31 Jul, 2006
World Trade Pact May Contain Unpleasant Surprises for Tourism
If the travel & tourism industry is looking for good reason to celebrate the collapse of the WTO talks, it is contained in the WTO annual report for 2006.
The main subject of the report is subsidies and if history is an indicator, it will be a step in a process towards pursuing the eventual elimination of a funding source that will cut the legs out from under the tourism and transport industries.
The travel & tourism industry has not paid much attention to what has been going on in the WTO, preparing itself mainly for the additional problems to come from open markets and competition from foreign multinationals.
But the latest WTO report sets the stage, as and when the WTO talks are revived, for even bigger problems to come – increased scrutiny for issues like brochure support, marketing funds, joint advertising campaigns and numerous other forms of assistance that governments extend to travel & tourism, both directly and indirectly.
Thailand is mentioned in three of the categories of subsidies, that of “providing support for hotel investment,” “marketing support” and “eco-tourism and preservation of cultural heritage.”
Other categories that fall under the definition of what the WTO considers to be tourism subsidies are support for small and medium sized enterprises, training, labour market policy, tourism as a development strategy, support for exporters, and support for infrastructure.
The report analyses the extension of subsidies for tourism as part of the broader context of “services” which includes banking, telecommunications, finance, transport and audiovisual.
However, while noting that international sources of data on the incidence of subsidies in the services sector “is practically nonexistent,” the report says that “one useful, if incomplete, source of international data on subsidies to services is the WTO’s trade policy reviews (TPR). Its findings draw on “information contained in the TPR reports issued between 1995 and February 2004.”
Based on this, the report finds that “subsidies to the tourism sector are widespread, particularly but not exclusively in developing countries. While subsidies are primarily development-focused in the latter countries, in developed countries they tend to be more concerned with other considerations, such as regional conditions and small and medium enterprises.”
Says the report, “Many developing countries consider tourism to be a sector with significant growth potential and governments wish to stimulate the sector by using subsidies. This is notably the case in Africa, a region that is widely recognized for the quality of its resource endowment for tourism, but where the industry is far from reaching its full potential, notwithstanding promising growth figures at the beginning of this decade.”
A table categorising information on subsidies in tourism according to the stated objective of the subsidising authority, “reveals that in the subsidy programmes of a number of African Members, tourism is explicitly mentioned as one of the industries targeted in the context of the Member’s development strategy. This is also the case in a number of Asian and Latin American countries.
“Subsidy programmes in some countries target exporting industries in general and the tourism sector is explicitly mentioned in this context. Poor infrastructure is one of the factors frequently blamed for the underperformance of the tourism industry in developing countries. Many African, Asian and Latin American Members use subsidies for investments in infrastructure relevant for the tourism sector.”
The report notes that “in industrialised countries, tourism subsidies are also frequently intended to be a development tool, though they tend to be used for regional development in those countries.”
One chart based on information from the European Union’s Support Measures database shows that by far the largest part of support in the tourism sector occurs in the context of regional development programmes, implying that the tourism industry in a particular region is targeted.
The report makes no specific conclusions and takes no position, claiming to be designed “to aid understanding of complex trade policy issues facing governments.”
However, it adds, “This is not intended primarily as a prescriptive report, but rather as an invitation to deeper reflection, and it is aimed not just at policy-makers but also the public they represent and the individuals and organizations that actively seek to influence government policies.”
Nevertheless, a sign of what’s to come is indicated in the comment: “The WTO, notably in the Agreement on Subsidies and Countervailing Measures, embraces an approach that seeks to preserve a level playing field between companies, when governments provide financial support.
“The report assesses how far this and other definitions used at the national level help to disentangle policy choices facing governments, facilitating a distinction between subsidy practices that distort resource allocation and those that serve a defensible social or economic purpose.”
It clearly seeks to pry out more information about subsidies. Says WTO Director-General Pascal Lamy, “One lesson from the analysis in the report that I believe deserves particular attention concerns the extraordinary paucity of reliable and systematic information on subsidies.
“Even in the WTO, many governments are remiss in meeting their notification obligations. It is simply impossible to make good policy or to forge mutually beneficial international cooperation in the absence of information. This is an issue in pressing need of attention by governments.”
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