Presentation on theme: "REGULATORY DISCIPLINES IN TRADE AGREEMENTS"— Presentation transcript:
1 REGULATORY DISCIPLINES IN TRADE AGREEMENTS Dr. Sherry StephensonDirector, Department of Trade, Tourism and Competitiveness, OASCanberra, May 3, 2007
2 THESIS STATEMENTMODERN TRADE AGREEMENTS ARE AS MUCH ABOUT REGULATORY DISCIPLINES AS THEY ARE ABOUT SERVICES LIBERALIZATION
3 Regulatory Rights and Trade Agreements WTO does NOT pronounce on the content of national regulation or on government policy objectives : in Preamble to GATSRegional trade agreements (RTAs) follow the same approach: the government right to regulate is intact
4 What then is the role of trade rules in addressing regulations? Three main functions:1. Trade rules may help to encourage good regulatory practicesAnd provide impetus to domestic economic reform efforts2. Trade rules can address possible cases where regulation is used for protectionAnd balance this with the right to regulate3. Trade rules can help to encourage regulation that supports liberalizationEffective liberalization can require (re) regulation
5 KEY QUESTIONS How do trade agreements discipline these measures? Which type of trade agreement does this more effectively?i.e. GATS-type, or new RTAs?
6 Various types of regulatory measures can negatively affect services trade Denial of market accessDiscrimination against services or services providersLack of information on applicable service regimeAnticompetitive commercial practicesInsufficient objectivity or effectiveness of the regulation designed to address the competence, capacity, etc. of the foreign service or service providerInsufficient impartiality in administrative processes related to the regulations (ex. the granting of licenses)Insufficient objectivity or effectiveness of qualitative norms affecting the service or service provider (competence, capacity, etc.)
7 Provisions in Trade Agreements to address Regulatory Issues Quotas or quantitative restrictionsaddressed by Art. XVI in GATSaddressed by MA Article in RTAsInternal discriminatory practicesaddressed by Art. XVII in GATSaddressed by NT Article in RTAs
8 Provisions in Trade Agreements to address Regulatory Issues Domestic regulationsaddressed by Art. VI in GATSaddressed by DR Article in recent RTAsTransparencyaddressed by Art. III in GATSaddressed by chapter on Transparency in recent RTAs
9 REGULATORY DISCIPLINES UNDER THE WTO SERVICES AGREEMENT (GATS)
10 Disciplines on Market Access Restrictions under GATS Article XVI: Limitations onThe number of service suppliers;The total value of service transactions or assets;The total number of service operations;The total number of natural persons that may be employed;The participation of foreign capital;Specific types of legal entity.
11 Disciplines on National Treatment Restrictions - GATS Art. XVII : Unlimited restrictionsExamples of National Treatment Limitations :Restrictions on the international movement of payments and remittances;Recognition requirements for professional qualifications;Requirements for practice and experience in the country;Nationality/and or residency requirements;Restrictions on the acquisition of real estate;Partnership requirements with local firms.
12 Disciplines on Transparency under GATS Article III:Obligation to publish all measures affecting services trade and make them publicly availableObligation to notify all new measures affecting services trade and/or changes to existing measures at all on an annual basis
13 Disciplines on Domestic Regulation under GATS GATS Article VI : In sectors where commitments are undertaken:VI:4 - “Necessity” test to be appliedVI:6 - Procedures to verify competence in placeIn all sectors, with or without commitments:VI:1 - Reasonable, objective and impartial administration of measures of general applicationVI:2 - Procedures for the review of administrative decisions affecting trade in servicesVI:3 - Decisions on applications to be made within a reasonable period
14 Core of regulatory discipline “Necessity” test GATS objective is to ensure that domestic regulations DO NOT CREATE UNNECESSARY BARRIERS TO TRADE (Article VI:4)… that measures relating to qualification requirements and procedures, technical standards and licensing requirements are, inter alia:Based on objective and transparent criteria, such as competence and the ability to supply the serviceNot more burdensome than necessary to ensure the quality of the service;In the case of licensing procedures, not in themselves a restriction on the supply of the service.
15 Domestic Regulation Discipline - Provisional application Article VI:5“(a) In sectors in which a Member has undertaken specific commitments, pending the entry into force of disciplines developed in these sectors pursuant to paragraph 4, the Member shall not apply licensing and qualification requirements and technical standards that nullify or impair such specific commitments …”
16 Are GATS disciplines on Domestic Regulation adequate? Controversial issue for past 10 years in Working Party on Domestic RegulationStronger disciplines are found in:WTO TBT Agreement ArtWTO SPS Agreement Art. 2.2, Art. 5.6GATS Disciplines on Domestic Regulation in the Accountancy Sector“Necessity text” also found in:GATS Annex on Telecommunication, para. 5(3)GATS Art. XIV on General Exceptions
17 WTO Disciplines on Accountancy go further “Necessity test”Measures should not be more trade-restrictive than necessary to fulfill a legitimate objective…….defined as, among others: protection of consumers, quality of the service, professional competence, and integrity of the professionTransparencyNot just provide information on requirements, procedures and technical standards……… but alsostate reason for the measure and its relation to legitimate objective……, andprovide opportunity for public comment
18 Disciplines on Domestic Regulation for Accountancy – a model? Licensing requirementsKnown in advance, public & objectiveAlternatives for the residency requirementReasonable affiliation to professional bodyReasonable administrative costsLicensing proceduresKnown in advance, publicOnly strictly necessary documentation requiredQualification requirementsTake into account degrees earned abroad on the basis of “equivalency”Provide examination for the activityQualification proceduresVerification of diplomas in a reasonable time frameCarry out exams in a reasonable time frame
19 Ways to strengthen regulatory disciplines under GATS To reduce impact of excessively burdensome regulations on services tradeStrengthen NATIONAL TREATMENTStronger TRANSPARENCY disciplinesHARMONIZATION of normsMUTUAL RECOGNITIONAdoption INTERNATIONAL STANDARDSSECTOR-SPECIFIC DISCIPLINES
20 REGULATORY DISCIPLINES FOR SERVICES IN REGIONAL TRADE AGREEMENTS
21 Evolution in thinking in RTAs on Regulatory Issues during 1990s Increased importance attributed to regulatory disciplines:Sector-specific regulatory discipline elaborated furtherTransparency disciplines strengthenedDomestic Regulation provision addedDR provision:Viewed as “third pillar” for services liberalization, along with market access and national treatmentseen as necessary to discipline non-quantitative, non-discriminatory regulations that can act as barriers to trade
22 Approach of RTAs to Regulatory Disciplines Area where regional agreements have followed and drawn from the multilateral GATS disciplines but have gone furtherRTA’s have been reluctant to engage in rule-making in the DR areaBut RTAs have strengthened application of DR article and have evolved additional regulatory sectoral disciplines and transparency disciplines
23 Approach of recent RTAs towards Services Regulation Article on domestic regulation in services and investment chapter identical to GATS Article VI.3 and 4, but permanent in nature and of general applicationTreatment of regulatory issues with respect to licensing and certification for professional services in Annex on Professional ServicesSeparate chapters with regulatory disciplines for telecommunications and financial servicesSame approach followed by all NAFTA-type agreements negotiated by U.S. and by Mexico and Chile
24 Recent US FTAs deal with regulatory issues explicitly Evolution in FTAs with respect to Regulatory Disciplines after 2000 (under new TPA Act)US-Chile (2003)US-Singapore (2003)US-CAFTA (2004)US-Australia (2004)US-Morocco (2004)US-Peru (signed 2006)US-Colombia (signed 2007)US-Panama (signed 2007)US-South Korea (signed 2007)All contain similar approach covering regulatory issues spread out through the agreement.
25 CHAPTERS CONTAINING REGULATORY DISCIPLINES AFFECTING SERVICES RTAs AgreementsCHAPTERS CONTAINING REGULATORY DISCIPLINES AFFECTING SERVICESCROSS-BORDER TRADEINVESTMENTTELECO - MMUNICATIONSFINANCIAL SERVICESELECTRONICCOMMERCETRANSPARENCYTEMPORARY ENTRY OF BUSINESS PERSONSCOMPETITIONCHILE-USA (01 January 2004 )CHAPTER 11CHAPTER 10CHAPTER 13CHAPTER 12CHAPTER 15CHAPTER 20CHAPTER 14CHAPTER 16SINGAPORE-USA (01 January 2004)CHAPTER 8CHAPTER 9CHAPTER 19AUSTRALIA-USA (01 January 2005 )PERU-USA(12 April 2006)COLOMBIA-USA(22 November 2006)PANAMA-USANot signed yetCHAPTER 18KOREA-USA
26 1. Chapter on Transparency Applies to all matters under the agreement, including servicesDisciplines on: contact points; publication; notification and provision of information; administrative proceedings; prior comment; advance publication; and judicial review and appealAdditional transparency disciplines present in: Cross-Border Trade in Services Chapter, Investment Chapter; Professional Services Annex; Temporary Movement Chapter; Telecommunications Chapter; and Financial Services Chapter
27 2. Chapter on Cross-Border Trade: DR Provision Includes Article on Domestic Regulation with identical text to that contained in GATS Article VI.3 and VI.4BUTArticle is of general application to all services,Article is a definitive, not a provisional textCross Reference to Investment chapter means that mode 3 is also covered (investment in goods and services)
28 3. Annex on Professional Services Contains regulatory disciplines to address licensing and qualification requirementsAdditional objectives:--To develop mutually acceptable standards and criteria for licensing and certification of professional services providers--To provide recommendations on mutual recognition agreementsUS-Chile FTA: specific sections on foreign legal consultants and engineers – work programs to be undertaken to provide for temporary licensing
29 4. Sector Specific Regulatory Disciplines Telecommunications chapterSet of pro-competitive regulationsStronger than WTO “Reference Paper”Financial services ChapterSelf-containedTransparency, procedural disciplinesMarket-access commitments for investment and services
30 Sectoral Disciplines with Domestic Regulation component AT MULTILATERAL LEVELReference Paper on TelecommunicationsAccountancy DisciplinesAT REGIONAL LEVEL – “NAFTA-type” RTASChapter on TelecommunicationsAnnex on Professional ServicesChapter on Financial ServicesChapter on Temporary Entry Business Person
31 Objective of regulatory disciplines in recent RTAs To ensure that regulations are not “more burdensome than necessary” to ensure the quality of the serviceTo ensure that regulations do not undermine liberalization undertakingsBut allowing regulatory autonomy to remain intact.
32 Regional Trade Agreements Disciplines on Domestic Regulation in RTA’s (since mid-1990s)
33 Strengths of recent RTAs with respect to Regulatory Disciplines Promote gains in transparencyLock-in the status quo in all sectorsEncourage a domestic regulatory audit of service sector regimesApply national treatment and the necessity test in form of a general obligation to all service sectors
34 Focus of recent RTAsOn expanding and deepening transparency provisionsOn strengthening sector-specific regulatory disciplinesOn generalizing application of the existing “necessity” test rather than further defining concept of “necessity”Definition of what is an appropriate level of regulatory intervention may be left open to future panels
35 Some ConclusionsThere has been little progress likely at multilateral level on developing deeper regulatory disciplines for services other than telecomsRTAs have gone furtherGap in rule-making and in application of rules between WTO and RTA’s will continue to widen
37 1. Strengthened National Treatment Best alternative to expanded domestic regulation disciplines?AT MULTILATERAL LEVEL: NT is conditional; only applies to listed service sectorsAT REGIONAL LEVEL: New and high quality RTAs following the negative list approach provide for general application of the NT discipline (i.e. to all service sectors, subject to limited exceptions or non-conforming measures) –extremely strong discipline
38 1. Strengthened National Treatment Best alternative to expanded domestic regulation disciplines?AT MULTILATERAL LEVEL: NT is conditional; only applies to listed service sectorsAT REGIONAL LEVEL: New and high quality RTAs following the negative list approach provide for general application of the NT discipline (i.e. to all service sectors, subject to limited exceptions or non-conforming measures) –extremely strong discipline
39 2. Transparency AT MULTILATERAL LEVEL AT REGIONAL LEVEL GATS Art. III requirements--publication--notification of changes in regulations that “significantly” affect foreign services/ service providers--[ Requirements in Accountancy Disciplines--provide reason for the measure and its relation to legitimate objective--provide, when possible, opportunity for public comment before the adoption of new measures ]AT REGIONAL LEVELSeparate chapter on Transparency ---Applies to all matters under the agreement, including services. Covers: contact points; publication; notification and provision of information; judicial review and appeal and administrative proceedings--Opportunity for prior comment--Written response to commentsAdditional transparency disciplines for services in Cross-Border Services Chapter; Financial Services Chapter; Temporary Entry Chapter
40 3. Harmonization of Standards AT MULTILATERAL LEVELNo attempt to carry out harmonization of services standardsAT REGIONAL LEVELNo attempt to carry out harmonization in most RTAsExceptions :Andean Community (sectoral norms)CARICOM (establish common standards for accreditation of qualifications- professional services)European Union (sectoral norms)
41 4. Mutual Recognition / Equivalence AT MULTILATERAL LEVELGATS Art. VII on Recognition allows for conclusion of recognition agreementsIntends to assure such arrangements may be acceded to by other WTO members“Guidelines for Mutual Agreements or Arrangements in the Accountancy Sector.AT REGIONAL LEVELMany RTAs contain article on Mutual Recognition that encourages conclusion of such agreementsAnnex on Professional Services in NAFTA-type agreements encourages the development of mutually acceptable professional standardsSection on Foreign Legal Consultants and Engineers mandates consultations with professional bodies
42 5. International standards The existence of international standards would facilitate implementation of a ‘necessity’ testInternational standards would also assist in the development of MRAsDevelopment of international standards could clearly have a trade facilitating effect.However, at present there are few internationally agreed standards for services.
43 6. Sector-Specific Disciplines Useful to clarify, elaborate or supplement horizontal disciplines in sectors with unique characteristicsNetwork-based infrastructure servicesServices with asymmetries of informationSocial services (“universal service objective”)Specific sectoral treatment carried out through individual chapters, annexes, etc.Specific treatment can also be provided for Mode 4
44 Sectoral Disciplines with Domestic Regulation component AT MULTILATERAL LEVELReference Paper on TelecommunicationsAccountancy DisciplinesAT REGIONAL LEVEL – “NAFTA-type” RTASChapter on TelecommunicationsAnnex on Professional ServicesChapter on Financial ServicesChapter on Temporary Entry Business Person
45 REGULATORY DISCIPLINES FOR SERVICES IN REGIONAL TRADE AGREEMENTS