suppliers has
been increasing in recent years, not least for coverage against natural disasters such as
Similarly, many of the contracts between CARIFORUM hoteliers and international tour
operators contain a clause indemnifying the tour operator from any compensation claims for
personal injuries sustained by tourists while on property. Tourists usually chose to pursue
those claims in the courts of the country where they reside. This means that CARIFORUM
hoteliers have to purchase insurance policies with worldwide -rather than local – jurisdiction.
This massively inflates the premiums for these policies. So much so, that the cost of
insurance with worldwide jurisdiction for one Barbados hotelier is US $250,000 per year
whereas insurance with Barbados cover would cost US $25,000 58.
CARIFORUM negotiators could raise these issues in external negotiations on services, and
request that trading partners support the settling of such cases in local courts. CARIFORUM
negotiators could argue that the necessity to buy insurance policies with global jurisdiction is
a trade barrier. However, an informal legal opinion sought for this assignment has indicated
that it would be difficult to challenge an individual’s right to pursue a claim in their own
jurisdiction. Also, the issue of cruise ships only dealing with operators who have certain
kinds of insurance policies also appears to be a commercial issue, that once again reflects the
weak bargaining power of CARIFORUM services suppliers in the tourism market. Despite
this, negotiators should consider raising this issue in the negotiations with the EU, US and
Canada.
d. Request that EU, Canada and the US approve the portability of health insurance
policies in order to cover spa, rehabilitation, and chronic care services provided to
their nationals in CARIFORUM states
A recent study59 commissioned by the CRNM identified as a major trade objective the need
to increase the flow of health tourists to the region by extending insurance coverage and by
improving standards. The study recommended that international portability of insurance,
recognition of professional and hospital standards should be considered priority areas for
discussion and future work. It further proposed that Caribbean countries may wish to examine
the possibility of pursuing under GATS Art. VI. 4 the question of standards and portability of
insurance as barriers to trade.
58
Telephone interview with William Tomlin, General Manager of CGM Insurance Brokers Ltd, May 7th 2003.
59
Health Tourism and Related Services: Caribbean development and international trade, Gonzales, Brenzel and
Sancho, 2001.
The CARIFORUM is both a consumer and provider of goods and services. The tourism
product consists of many inputs including both publicly traded services – such as transport,
electricity and water supply – and privately traded services, such as hotel and
accommodation, catering services and visitor attraction services. The ability of a tourism
destination to compete60 internationally will depend on whether the entire range of these
goods and services are provided efficiently and at low cost. This means that both the public
and private sectors have a role to play in building competitiveness.
Compared with the global competition, CARIFORUM destinations – apart from the
Dominican Republic – are now considered high cost destinations. As the President of the
Caribbean Development Bank recently stated, “CARICOM destinations are pricing
themselves out of the market”61. The industry would support further liberalisation in local
infrastructure services, particularly electricity and telecommunications services, if this leads
to these services being provided more efficiently and at lower cost. However, if privatisation
leads to the replacement of a public monopoly with a private one, any benefit in terms of
lower operating costs will be lost. In this regard, the economies of CARIFORUM may have a
natural handicap given that small market size can result in limited competition – as
CARIFORUM markets are not large or attractive enough to attract many service providers –
and the continual presence of monopolies.
From a trade negotiating perspective, the CARIFORUM tourism sector would support further
liberalisation in the following services, all of which of major inputs into the tourism product,
if this leads to more efficient services at lower cost:
60
Two CARIFORUM states, Antigua and Barbuda and Grenada, currently rank among the bottom five tourism
destinations in the Price Competitiveness Index of the World Tourism and Travel Council’s (WTTC). This
Index uses data and indices that include hotel price index, power parity index, adjusted consumer price index
and taxes on goods and services.
61
Some thoughts on tourism, address by Dr. Compton Bourne, President, Caribbean Development Bank (CDB),
October 21 st, 2002.
Concerning goods, tariff reductions on the following tourism inputs have been identified as
being of particular benefit in lowering hotel operating costs: furniture and linen, pasta, wines
and spirits, bar and kitchen equipment (e.g. chillers and freezers) and specialty meats fish and
shellfish.
As a result of the consultations with public and private sector officials in CARIFORUM
states and desk research conducted for this assignment, the following policy
recommendations are proposed to promote the growth of tourism in CARIFORUM states.
The costs and benefits of cruise tourism to CARIFORUM tourism economies is a highly
divisive issue between, and among, the public and private sectors engaged in tourism. Many
public sector officials – particularly those within the Port Authorities of CARIFORUM states
– point to the upgrading of port facilities, paid for by passenger head taxes, as a key benefit of
cruise tourism. However, one senior CARIFORUM tourism public sector official has
emphasised that external trade negotiations should provide the stimulus for a regional policy
on cruise ships. The aim of this policy should be to increase the collective bargaining power
of destinations in the negotiations with cruise ships and to maximise on-shore expenditures
by cruise ship passengers. It should also establish environmental standards for cruise
operations, and mechanisms to increase the economic benefits of cruise activities to national
economies. It is important to note that the proposal for a common regional passenger head
tax63, as advocated by the Caribbean Association of Industry and Commerce (CAIC) and
others, may not be feasible given that the costs of operating port facilities differs greatly from
island to island. CARIFORUM trade negotiators could seek to raise this issue at COTED.
62
Catastrophe Insurance Market in the Caribbean Region: Market Failures and Recommendations for Public
Sector Interventions, P. Auffret, World Bank Policy Research Working Paper 2963, January 2003.
63
Earlier this year, Bermuda insisted that cruise operators hire more Caribbean nationals, contribute
US$1.5million to an education fund, introduce US$50 vouchers to be distributed to every cruise passenger to be
spent onshore on local businesses, and raise the passenger head tax to US$60.
An essential prerequisite for successful public policy planning on tourism, and participation
in external trade negotiations on services, is the availability of accurate data on the impact of
tourism on national economies. The statistics produced by the CTO are thorough and
extensive, and focus on the movement of tourists and cruise passengers, occupancies and
expenditures. The national statistical accounting systems do not accurately measure the
impact of tourism on national economies: in many cases, tourism is not even disaggregated
from general services statistics. The introduction of Tourism Satellite Accounts (TSA) would
improve the understanding of tourism and its value to national economies. Without the
upgrading of the regional statistical capacity for tourism, the industry will have to continue to
rely on external research organisations, such as the WTTC, to provide this data. The
introduction of the TSAs will also facilitate the agreement of a regional definition for tourism
for the first time.
Box. 1.12: The 2002 ASEAN Regional Tourism Agreement: a model for CARIFORUM?
In November 2002, ASEAN (Association of South East Asian Nations) governments signed a
Regional Tourism Agreement1 which extended visa-exemption arrangements, harmonised visa
procedures for international travellers, and put in place a timetable for the phasing out of travel
levies and taxes on ASEAN nationals visiting other ASEAN member states. This comprehensive
regional tourism agreement contains a range of policy measures to promote the growth of tourism
in ASEAN states. Within the agreement, the ASEAN states – leading competitors of
CARIFORUM destinations – emphasised the strategic importance of tourism as a means for
accelerating the regional integration process.
Source: ASEAN Tourism Agreement signed at Phnom Penh, Kingdom of Cambodia, 4th November 2002.
d. The need to facilitate the movement of tourists within CARIFORUM, and of tourism
professionals.
CARICOM nationals do not require a visa for travel for tourism purposes within the regional
grouping. Even so, the development of the intra-regional tourism sub-sector would be
facilitated if regional governments agreed to phase out travel levies and taxes on CARICOM
e. Tourism is not viewed as an export industry, and is not treated as such in national
taxation policy.
There is still a reluctance to view tourism as an export industry in public policy planning in
CARIFORUM states. The industry has emphasised that this is much than just an esoteric
discussion. They point to the fact that the tax burden of the tourism sector is far greater than
any other economic sector. For policymakers, taxing Travel & Tourism is attractive because
the bulk of the tax burden is perceived to fall on the shoulders of non-constituents, i.e. foreign
tourists. However, the increase of the tax burden on tourism destinations can have a direct
impact on competitiveness. UNCTAD (1998) noted that, “Fiscal policy in many developing
countries places a heavy tax burden on tourism service suppliers (particularly small and
medium-sized enterprises). While most governments provide for tax and duty drawback paid
by exports of goods, this is usually not applied to exports of tourism services64”.
The issue of tourism taxation at the national level is outside the scope of this report unless
foreign and domestic services suppliers are not similarly taxed (i.e. foreign suppliers do not
receive “national treatment”). But national taxation is essential in any discussions regarding
the competitiveness of the CARIFORUM tourism sector. A recent World Bank study
highlighted the price elasticity of tourism in the Caribbean, and emphasised that “anything
that makes an island more expensive relative to competition will lead to a substantial fall in
total revenues65”. This report recommends that CARIFORUM governments consider making
a commitment not to increase tourism taxation beyond current levels. This would greatly
increase investor confidence in CARIFORUM tourism.
f. How the design of the CSME limits the scope of negotiating requests on tourism
services.
Finally, the design of the CSME may constrain the scope of CARIFORUM negotiating
requests in two areas: proposals for disciplines to prevent anti-competitive disciplines in the
tourism sector, and Mode 4 requests on the temporary exports of tourism services supplying
nationals. Firstly, as noted previously in this study, CARIFORUM states will only be able to
implement, in the regional market, any new multilateral disciplines regarding anti-
competitive practices once a regional competition policy has been introduced. Secondly, the
potential to increase the temporary export of hospitality labour to developed country markets
may be limited due to the CSME provisions on the movement of natural persons. A recent
64
Report of the expert meeting on strengthening the capacity for expanding the tourism sector in developing
countries, UNCTAD, 7 July 1998 (TD/B/COM.1/17)
65
Demand for Tourism, W.F. Maloney and Gabriel V. Montes Rojas, The World Bank, August 21 st 2001
(Draft).
Beyond pursuing the negotiating requests outlined previously, the following actions would
serve to promote the interests of the tourism industry in services trade negotiations:
There has been a marked reluctance on the part of the donor community to embrace tourism
as a means of addressing poverty alleviation and promoting sustainable economic
development. This is partly due to concerns about the legitimacy of the sector as a recipient
of public resources, particularly as the level of foreign ownership in the sector is so high.
Given tourism’s status as the leading source of income and employment in most
CARIFORUM states, CARIFORUM negotiators should seek to negotiate specific provisions
in all services trade negotiations that recognise the industry as a recipient of development
assistance. The aim should be to negotiate specific funding facilities within EDF envelopes,
and USAID and CIDA funding mechanisms. The CARIFORUM tourism sector urgently
needs support to be targeted at the following areas: hospitality training and the upgrading of
industry human resources, finance for the upgrading of hotels and tourism infrastructure, the
enhancement of regional marketing programmes, and the encouragement of tourism’s
integration with the rest of CARIFORUM economies. In the case of the EPA negotiations
with the EU, it is likely that substantial compensatory funds will be negotiated to support a
transition away from traditional agriculture (e.g. sugar) to newer services industries. It is
essential that regional negotiators position the tourism sector as a recipient of any EDF
programmes aimed at restructuring and economic transition.
In order to pursue the strategy outlined in this report, the increased involvement of both
public and private sector tourism officials in external trade negotiations is required. A small
trade negotiating committee could be established to include representatives from both CTO
and CHA under the leadership of a senior CARIFORUM tourism minister to ensure that the
interests of the regional tourism sector are adequately defended in all current external trade
negotiations. That minister could be called upon to represent industry interests in formal
negotiating fora as and when required.
66
Negotiating the liberalisation of the Movement of Natural Persons, Commonwealth Secretariat, 2002. Winters
et al.
Further consultation with the regional tourism sector is required to identify the areas where
further research may be required. The following could be used as a basis for this consultation:
i. Research into the costs and benefits of including air transport services in the
services negotiations with the EU and Canada.
ii. Research into whether trade negotiations on insurance services can be used to
increase insurance capacity and reduce costs for the tourism industry.
iii. A study on the competition policy issues affecting CARIFORUM tourism services
suppliers within the regional market and in cross-border tourism services
transactions.
iv. The impact of external services negotiations on sustainable tourism development
in the CARIFORUM region.
v. Research into the hospitality labour markets of CARIFORUM states and OECD
states for the purposes of negotiating Hospitality Service Providers Programmes.
vi. An assessment of the impact of market consolidation of the EU, US and Canadian
hospitality and airline sectors and its impact on the CARIFORUM tourism sector,
including the competitive effects of this consolidation.
vii. A study on Internet marketing strategies to increase direct cross-border trade of
CARIFORUM tourism services suppliers, particularly SMEs.
viii. Research to tailor the GATS Model Request on Tourism and Travel Related
Services to suit the specificity of the CARIFORUM tourism sectors.
Auffret P., 2003, Catastrophe Insurance Market in the Caribbean Region: Market Failures
and Recommendations for Public Sector Interventions, World Bank Policy Research
Working Paper 2963, The World Bank.
Font X., Bendell J., 2002, Standards for Sustainable Tourism for the Purpose of Multilateral
Trade Negotiations, Madrid, World Tourism Organisation.
Gauci A., Gerosa V and Mwalanda C., 2002, Tourism in Africa and the Multilateral Trading
System: Challenges and Opportunities, United Nations Economic Commission for Africa.
Gollub J., Hosier A. and Woo G., 2002, Using Cluster-Based Economic Strategy to Minimise
Tourism Leakages, Madrid, World Tourism Organisation.
Gonzales A., Brenzel L. and Sancho J., 2001, Health Tourism and Related Services:
Caribbean Development and International Trade, Caribbean Regional Negotiating
Machinery (CRNM).
Holecek D., Nikoloff A. and Singh A., 2001, Fundamental Considerations for Travel and
Tourism: Tax Policy Development in the Caribbean, Michigan State University, The World
Travel and Tourism Tax Policy Center.
Honeck D., 1999, Tourism and the General Agreement on Trade in Services, Brussels, The
ACP-EU Courier.
Ifill L. and Garcia A., 2001, The Movement of Natural Persons – A CARICOM Strategy for
Trade in Services and International Trade Negotiations, Caribbean Regional Negotiating
Machinery (CRNM).
Lowe M., 2001, Tourism in the GATS: Issues for CARICOM members, Caribbean Regional
Negotiating Machinery (CRNM).
Meyer Krumholz. D, 1998, The Free Agreements and Their Effects on Tourism, Organisation
of American States (OAS).
Riddle D., 2002, Issues Regarding Small Service Suppliers in the Context of the FTAA,
Caribbean Regional Negotiating Machinery (CRNM).
Souty F., 2002, Passport to Progress: Competition Challenges for World Tourism and
Global Anti-Competitive Practises in the Tourism Industry, World Tourism Organisation.
Proposal by [Bolivia, Cuba], Dominican Republic, [Ecuador, El Salvador, Guatemala, Honduras, MERCOSUR, Nicaragua, Panama, Peru,
Venezuela]…
The following request develops the proposals, concepts and ideas presented in the following documents:
1) S/CSS/W/107, “Draft Annex on Tourism” – Communication from Bolivia, Dominican Republic, Ecuador, El Salvador, Honduras,
Nicaragua, Panama, Peru and Venezuela, dated 26 September 2001;
2) S/CSS/W/122, “Tourism and Travel Related Services” – Communication from Colombia, dated 27 November 2001;
3) S/CSS/W/125, “Tourism Services” – Communication from MERCOSUR67, dated 29 November 2001;
4) S/CSS/W/128, “Tourism Services” – Communication from Costa Rica, dated 30 November 2001; and
5) S/C/W/149, “Conclusions and Recommendations of the Expert Meeting on Tourism” – Communication from the Paradisus Group68,
dated 23 May 2000.
The co-sponsors present a request for specific liberalization commitments and for the withdrawal of horizontal measures and MFN exemptions
applicable to tourism and travel related services. Adoption by Members of this model request should serve to “ensure the effective
implementation of Articles IV and XIX:2” as provided for in paragraph 15 of the Guidelines and Procedures for the negotiations on Trade in
Services, in order to increase the participation of developing countries in services trade.
67
Argentina, Brazil, Paraguay and Uruguay.
68
Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua and Panama.
As a mechanism for the effective implementation of Articles IV and XIX:2 of the GATS.
Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons.
Limitations on Limitations on
Sector or Subsector Additional Commitments
Market Access National Treatment
II. SECTOR-SPECIFIC COMMITMENTS.
9. TOURISM AND TRAVE L RELATED SERVICES.
A. Hotels and restaurants (CPC 641-643) (1), (2), (3), (4) None (1), (2), (3), (4) None Desiring to implement Articles IV and XIX:2 in order to
B. Travel agencies and tour operator services (1), (2), (3), (4) None (1), (2), (3), (4) None facilitate the increasing participation of developing
(CPC 7471) countries in trade, [Member] agrees to adopt these
i
C. Tourist guides services (CPC 7472) (1), (2), (3), (4) None (1), (2), (3), (4) None principles :
1. Strengthening the competitiveness of developing
D. Other (1), (2), (3), (4) None (1), (2), (3), (4) None
countries;
Fishing license services (CPC 91131)
2. Liberalization of market access for developing country
Hunting license services (CPC 91131) suppliers; and
Spa services (CPC 97029) 3. Cooperation for the sustainable development of tourism.
The Plan sets out a vision for Caribbean tourism to the year 2012: “The further
development of a Caribbean tourism industry that is fully understood and embraced
by the peoples of the region and which, through co-operative action among
Governments and with the private sector, makes a significant and sustainable
contribution to development in both mature and emerging destinations”.
The Plan was approved by the board of the Caribbean Tourism Organisation (CTO)
in 2002. It has also been endorsed by the private sector Caribbean Hotel Association
(CHA). CTO and CHA are currently in discussions to resolve outstanding questions
regarding the Plan’s marketing and funding elements.
TERMS OF REFERENCE
Background
2. The tourism sector is perhaps the most open service sector in CARIFORUM. It has had
to make many concessions to secure investment. But many tourism dependent countries, with
very narrow resource bases, depend on taxes from tourists and duties from the wide variety of
imported inputs needed to service the industry.
3. From a public policy perspective, one of the major challenges facing CARIFORUM
countries has been to transform a situation of foreign management within their own borders
across the many sub-sectors of accommodation, amenities and attractions. Additionally, the
distribution system serving the tourism industry from the marketplace is almost entirely
foreign owned. It employs many foreign advertising experts and tourism consultants.
Foreign carriers dominate the air lanes and provide serious competition for national carriers.
For those involved in these negotiations, it will be necessary to strike the right balance
between enhancing the participation of local service suppliers in tourism activities and
encouraging foreign investment to increase the competitiveness of the Caribbean tourism
product.
5. In the GATS negotiations, there have been several proposals on tourism services. One of
the most interesting is the notion of a Tourism Annex. 71 There is also the related question of
69
CARIFORUM consists of the countries of the Caribbean Community (CARICOM), including Suriname and
Haiti, and the Dominican Republic.
70
The Dominican Republic is not involved in the CARICOM – Canada negotiations.
6. Given the critical importance of the tourism industry to CARIFORUM states and the
many inter-sectoral linkages with other sectors – both goods and services – the special
interest shown in tourism to date in the GATS negotiations requires careful study. Tourism
may also become a critical issue in the FTAA and ACP -EU negotiations.
Objective
7. The general objective of this consulting assignment is to enable the tourism industry and
governments in CARIFORUM countries to develop a better understanding and appreciation
of the trade-related challenges that lie before them. The specific objective is to assist the
Caribbean Regional Negotiating Machinery (CRNM) in advising CARIFORUM
Governments of the best negotiating options for the Region. This requires in-depth and
careful analysis of the issues relating to tourism and the GATS and other negotiations
(FTAA, ACP -EU) and their implications for CARIFORUM. The CRNM requires a
consultant to prepare a background paper in accordance with the terms of reference detailed
below.
Scope of Work
(a) Present an overview of the nature of the tourism industry in CARIFORUM states in
terms of the extent of diversity of tourism products and services. Identify the areas of
greatest growth, potential growth, and areas of decline;
(b) Present a succinct review of the proposals on tourism in the GATS negotiations to date
and assess the areas that are in CARIFORUM's interest;
(c) Examine the proposal regarding an Annex on Tourism in the GATS and assess whether
it is a feasible concept and whether it is in the interest of CARIFORUM to endorse it;
(d) Examine the classification of Tourism Services in the GATS and assess whether it
should be amended to better reflect the new nature of tourism in recent years. The cruise
ship industry, for instance, is classified as maritime transport but is now a major tourism
sub-sector with an increasing segment of the tourism market in the Caribbean;
(e) Identify the barriers to tourism suppliers from CARIFORUM in all modes of supply in
major overseas markets (eg. the EU, United Kingdom, United States, Canada) and
suggest mechanisms to reduce them (for instance, in commercial presence (mode 3) to
set up offices in the US, UK, etc.). Also examine barriers to temporary entry (mode 4)
through which Caribbean tourism firms would like to do trade shows, advertise, meet
with clients, etc.;
71
Dominican Republic and others.
(g) Identify the goods and services sectors in CARIFORUM in which further tariff
reductions will benefit the tourism industry;
(h) Identify any negotiating issues in tourism that are of strategic importance to
CARIFORUM and recommend negotiating options, in particular the Region’s offensive
interests;
(i) Review and assess any requests made to CARIFORUM states in the tourism sector in
the context of the WTO and provide recommendations regarding requests that
CARIFORUM states should make to other WTO Members in respect of tourism
services;
(j) Recommend how CARIFORUM governments should best promote the development of
the tourism sector through trade negotiations in each of the forums identified at
paragraph 4 above; and