Market Access Issues in Services Lecture 4

Market Access Issues in Services Request-Offer Approach, delay in ensuring commitment. First commitment by Sector, then by Mode. Even if commitment is provided, the level is not deeper. Market Access and National Treatment limitation. Most commitments are unilateral.

Restrictiveness of services trade policies by region Source: Gootiiz and Mattoo (2009)

Restrictiveness of services trade policies by region and sector Source: Gootiiz and Mattoo (2009)

Restrictiveness of services trade policies by mode Source: Gootiiz and Mattoo (2009) Mode 1 includes financial, air passenger, maritime shipping and professional. Mode 3 includes financial, telecommunications, retailing, air passenger and maritime shipping, maritime auxiliary, and professional. Mode 4 includes accounting, auditing, and legal services.

Restrictiveness of GATS (UR) commitments, Doha offers and actual policy by country Source: Gootiiz and Mattoo (2009)

Offer in Management Consulting Services CountryMarket Access LimitationsNational Treatment Limitations AustraliaLimited commitment - does not include several sub- sectors Canada1. None, other than: Agrologists (Newfoundland and Labrador): Permanent residency requirement for accreditation. 2. None, other than: Agrologists (Newfoundland and Labrador): Permanent residency requirement for accreditation. 3. None 4. Unbound except as indicated in the horizontal section, and: Agrologists (Newfoundland and Labrador): Permanent residency requirement for accreditation. 1.None 2.None 3.None 4.None

Market Needs test for Independent Professionals (MCS) - EU The natural person must possess: (a) a university degree which is relevant to the sector of activity concerned or a technical qualification demonstrating knowledge of an equivalent level, (b) professional qualifications where this is required to exercise an activity pursuant to the laws, regulations or requirements of the EC or the Member State where the service is supplied and (c) at least six years professional experience in the sector. Where the degree or qualification has been obtained in a third country, the EU Member State concerned may evaluate whether this is equivalent to a university degree required in that Member State.

Quality Requirement - Canada FieldSpecifications Information and Communication Technology Professionals Baccalaureate degree in computer sciences or a related discipline and two years of experience in computer sciences; or Baccalaureate degree and 5 years experience in the field of computer sciences and information systems; or A Canadian I.S.P. designation (Information Systems Professional of Canada) or a license or designation from a recognized foreign certification body. Management Consultants A designated Certified Management Consultant (CMC) or equivalent designation recognized by the International Council of Management Consulting Institutes (ICMCI); or A management consultant certified by an accreditation body that is not recognized by the ICMCI but having a Baccalaureate degree and 5 years experience in a field directly related to the nature of the service contract. Current list of recognized certification bodies: United Kingdom - British Computer Society (BCS); United States - Institute for the Certification of Computing Professionals (ICCP); Canada - Canadian Information Processing Society (CIPS); New Zealand - New Zealand Computer Society (NZCS); Australia – Australian Computer Society (ACS).

Market Access Barriers - US Telecommunications and related services Under Section 310(b) of Communications Act (1934), broadcast and common carrier, and aeronautical radio licences cannot be granted to or held by non-U.S. citizens, their representatives, corporations not organized under the laws of the United States, or foreign governments. Nor may licences be granted to U.S. corporations of which more than 20% of the capital stock is owned of record or voted by any of these entities. However, under Section 310(b)(4), licences may be granted to companies organized in the United States that are controlled by holding companies organized in the United States and in which foreign individuals, corporations, or governments own of record or vote more than 25% of the capital stock, unless the Federal Communications Commission (FCC) finds that such ownership is inconsistent with the public interest. The international settlements policy (ISP) is one of several FCC regulatory safeguards to deter conduct by a foreign-based carrier that would harm competition in the U.S. telecommunications market. In early 2008, 165 routes were exempt from the ISP.

Market Access Barriers – US.. Banking Services: Foreign bank branches and agencies are subject to an "asset pledge requirement" under applicable federal and state law. At the federal level, the International Banking Act of 1978 provides that branches and agencies licensed by the OCC must maintain a "capital equivalency deposit" equal to at least 5% of their third-party liabilities with a local custodian bank. Requirements under state laws vary. Interstate expansion by a foreign bank through the establishment of branches by merger with a bank located outside the home state of a foreign bank is permitted on a national treatment basis. However, certain size limitations apply. Opening a branch is permitted in only 21 states, and under conditions of reciprocity. A majority of the board need to be U.S. citizens; approximately half of the states also require all or the majority of the board of directors of depository financial institutions to be U.S. citizens. Representative offices of foreign banks are not permitted in 18 states, and are subject to limitations in some.

Market Access Barriers – US.. Maritime Transport Service The Jones Act reserves cargo service between two points in the United States for ships that are registered and built in the United States and owned by a U.S. corporation, and on which 75% of the employees are U.S. citizens. The Jones Act does not prevent foreign companies from establishing shipping companies in the United States as long as they meet the requirements with respect to U.S. employees. Any foreign ownership in a U.S. carrier is limited to a maximum of 25% of voting shares. Exemptions: the Secretary of Transportation may waive the U.S.-built requirements for vessels authorized to carry no more than 12 passengers in a specified area provided certain criteria are met. Maritime Policy Improvement Act (2002) allows for Jones Act waiver for self-propelled tank vessels not built in the United States, provided the person requesting the waiver is a party to a binding legal contract with a U.S. shipyard for construction of a self-propelled tank vessel in US (built vessels must be U.S.-owned). The waiver however may not be granted to more than three vessels.

Market Access Barriers – US.. Accounting services: In most U.S. states, only Certified Public Accountants (CPA) are licensed to provide public attestation opinions on financial statements (including auditing). American Institute of Certified Public Accountants (AICPA) conducts the International Qualification Examination (IQEX), which states can use for non-U.S. professionals covered by a mutual recognition agreement (MRA). Currently there are MRAs with Australia, Canada, Ireland, and Mexico. In Alabama and North Carolina, U.S. Citizenship or permanent residency is a requirement for licensing, except if there is international reciprocity. Thirteen states require state residency, employment in the state, or an in-state office for licensing of accountancy.

Market Access Barriers – US.. Engineering and integrated engineering services: The registration of professional engineers is performed by the individual states. Each registration or licence is valid only in the State in which it is granted. The licensing procedure requirements vary but in general include: (i) graduation with a degree from an accredited four-year university programme in engineering; (ii) completing a standard Fundamentals of Engineering (FE) written examination; (iii) accumulating a certain amount of engineering experience (four years, in most states); and (iv) completing a written Principles and Practice in Engineering examination. Some states also have state-specific examinations. Various states issue generic professional engineering licences, while others issue licences for specific disciplines.

EU Experience TitleRestrictions in the insurance sector: opening reinsurance to competition MeasureServices - Financial Third Country Brazil Description Brazil abolished its monopoly on reinsurance in 2007, but it still puts restrictions for the provision of cross-border reinsurance for insurance services, which corresponds to the most widely followed commercial practice in this area. Although ordinary insurance is open to competition the current legislation foresees only the gradual liberalisation of the reinsurance sector, keeping several restrictions in place, notably as regards the provision of cross-border supply, thus limiting the possibilities for EU reinsurers to operate in this market. State of Play Raised in the Joint Committee in 2007 as well as repeatedly in the context of the DDA negotiations. Barrier id95268 Barrier Status Ongoing

EU Experience TitleRestrictions on Maritime transport services MeasureServices – Transport Third Country Brazil Description Although some EU companies are already present in the market through a local establishment, Brazil maintains several restrictions which hamper EU business in a very important way, namely the lighthouse fees, due to their discriminatory nature. Brazil applies a lighthouse fee (TUF), established by Decree-Law No. 1,023/69, and regulated by Decree No. 70,198 of 24 February 1972 and Decree No. 878 of 22 July The TUF is applied only to foreign flag vessels, each time a foreign ship uses a port in a different Brazilian state. The fee is increased by 50% for ships over 50,000 tonnes, and by 100% for ships over 100,000 tonnes. The protection of intra-Mersocur traffic, due to the cargo sharing agreements that reserve access, on a first refusal basis, to the market only to vessels flying the flag of Mercosur countries (cargo reservation to Mercosur operators of intra- Mercosur traffic). State of Play Raised several times both in the Maritime dialogue and in several Joint Committees, most recently in July Barrier id Barrier Status Ongoing

EU Experience TitleInsurance - Discriminatory practice in branch approval MeasureDiscriminatory treatment Third Country Brazil Description Foreign insurers are facing difficulties in business planning and resource management due to limited predictability of regulatory approval in geographical business expansion. Currently, the criteria for admitting foreign insurers into China are not completely transparent. Foreign insurers in China remain subject to administrative practice of branch approval on a consecutive basis and are de facto limited to two licences a year. This is not the case for domestic insurers who can apply for concurrent or simultaneous licenses. Indeed, compared to domestic insurers, whose geographic expansion is only subject to their own financial and operational considerations, European insurers are still facing additional numerical constraints in approval of provincial branches or sub- branches or sales service centres. State of Play The issue was raised regularly by the Commission notably during the EU-China Joint Committee in September 2008, as well as during the Transitional Review Mechanism exercise at the WTO Committee on Trade in Financial Services. Barrier id Barrier Status Ongoing