Transcript The Multilateral Trading System Basic Elements

THE GENERAL AGREEMENT ON
TRADE IN SERVICES (GATS)
- MAIN ELEMENTS DG TRADE G1, Julien Guerrier
October 2005
1
Services: Economic importance

Share in Production and Employment
Generally over 50%, although figures can vary
between less than 30 and over 70%,
depending on resource structure and level of
development of an economy
 Share in Total World Trade
Some 20 percent (BOP-basis)
October 2005
2
Services in the EU
 77% of gross value added
5.1% average growth each year
between 1995 and 2003, compared to
2.8% for industry.
 76% of EU employment in 2003
(compared to 71% in 1995)
More than 150 million people are
employed in services in the EU.
October 2005
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EU = the world’s biggest exporter
of services
EU’s share of world trade in
services = 25% in 2003
(compared with 18% for goods).
Services account for 29% of EU
cross-border exports.
October 2005
4
Chart I: Share of services in
production (GDP, 2000)
U
Services
pi
ne
s
In
di
a
M
al
ay
sia
U
ga
nd
C
am a
er
oo
n
A
ng
ol
a
Ph
ili
p
Pe
ru
ni
te
d
St
at
es
*
U
Fr
ni
an
te
ce
d
K
in
gd
om
Po
la
nd
A
rg
en
tin
a
C
ol
om
bi
a
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Industry
Agriculture
*1999 data.
Source: World Bank, World Development Report 2002, Washington D.C.
October 2005
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Developments in services trade:
Some figures*
 Services have been the fastest growing segment of
world trade between 1980 and 2000.
 Since 1990, services exports from developing countries
grew over 3 percentage points faster (per annum) than
developed countries’ exports.
 The share of developing countries in world services
exports increased from 20 to 26 % (1990 - 2000).
 Travel and tourism account for over 60 % of
developing countries’ services exports.
October 2005
*Source: WTO Secretariat estimates;
BOP data.
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Chart II: World exports of goods and
services (1980 - 2000)
Goods
Services
400
Services
350
10500
Goods
9000
250
7500
200
6000
150
4500
GDP
100
3000
50
1500
00
20
98
96
October 2005
94
92
90
88
86
84
0
82
19
80
0
7
Billion $
300
(1980=100)
12000
Chart III: Services exports by economic
groups, 1990-2000 (Average annual change)
Developing
countries
1990
20%
1995
Developing
countries
25%
80%
75%
Developed
Developed
Developing
countries
2000
26%
74%
Developed
October 2005
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Services trade and development:
Expectations
“The gains from liberalizing services may be
substantially greater than those from liberalizing trade
in goods, because current levels of protection are
higher and because [there would be] spillover benefits
from the required movement of capital and labour.”
(World Bank, 2001).
Infrastructural services such as telecommunications,
finance and transport are crucial determinants of
overall economic efficiency and growth.
October 2005
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Services trade and development:
Some estimates
 Lack of competition in maritime transport (cargo
reservation, restrictions on port services, collective
rate setting, etc.) can increase freight rates up to
25 % on certain routes.
 Countries that fully liberalized investment in
telecom and financial services grew about 1.5 %
faster over the past decade than others.
 Services liberalization in developing countries
could provide as much as US$6 trillion in additional
income between 2005 and 2015.
Source: World Bank, 2001. October 2005
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GATS: Scope, coverage,
definition

MEASURES AFFECTING TRADE IN
SERVICES AT ALL GOVERNMENT LEVELS

FOUR MODES OF SUPPLY
Cross-border supply (Mode 1)
Consumption abroad (Mode 2)
Commercial presence (Mode 3)
Movement of natural persons (Mode 4)

ALL SERVICES
(except services supplied in the exercise of
governmental authority and air traffic rights)

RECOGNITION OF
MEMBERS’ RIGHT TO
October 2005
REGULATE
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The 4 Modes of Supply
Cross border supply - Mode 1
Example: consulting by telephone your lawyer who
resides abroad
Service
Supplier
Service supplied
into the territory
of another
Member
Service Supplier
supplies service
from territory of
one Member
Service
Consumer
Service Consumer
receives service
in territory of any
other Member
October 2005
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The 4 Modes of Supply
Consumption abroad - Mode 2
Service supplied in territory
of one Member to the service
consumer of another Member
Service
Supplier
Service
Consumer
Service Consumer receives
service in territory of supplier October 2005
Service Supplier
supplies service
in territory of
one Member
Service
Consumer
Example:
consulting your
lawyer at his office
abroad
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The 4 Modes of Supply
Commercial Presence - Mode 3
Service supplier establishes a
commercial presence in the
territory of another Member
Any type of business
or professional
establishment
Service
Supplier
Example:
Your lawyer
establishes an office
in the EU
Service
Consumer
October 2005
Service supplied
through commercial
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presence
The 4 Modes of Supply
Natural Persons - Mode 4
Service supplied through
presence of natural
persons of a Member in
territory of another Member
Example : Your
lawyer moves
temporarily to
the office he
has established
in the EU.
Service
Consumer
October 2005
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The economic importance of
individual modes?
The share of individual modes in world services trade has
been roughly estimated at:
-
around 25 per cent for mode 1;
-
around 15 per cent for mode 2 (mainly tourism);
-
around 60 per cent for mode 3;
-
less than 2 per cent for mode 4.
Mode 3 trade, mostly combined with foreign direct
investment, has been the most dynamic component in
recent years (Source: Guy Karsenty, WTO).
October 2005
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GATS: Sectoral coverage
 Business Services
 Health Related Services
 Communication
 Financial Services
 Construction
 Tourism
 Distribution
 Recreation, Culture, Sports
 Education
 Transport
 Environmental Services  Other Services
October 2005
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A. Governmental Services
Excluded from coverage are “services
provided in the exercise of
governmental authority” which, in turn,
are defined as services that are
supplied “neither on a commercial
basis, nor in competition with one or
more service suppliers”. (Article I:3)
October 2005
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What are
“Governmental Services”?
Typical examples:
Police, fire protection, justice,…
Other sectors may also fall under
“Governmental services”, for instance
health and education, IF they meet
the relevant criteria (i.e. are provided
neither on a commercial basis, nor in
competition with one or more service
suppliers).
October 2005
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B. Air Transport Services
Excluded from coverage are measures
affecting “traffic rights” and “services directly
related to the exercise of traffic rights”.
However, the GATS applies to:
(a) aircraft repair and maintenance;
(b) selling and marketing of air services;
(c) computer reservation systems.
October 2005
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GENERAL AGREEMENT ON TRADE
IN SERVICES OBLIGATIONS
General obligations
Obligations that apply only when a
WTO member decides to take specific
commitments
October 2005
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GATS General obligations
 Most-Favoured-Nation Treatment
 Transparency obligations
 Some other “good governance”
provisions (availability of legal
remedies, etc.)
October 2005
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Most-Favoured-Nation (MFN)
Treatment
“… each Member shall accord
immediately and unconditionally to
services and service suppliers of any
other Member treatment no less
favourable than that it accords to like
services and service suppliers of any
other country” (Article II:1)
Exemptions could have been sought at
the date of entry of GATS.
October 2005
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Specific Commitments
Principle of the “positive list” or
“bottom-up approach”.
The GATS requires each Member to submit a
Schedule of Specific Commitments that lists
the sectors in which it grants Market Access
and National Treatment.
October 2005
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Flexibility for Developing Countries
This bottom-up approach gives
flexibility to WTO Members, in
particular to Developing Countries, to
decide which sectors to open and at
which pace.
Developing Countries are not
expected to open as many sectors as
Developed Countries
October 2005
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How can national policy interests
be protected under GATS ?
Market Access (MA) and National Treatment
(NT) obligations are incurred only:
 in scheduled sectors; and
 to the extent that no limitations have
been inscribed.
October 2005
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Meaning of “limitations”?
Scheduling of a sector does not imply
that trade (i.e. MA and NT) must be
liberalized for all modes. Rather,
commitments may vary within a
spectrum between:
“unbound” = no commitment
“none” = no limitation (full
commitment)
October 2005
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Is there flexibility in
implementing commitments?
Yes. The GATS allows Members:
• to renegotiate their commitments against
compensation (Article XXI),
• deviate from them for public moral, public
order, health and other public policy reasons
(Article XIV exceptions, ‘prudential carve-out’ in
financial services) or security concerns (Article
XIVbis),
• introduce restrictions to protect the Balance of
Payments (Article XII).
October 2005
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DDA negotiations on services
October 2005
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Uruguay Round commitments :
Country line-up
(Distribution of Commitments across Members)
Committed
Sectors
Number of
Members
Composition
1-20
44
Least developed countries and
many low-income developing
countries
21-60
47
Mostly middle-income
developing countries
over 60
53
All developed countries, several
developing countries, a few leastdeveloped countries, all recent
accessions
Total number of sectors: ~160. EU has commitments in more than 120.
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Uruguay Round commitments:
Sector line-up
(Number of WTO Members, February 2002)
150
100
50
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(Number of Members tabling proposals, Feb 2002)
25
Developed
Developing
20
15
10
5
0
October 2005
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Objectives and Principles of
the Negotiations
GATS Preamble, Articles IV and XIX;
Negotiating Guidelines, Doha
Declaration:
Progressive liberalisation
Balanced rights and obligations
Respect for national policy objectives
Right to regulate and re-regulate services
Right to choose sectors and modes
Due consideration for small/medium service
suppliers
October 2005
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Principles for Developing
Members
Increase in participation in trade
Respect for level of development,
size of economies
Special priority for least developed
Flexibility in making commitments
others to make relevant
commitments
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Scope of the Negotiations
Scope
– Specific commitments negotiations:
no a priori exclusions of sectors or
modes
– MFN exemptions subject to
negotiation
– Rule-making negotiations: domestic
regulation, emergency safeguard
measures, government procurement,
subsidies
October 2005
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Negotiating calendar
Submission of initial
requests: by 30 June
2002
Submission of initial
offers: 31 March
2003
Submission of revised
offers: 31 May 2005
October 2005
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Offers
As of 20 June 2005:
initial offers were presented by 64
Members (counting the EC as 1);
- revised offers were presented by 15
Members (counting the EC as 1).
Offers may cover various services sectors, the
presence of natural persons (mode 4) and other
horizontal issues
More than half of the initial offers accounted for
were presented by developing countries.
October 2005
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Number of Offers
Number of Offers Proposing New Commitments and/or
Improvements to Existing Commitments
25
20
15
10
5
0
Sectors
October 2005
New commitments
Improvements
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Number of Offers
Number of Offers by Sector
October 2005
Developed
Developing and in Transition
35
30
25
20
15
10
5
0
Sectors
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The Way Forward
Next steps
– Stock taking exercise
– Hong Kong Ministerial
“Request/offers” as main method of
negotiation showed its limits
Explore idea of introducing multilateral
formula-type component (benchmarks)
to increase the overall baseline of
commitments
Complete with specific initiatives in
sectors where there is critical mass
October 2005
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The Way Forward
Parallel Multilateral Processes
• Development of common frameworks
(classification) /understandings
(computer services) / reference papers
(postal, telecom)
• More transparency in domestic
regulation ?
• Conclusion of negotiations on
Government Procurement, ESM and
subsidies ?
October 2005
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