REGIONAL LIBERALIZATION ON SERVICES IN ACCORDANCE WITH MULTILATERAL DISCIPLINES Commercial Diplomacy Programme UNCTAD

The GATS and Regional economic integration art.V The GATS enables its members to be a party to, or to enter into preferential agreements liberalising trade in services: art.V of GATS is the equivalent to art.XXIV and to the Enabling Clause of the GATT. Art.V provides for an exception to the general obligation of MFN treatment contained in art.II of GATS for parties of a regional trade agreement in services, meaning that the preferential treatment they apply among members of the regional agreement does not have to be extended to other GATS members.

Regional agreements liberalising services must comply with the conditions established in Art.V, i.e.: 2 basic conditions To be notified to the Council of Trade in Services of the WTO, and fulfil 2 basic conditions: “substantial sectoral coverage”have a “substantial sectoral coverage” in terms of sectors, volume of trade affected and modes of delivery, and national treatmentprovide for national treatment for services’ providers, eliminating “substantially” all discrimination. These conditions must be met at the entry into force of the agreement or on the basis of a “reasonable” time- frame.

Flexibility of art.V: flexibility Art.V provides for flexibility in the implementation of these requirements when the agreement : áinvolves developing countries, and áis related to a wider process of economic integration of trade liberalisation. BUT: BUT: how and who will determine “substantial sectoral coverage” and the appropriate time-frame ? Regional integration agreements among developing countries such as the MERCOSUR and the Andean Community have set a time-frame of 8-10 years to achieve a “substantial sectoral coverage” and full liberalisation of trade in services.

Other provisions contained in Art.V: The level of barriers to trade in the sectors covered by the regional agreement should not be raised compared to the level applicable before the agreement when signing the regional agreement. Para. 3(b) of art.V allows to grant more favourable treatment to juridical parties owned or controlled by natural persons of the parties of the regional agreement., i.e.:it allows to introduce or to maintain a preferential treatment on the basis of nationality.

Implications of these GATS provisions when negotiating regional agreements on services: The higher the level of commitments adopted in the GATS, less space is left for regional preferential treatment,The higher the level of commitments adopted in the GATS, less space is left for regional preferential treatment, for example: if a country binds in the GATS an unrestricted market access to all members (MFN) in all service sectors and for all modes of delivery, it will not be able to grant a preferential treatment in any sector nor mode to the members of the regional agreement. Therefore, the regional agreement will be less attractive for all parties concerned compared to the multilateral agreement. The “margins of preference” determine the relevance of the regional agreement compared to the multilateral agreement.

The importance of the “margins of preference” in the negotiation of a regional agreement: The “expected value” of regional integration for its members depends on what they can reasonably expect as the result of the regional negotiation. If they expect to receive the same market access from their regional partners as in the multilateral framework, their offers will be less significant. While some countries will not benefit of a regional margin of preference, others could benefit from them. By definition, regional agreements in services should provide for a “GATS plus” treatment for their members. The approach of “positive lists” allows for preferential treatment for regional agreements.

The importance of multilateral negotiations of GATS 2000 for regional agreements: New disciplines to be developed in GATS 2000 such as subsidies, emergency safeguards, government procurement, will have an impact on what has been or could be agreed at the regional level. Any new regional agreement should be compatible with the current GATS provisions and with future provisions. To maintain its relevance, the regional agreement should go beyond future GATS provisions.

Main elements to be considered for the negotiation of a regional agreement in services: ¶The COVERAGE of the liberalisation ¶The COVERAGE of the liberalisation, i.e.: how many sectors, what modes of delivery, what volume of trade involved, will there be exemptions (permanent or temporary)? what measures will be covered (i.e. subsidies, government procurement?). ·The KIND of liberalisation ·The KIND of liberalisation, i.e.: MFN treatment and national treatment with preferences for the partners n the regional agreement? ¸Related disciplines ¸Related disciplines, i.e.: the provisions that address specific issues of trade in services, such as transparency, monopolies and competition, safeguards, subsidies, rules of origin, dispute settlement.

Regional liberalisation of trade in services: the example of the Andean Community

WHAT IS THE ANDEAN COMMUNITY: A subregional integration scheme established in 1969 among 5 Latin American countries (Bolivia, Colombia, Ecuador, Peru, Venezuela) = all members are middle-income developing countries. It adopts supranational decisions that are automatically incorporated into the national legal frameworks without ratifications (as in the EU). It has a common external tariff for trade in goods and aims at achieving a common market for goods and services in 2005.

Andean commitments regarding trade in services: The “General Framework of Principles and Rules for Liberalising the Trade in Services in the Andean Community” was adopted as the supranational decision number 439 in June Its main objective is to create a common market of services among andean countries through the elimination of restrictive measures.

Andean commitments regarding trade in services: Coverage: all sectors, all modes and all measures. Only exclusion: air transport services and services provided by governmental authority. But: there were common regimes prior to this decision for transport services, maritime services, road transport and air transport. 5 liberalising principles: MFN, national treatment, market access, right to free transit and temporal presence, automatic recognition of qualifications and licenses. Negative lists, with the possibility of registering reservations and total liberalisation are set as objectives for the year 2005 through annual negotiations where progressive liberalisation is to be achieved. Related disciplines: rules of origin, safeguards, subsidies, and special and differential treatment for 2 of the 5 members.