Transcript Overview of Trade in Services and the GATS

Overview of Trade in Services
and the GATS
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Importance of Trade in Services –
The Overall Picture
• 2000-2003, 16% total trade of developing countries
(expanding at par with trade in goods)
• Services provide essential functions (water, health
education, economic activity tourism), and
interconnectivity with other sectors (distribution,
manufacturing, logistics)
• Growth in contribution to GDP
• About 50% of workers in East Africa are employed in
services sector.
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Importance of Trade in Services –
The Overall Picture
• Ever increasing importance to human
development e.g health, education
• 2000-2010: growth of economically active
population outside agriculture will outpace
agriculture (UNCTAD LDC Report 2006).
Services to be a lead scorer
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Importance of Trade in Services The East African Picture
• GDP share for Uganda is at 42.1%, 60% in Kenya, and
TZ growing fast)
• Services offer employment and increase social
welfare:
– Key sectors in Uganda being tourism (growth at annual
rate of 21% since 1992, contributing 60% of services
inflows annually)
– Key sectors in East Africa: Education and training,
transport, management consultancy, health related and
social services , and data processing.
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GATT and GATS
GATS
GATT
TRIPS
WTO JURISPRUDENCE
GATS: Definitions
• Sole International Agreement responsible
multilateral liberalisation of trade in services.
for
governing
• The Agreement defines services against delivery modes from the
Territory of one Member into the Territory of any other Member:
(Art 1:2).
Mode 1. Cross Border Trade
– Trade in the territory of one Member to the service consumer of
any other Member
Safari Com in Kenya supplying mobile telephone
services in Uganda. Safari com is based in Kenya but its
service crosses the border to Uganda.
GATS: Mode 1.
Cross Border Trade
Safari Com
Kenya in
Kenya
Safari Com
Kenya in
Uganda
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GATS: Mode 2
Consumption Abroad
 Trade by a service supplier of one Member,
through Commercial Presence, in the territory
of any other Member.
Nationals of Malawi going to South Africa
as students, or patients to consume the
respective services in South Africa.
GATS: Mode 3
Commercial Presence
 Trade by a service supplier of one Member,
through the presence of natural persons of a
Member in the territory of any other Member.
The service is provided within Swaziland by a
locally established affiliate, subsidiary or
representative office of a foreign owned and
controlled company.
Commercial Presence – Mode 3
GATS: Mode 4
Movement of Natural Persons
 By a service supplier of one Member,
through presence of natural persons of a
Member in the territory of any other
Member.
Independent movement of People from
Tanzania to United Kingdom to supply
services as consultants, cleaners, nurses
etc.
Movement of Natural Persons:
Mode 4.
The GATS: Objectives
• Expansion of trade as a means for development.
• Achievement of progressively higher levels of liberalization
through successive Rounds.
• Due respect to national policy objectives.
• Respect for the right to regulate to meet national policy
objectives.
• Facilitation of the increasing participation of Developing
Countries in international trade in services .
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Scope of the GATS
Article I
• Measures by Members affecting trade in services
 taken by central, regional or local governments and
authorities
 taken by non-governmental bodies in the exercise of
powers delegated by central, regional, or local
governmental authorities (Art.I: 3 (a)
• Services include any service in any sector except
services supplied in the exercise of governmental
authority,
– i.e any service supplied neither on commercial basis or in competition
with one or more suppliers. (Art.I: 3 (b) and (c)
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Scope of the GATS
Sectoral Coverage
• Services sectoral classification list (MTN.GNS/W/120)
• Sectors included are:
Business services, Communication services, Construction and
related services, Engineering services, Distribution services,
Educational services, Environmental services, Financial services,
Health related servcies, Social services, Tourism and Travel related
services, Recreational, Cultural and Sporting services, Transport
services and other services not included above.
• All these are further broken down to sub-sectors (Ref.
W/120)
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Key Principles:
Most Favored Nation
• Each Member to 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)
• MFN exemptions are permitted provided they:
– Are listed, (GATS Art. II:2)
– Do not, in principle, last more than 10 years, (Para 6, Annex on
movement of natural persons)
– Are subject to future Rounds of trade liberalization
• Any new MFN exemptions have to follow the waiver process
in Article IX:3 of the Marakesh Agreement.
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Market Access: Article XVI
• Article XVI locks members to terms and
conditions committed to in their schedules.
• The following Measures cannot be restricted
save if they are provided in the schedule:
limitations on the number of suppliers,
 limitations on the total value of transactions,
measures which restrict or require specific types of
legal entity,
limitations on the participation of foreign capital.
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Negotiation of Specific Commitments:
Article XIX
• Each successive Round of negotiations is aimed at
achieving progressively higher levels of liberalisation
–  XIX:2 Flexibility for developing countries
• Negotiations to take bilateral,
multilateral approaches. Art.XIX:4
plurilateral
or
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Schedules of Specific Commitments:
Article XX
• Members to lay out the scope of their commitments
including:
terms, limitations and conditions on market
access;
 conditions and qualifications on national
treatment;
undertakings relating to additional
commitments;
• Schedules of specific commitments are considered
an integral part of the GATS.
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Example of a Schedule:
Health Services, Singapore
Sector or Sub
Sector
Limitations on
Market Access
Medical services
1)
2)
3)
4)
Unbound*
None
None, other than
the number of
foreign
registered each
year may be
limited
depending on the
total supply of
doctors.
Unbound, except
as indicated in
the horizontal
section
Limitations on
National Treatment
1)
2)
3)
4)
Additional
Commitments
None
None
None
Unbound
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Uganda’s Commitments in the GATS
Uruguay Round commitments: Telecommunication and Tourism.
Telecomm:
• Uganda has market access unbound except for the duopoly
major license holders (mode 1), until 1998 (mode 3)(MTN,
Celtel)
• technically, market still closed to two at WTO level, until
Uganda lists none.
• (rev1 includes ref. to pre-existing licence holders according to
terms of their licenses.
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Uganda commitments: Telecom cont’d
• Mode 4 is unbound except for technical personnel. Where
Ugandans are available they are priority.
• No limitations on National treatment for Modes 1,2 3, which
means equal treatment for services and services suppliers for
whom market access is open.
• Uganda undertook under additional commitments obligations
in the Telecom reference paper which covers deeper
commitments containing definitions and principles on the
regulatory frame work for basic telecomm- which creates
additional regulatory obligations for Uganda.
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Uganda - Tourism and Travel related
services
• Uganda has full market access commitments
for hotels and restaurants, travel agencies in
modes 1 and 2. Implication? Market is fully
open.
• For Mode 3, investment authority approval is
required.
• Mode 4 is unbound except for technical
experts.
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Additional Commitments: Article XVIII
• Commitments that go beyond market access
and
national
treatment,
including
qualifications, standards or licensing matters
are permitted.
• E.g. Telecom Reference Paper commitments of
Uganda.
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Modificaiton of schedules: Article XXI
• No commitment can be modified or withdrawn until at least 3 years
after it entered into force.
• 3 months' notice must be given of the proposed change.
• Modifying Member must compensate any WTO member affected
by the change – normally settled by negotiation.
• If all goes well, agreement is reached on new commitments to
offset those being withdrawn, but the general level of
commitments between countries concerned is no less favourable to
trade than before.
• If no agreement, recourse can be made to arbitration.
• Compensatory adjustments are to be applied on an MFN basis.
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Exercise
1.Imagine that your country intended to
schedule banking and rail transport services in
its Schedule of Specific Commitments. What
could be an example of a market access
restriction in these sectors?
2. When can existing specific commitments be
modified?
National Treatment: Article XVII
• In the sectors inscribed in its Schedule, and subject
to any conditions and qualifications set out therein,
each Member shall accord to services and service
suppliers of any other Member, treatment no less
favorable than that it accords to its own like services
and service suppliers.
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Transparency
• Prompt publishing of all relevant measures of general
application that affect the operation of the agreement,
including international agreements that affect the GATS.
• Members must notify the Committee for Trade in
Services of new or changed laws, regulations or
administrative guidelines that affect trade in services
covered by their specific commitments under the GATS.
• Each member should establish an enquiry point, to
respond to requests from other Members for information
on these matters.
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Increasing Participation of Developing
Countries: GATS Article IV
Calls for facilitation of Developing Country trade through negotiated specific
commitments relating to:
• strengthening their domestic services sectors
• improvement of their access to distribution channels and information
networks
• the liberalization of market access in sectors and modes of supply which
are of export interest to Developing Countries.
Developed countries shall establish contact points to provide Developing
Country service suppliers with information on:
• Commercial and technical aspects of the supply of services
• Registration, recognition and obtaining of professional qualification
• The availability of services technology
Special priority for LDCs on implementing the above provisions.
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Economic Integration:
GATS Article V
Economic integration agreements must fulfill the
following criteria:
• Provide for the absence or elimination of substantially all
discrimination, in national treatment terms among the parties
• Have substantial sectoral coverage.
• Must not in respect of any Member outside the Integration
raise the overall level of barriers to trade in services (Art.V:1)
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Domestic Regulations: GATS Article VI
• Measures of general application affecting trade in sectors
committed must be administered in a reasonable,
objective and impartial manner.
• Members must maintain administrative, judicial or
arbitral tribunals to review, and provide remedy for
administrative decisions affecting trade in committed
sector.
• Members to ensure that measures relating to
quantitative restrictions, and technical standards are not
unnecessary barriers to trade.
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Recognition: Article VII
• WTO Members may recognize the education or
experience obtained, requirements met, or licenses or
certifications granted of other Members.
• Such recognition can be achieved:
- through harmonization or otherwise,
- can be based upon an agreement or arrangement
with the country concerned,
- may be accorded autonomously
• Members party to such agreement must afford others
interested the opportunity to join such Agreement.
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Restrictions to Safeguard BOP Issues:
Article XII
In the event of serious BOP and external financial difficulties or
threat, a Member may adopt or maintain restrictions on trade in
services on which it has undertaken specific commitments.
Such restrictions must:
not discriminate among Members;
avoid unnecessary damage to the commercial, economic and financial
interests of any other Member;
not exceed those necessary to deal with the circumstances in question;
be temporary and be phased out progressively as the situation
improves.
Any restrictions shall be promptly notified to the WTO General
Council
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Government Procurement: Article XIII
• Government Procurement involves services purchased
for governmental purposes, without aim of commercial
resale or for use in supply of services for commercial
resale.
• Note existence of the WTO Plurilateral Agreement on
Government Procurement.
• MFN and National Treatment principles shall not apply
to Government Procurement.
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General Exceptions: Article XIV
Provided measures are not used as an unnecessary
barrier to trade, some exceptions are permitted:
 necessary to protect public morals or to maintain public
order;
 necessary to protect human, animal or plant life or health;
necessary to secure compliance with laws or regulations
which are not inconsistent with the GATS
e.g., relating to prevention of deceptive and fraudulent practices,
protection of the privacy of individuals in the processing and
dissemination of personal data, and safety.
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Subsidies: Article XV
• Negotiators are mandated to develop
necessary multilateral disciplines to avoid
trade distortive effects of subsidies in
services and the appropriateness of
countervailing procedures
• Negotiators also need to recognize the role of
subsidies in relation to the development
programmes of Developing Countries.
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Dispute Settlement
• Recourse where members breach obligations
on specific commitments.
• Where a member feels there is
nullification or impairment of benefits, it
may have recourse to the DSU.
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US – Measures Affecting Cross – Border Supply
of Gambling and Betting Services.
• Antigua and Barbuda challenged US laws which prohibited the
supply of gambling services from any WTO Member to the US on a
cross border basis.
• In its Schedule of Commitments however, USA had taken
commitments on recreational services except sporting, with no
limitation on supply via Mode 1, (cross border supply). That is, US
had undertaken to allow other WTO Members to supply
recreational services into its territory on a cross border basis.
• The Panel found that by writing “none” in the market access
column, the US had made full market access commitment for
gambling and betting , which were recreational services that did not
fall in the category of sporting.
State of Play in GATS Negotiations
• The Doha Ministerial Declaration (2001,
November)
• Hong Kong Ministerial Declaration
(December 2005)
• Suspension of the Negotiations (August 2006)
• Soft and formal resumption of negotiations
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Market Access Negotiations
• No significant commercially meaningful openings
– Difficulty of assessing quality & depth of commitments
• emphasis on modes and sectors which currently dominate
schedules
• relatively few changes in sensitive sectors & Mode 4
• One form of limitation replaced by another
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Market Access: The Plurilaterals
• 23 plurilateral requests.
• Sectors covered include:
Architectural, Engineering & Integrated Engineering; Legal; Computer
& Related Services; Energy; Environmental; Financial; Maritime
Transport; Telecommunications; Audiovisual; Logistics; MFN
Exemptions (Audio-visual Services); Mode 3; Mode 4; Postal & Courier,
including Express Delivery; Cross Border Supply; Air Transport;
Distribution; Private Education; Services Related to Agriculture;
Construction.
• Meetings scheduled for April on plurilaterals
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Annexes to the GATS
- Annex on Article II Exemptions
- Annex on Movement of Natural Persons Supplying Services
under the Agreement
- Annex on Air Transport Services
- Annex on Financial Services
- Second Annex on Financial Services
- Annex on Negotiations on Maritime Transport Services
- Annex on Telecommunications
- Annex on Negotiations on Basic Telecommunications
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TAKE HOME ASSIGNMENT
• Trade in services has attracted increased
attention. Why is this so and what makes this
trade different from trade in goods?
• In your opinion, why is the GATS necessary?