Presentation on theme: "SERVICES TRADE UNDER THE GATS"— Presentation transcript:
1 SERVICES TRADE UNDER THE GATS GATS Main FeaturesFebruary 2007SERVICES TRADE UNDER THE GATS- An Introduction I -Rolf AdlungTrade in Services DivisionWTO
2 GATS Main FeaturesFebruary 2007STARTING POINT: INTERNATIONAL SERVICES TRADE – IMPLICATIONS FOR DEVELOPMENT
3 A Priori 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, 2002).Infrastructural services such as telecommunications, finance and transport are crucial determinants of overall economic efficiency and growth.
4 Services trade and development: Some estimates Lack of competition in maritime transport (cargoreservation, restrictions on port services, collectiverate setting, etc.) can increase freight rates up to25 % on certain routes.Economies that fully liberalized investment intelecom and financial services grew about 1.5 %faster over the past decade than others.Services liberalization in developing economiescould provide as much as US$6 trillion in additionalincome between 2005 and 2015.Source: World Bank, 2002.
5 Services trade and development: Necessary conditions Appropriate sequencing of reforms[(re-)regulation/liberalization/privatization]Contestable markets (effective competition) toprevent private rent-seekingEffective regulation, including prudential rules,to protect consumers and the public interestNote: The Preamble of GATS expressly recognizes “the right ofMembers to regulate and to introduce new regulations…to meet national policy objectives”.
6 The GATS: A latecomer in the multilateral system ... GATS Main FeaturesFebruary 2007The GATS: A latecomer in the multilateral system ...
7 Services in the Multilateral System: Since 1995 YEAR ROUND PARTICIPANTSGenevaAnnecy1951 Torquay1956 Geneva1960/61 Dillon Round1964/67 Kennedy Round1973/79 Tokyo Round1986/93 Uruguay Round(Creation of GATS)
8 The traditional view ● Services = intangible = non-tradable ● Services = government monopolies● Services = rich countries’ playfield● Services = unsuited for GATT-type disciplines
9 Challenges during the Uruguay Round ● Sector coverage?● Types of transactions?● Role of Most-Favoured-Nation (MFN) principle?● Permissible policy instruments?● Need for GATT-type trade remedies andregulatory disciplines?
10 GATS Main FeaturesFebruary 2007GATS: Main Features
11 GATS Main FeaturesFebruary 20071st ObservationTHE GATS IS FAR WIDER IN COVERAGE THAN CONVENTIONAL TRADE AGREEMENTS ....
12 GATS: Scope, coverage, definition MEASURES AFFECTING TRADE INSERVICES AT ALL GOVERNMENT LEVELSALL SERVICES (except governmental servicesand measures affecting air traffic rights)FOUR MODES OF SUPPLY- Cross-border supply - Consumption abroad- Commercial presence - Presence of nat. personsAPPLICATION TO SERVICES AND SERVICESUPPLIERS
14 Mode 4: who is in and who is out? CoveredNot coveredEmployees of foreign service suppliers in host country (ICTs)Employees of foreign service suppliers abroad to fulfill a contract (CSS)Natural persons as independent service suppliers fulfilling a contract (CSS)Also: Business VisitorsEmployees in the goods sectorEmployees of host country firmsPersons with citizenship, permanent residence and/or work permit
15 ... with interesting ramifications Test question: What modes are involved?(The patient and the nurse are foreigners, the hospital isforeign-owned, and ‘SURGERY.COM’ is based abroad.)
16 2nd Observation... BUT THE GATS IS EXTREMELY FLEXIBLE IN APPLICATION
17 Relevance for individual sectors GATS Main FeaturesFebruary 2007Relevance for individual sectorsThree possible Scenarios:I. Not covered: Governmental services and large segments of air trafficII. Covered - but no access obligationsIII. Access obligations(“Specific Commitments”)
18 Scenario I: Status of Governmental Services GATS Main FeaturesFebruary 2007Scenario I: Status of Governmental ServicesExcluded 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)Financial services: Competition as the sole criterion(Annex on Financial Services)
19 GATS Main FeaturesFebruary 2007Scenario II: What minimum obligations are incurred in sectors falling under GATS (“unconditional obligations”)?
20 Unconditional obligations GATS Main FeaturesFebruary 2007Unconditional obligationsMost-Favoured-Nation (MFN) TreatmentTransparency requirementsSome other “good governance” provisions (availability of legal remedies, opportunity for consultations, etc.)Note: There is no obligation to open markets!
21 Scenario III: What are the implications of “Specific Commitments”? GATS Main FeaturesFebruary 2007Scenario III: What are the implications of “Specific Commitments”?
22 Specific Commitments – Three basic concepts GATS Main FeaturesFebruary 2007Specific Commitments – Three basic conceptsMarket AccessNational Treatment(Additional Commitments)Plus: Unconditional and Conditional Obligations
23 Market Access and National Treatment: Main elements MARKET ACCESS (Article XVI)Absence of quota-type and similar restrictionsNATIONAL TREATMENT (Article XVII)Non-discrimination with regard to all measuresaffecting the supply of a serviceAny limitations must be inscribed in Schedules under the relevant mode(s).
24 Schedules of Specific Commitments: General Structure
25 How Schedules of Commitments are structured: Case A. *Unbound due to lack of technical feasibilityNOTE: “unbound” = no commitment (full policy discretion)“none” = no limitation (full commitment)“The number of ... “ = partial commitment
26 Specific Commitments – Where? How? When? GATS Main FeaturesFebruary 2007Specific Commitments – Where? How? When?Selection of sectorsInscription of limitations(i) Less than status quo?(ii) Status quo?(iii) More liberal?- With immediate effect?- Pre-commitment?
27 Conditional obligations GATS Main FeaturesFebruary 2007Conditional obligationsArt. III:3 (add. transparency requirements)Art. VI:1 (administration of measures)Art. VI:5 (regulatory disciplines)Art. VIII (compliance of monopolies)Art. XI:1 (current transactions)Art. XI:2 and fn 8 to Art. XVI (capital transfers)Annex on Telecommunications
28 Application of GATS obligations across the services economy
29 Must GATS obligations (and commitments) be respected at all costs? No. Members may intervene for overriding health and other policy reasons (Article XIV, ‘prudential carve-out’ in financial services), because of security concerns (Article XIVbis) or to protect the Balance of Payments (Article XII).Also, they may want to re-negotiate commitments (Article XXI) or seek a waiver (Article XIX:3 of WTO Agreement).