Gats Obligations

8/13/2019 Gats Obligations

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Prepared by Dr. Dorot hy Riddle,Service-Grow th Consult ants Inc.,Canada

Prepared by Dr. Dorot hy Riddle,

Service-Grow th Consultants Inc.,Canada

Obligations Under theObligations Under theGeneral Agreement onGeneral Agreement onTrade in ServicesTrade in Services

This presentation is intended to be used in conjunction with the

GATS Consultation Kit in order to introduce people to the actualobligations undertaken by your country in becoming a signatoryto the GATS. There are two other PowerPoint presentationsavailable on the International Trade Centre’s World Tr@deNetwebsite (www.intracen.org/worldtradenet) that you might findhelpful: “Overview of the General Agreement on Trade in

Services,” and “Issues in the New GATS Round.”

All references in these notes are to pages, boxes, or appendicesin the Business Guide to t he General Agreement on Trade in

Services (Geneva, 1999) commissioned by the Commonwealth

Secretariat and the International Trade Centre UNCTAD/WTO. The complete text of the GATS appears in Appendix I (starting onpage 115). To order the Business Guide to t he General

Agreement on Trade in Services , send requests on businessletterhead to:

ITC, Palais des Nations, 1211 Geneva 10, Switzerland

Or access the ITC homepage: http://www.intracen.org

There is also good reference material on the World TradeOrganization’s (WTO’s) own website, which you can accesseasil throu h the ITC’s Services Ex ortin Home a e:



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Progressive Liberalisat ion Progressive Liberalisat ion

ääAgreed to ongoing liberalisation.Agreed to ongoing liberalisation.

ääAims:Aims:

»» Reduce or eliminate tradeReduce or eliminate trade--distortingdistortingmeasures.measures.

»» Overall balance of rights &Overall balance of rights &obligations.obligations.

»» Respect for national policyRespect for national policy

objectives.objectives.

Participants need to understand that governments have already

agreed to an ongoing liberalisation process - this is not open tonegotiation. What is under negotiation is the areas that are tooffered by your government for liberalisation.

Remember - the aim is not “free trade” or “removing regulations.” The aim of the GATS negotiations is to address any measuresthat are trade distorting, based on an assumption that serviceswill continue to be regulated.

Each government is free to make or not make “offers” of

liberalisation, in keeping with national policy objectives.



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Transparency : A rt icle III Transparency: A rt icle III

ääInventory domestic regulationsInventory domestic regulations

affecting service operations.affecting service operations.Establish an enquiry point.Establish an enquiry point.

ääRespond promptly to queries.Respond promptly to queries.

ääNotify the Council for Trade inNotify the Council for Trade inServices annually of relevantServices annually of relevantchanges in laws, regulations, orchanges in laws, regulations, oradministrative guidelines.administrative guidelines.

The single most important benefit for service exporters from the

GATS is transparency - the critical element in a predictabletrading environment. Each government has taken on theresponsibility of identifying regulations, policies, andadministrative procedures at all levels of government (federal,provincial, municipal) that can affect the competitiveness ofservices and service providers.

The first task for governments is to conduct an inventory of

trade-related measures. Some of these (which treat nationalsdifferently from foreigners) will need to be “scheduled” aslimitations to market access or to national treatment. Others

(such as requirements for professional licensing that apply tonationals and foreigners alike) will simply need to be available inresponse to queries from foreigners.

The second task (to be completed within two years of signing the

GATS) is to set up Enquiry Points to which trading partners canaddress queries. These Enquiry Points will need to be equippedwith the inventory information in order to be able to respond

quickly.

There is an additional obli ation to notif the Council for Trade in



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Most Most - - Favoured Nat ion: A rt icle II Favoured Nat ion: A rt icle II

ääExtend to all WTO members anyExtend to all WTO members any

trading concessions granted to onetrading concessions granted to oneeconomy (whether or not a WTOeconomy (whether or not a WTOmember).member).

NOTE:NOTE:

»» Possibility of MFN exemptions tillPossibility of MFN exemptions till2005.2005.

»» Economic integration (Article V).Economic integration (Article V).

MFN is one of the hallmarks of the multilateral trading

environment. It is the principle that allows smaller or lessdeveloped economies to benefit from the trade concessionsachieved by large economies.

In essence, one must provide to all other WTO members the mostfavourable conditions given to any single trading partner. Notethat the trading partner in question does not need to be a WTOmember.

At the time that the GATS came into effect, WTO members had

the right to file for a one-time exemption for up to 10 years tocover existing more favourable trading agreements.

The single ongoing exception to MFN is in the instances ofeconomic integration agreements, which we will discuss next. Atthe present time, there are over 100 such agreements in effectaround the world.



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Domest ic Regulat ions: A rt iclesDomest ic Regulations: A rt icles

V I & VII VI & VII

ääAdministered in a reasonable,Administered in a reasonable,objective, and impartial manner.objective, and impartial manner.

ääProvide timely processing ofProvide timely processing of

applications.applications.

ääFor technical/professional standards:For technical/professional standards:

»» criteria that are objective & transparentcriteria that are objective & transparent

»» requirements that are not more burdensomerequirements that are not more burdensome

than necessarythan necessary

»» nonnon--restrictive licensing proceduresrestrictive licensing procedures

All governments have the right, and are expected, to regulate

service industries within their jurisdiction. However, there is anobligation to do so in a reasonable, objective, and impartialmanner.

Foreign service providers may be required to meet specificrequirements; however, the government has an obligation toprocess such applications in a timely manner and provideinformation on the status of the application.

In regard to technical or professional standards, a necessity test

comes into play with regard to the requirements that areimposed. The requirements may not in themselves be traderestrictive. They must be based on objective criteria (not, forexample, on nationality).



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Domest ic Regulat ions (cont .) Domest ic Regulat ions (cont .)

ääProvide procedures for verifying theProvide procedures for verifying the

competence of professionals.competence of professionals.ääBase recognition on internationalBase recognition on international

standards.standards.

ääAllow WTO members to justifyAllow WTO members to justifyrecognition of education, experience,recognition of education, experience,

licenses, or certifications.licenses, or certifications.

ääProvide for tribunals.Provide for tribunals.ääDetermine potential remedies.Determine potential remedies.

In regard to professionals, governments must have a reasonably

efficient procedure for verifying their competence which is linkedto international standards. Other governments have the right toprovide justification that the credentials of their professionals berecognised.

In the case of disputes, the government must provide for atribunal to hear the arguments and determine potential remedies.



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Monopolies: A rt icles VIII & IX Monopolies: A rt icles VIII & IX

ääEnsure that monopoly (or exclusive)Ensure that monopoly (or exclusive)

suppliers do not abuse their position.suppliers do not abuse their position.ääNotify the Council on Trade inNotify the Council on Trade in

Services 3 months prior to grantingServices 3 months prior to grantingnew monopoly or exclusive rights.new monopoly or exclusive rights.

ääCooperate in addressing businessCooperate in addressing business

practices that restrain competitionpractices that restrain competition

and restrict trade in services.and restrict trade in services.

There is no restriction on monopolies per se; however, the

government must ensure that monopolies (or exclusive serviceproviders) do not abuse that monopoly position.

In instances where the creation of a new monopoly is beingcontemplated, the government must give the Council for Trade inServices three months notice so that other trading partners cancomment.

Governments have agreed to cooperate in identifying andaddressing any business practices found to restrain competition

and restrict trade in services.



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Sect oral Scheduling: A rt iclesSect oral Scheduling: A rt icles

XX & XX I XX & XX I

ää

Schedule all service sectors:Schedule all service sectors:»» each mode of supplyeach mode of supply

»» market access and national treatmentmarket access and national treatment

ääBind the current level ofBind the current level of

liberalisation.liberalisation.

ääExamine current practices forExamine current practices forpotential progressive liberalisation.potential progressive liberalisation.

ääProvide compensatory adjustments ifProvide compensatory adjustments if

a schedule is modified.a schedule is modified.

The GATS differs from the GATT in that governments are free to

choose the service sectors in which they will liberalise marketaccess and national treatment. Those liberalisation offers are by“mode of supply” of which there are four:

Mode 1: Cross-border supply

Mode 2: Consumption abroad

Mode 3: Commercial presence

Mode 4: Presence of natural persons

See the GATS Consultation Kit for an explanation of thesemodes.

The scheduling sequence is first to bind current practices byscheduling all service sectors, even if the notation is “unbound”(or no commitments). Next the government needs to determine

where there is potential for liberalisation offers and from whichtrading partners it would like to request liberalisationconcessions. The formal “request and offer” process is expectedto start in early 2001, with formal submissions being made bymid-December 2000.

Note that schedules can be made more restrictive, butcompensation may need to be provided to trading partners.



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Market Access: A rt icle XVI Market Access: A rt icle XVI

ääAccess is granted to both theAccess is granted to both the

service and the service supplier.service and the service supplier.

ääCertain quantitative restrictions areCertain quantitative restrictions areallowed as long as they areallowed as long as they arestipulated.stipulated.

ääFull liberalisation involves theFull liberalisation involves theremoval of all quantitativeremoval of all quantitativerestrictions.restrictions.

One important difference from the GATT is that market access is

granted to both the service and to the service supplier.

In Article XVI of the GATS, six types of specific restrictions havebeen identified for liberalisation focus. Existing restrictivepractices in these areas must be noted on schedules as currentmarket access limitations and must be liberalised over time.



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Nat ional Treatment : A rt icle XVII Nat ional Treatment : A rt icle XVII

ääTreat foreign services and serviceTreat foreign services and service

suppliers no less favourably thansuppliers no less favourably thandomestic services and servicedomestic services and servicesuppliers.suppliers.

ääTreatment does not need to beTreatment does not need to beidentical as long as theidentical as long as theconsequences are equitable.consequences are equitable.

ääDoes not void double taxationDoes not void double taxationagreements (see Article XXII).agreements (see Article XXII).

The national treatment commitment is basically one of non-

discrimination between domestic and foreign services and servicesuppliers. It is important to note, though, that the “non-discrimination” applies to the competitive consequences not tothe precise treatment. For example, requiring both nationals andforeign nationals to have a degree from a particular localinstitution in order to be licensed would discriminate against

foreign nationals.



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Annexes Annexes

ääMovement of natural personsMovement of natural persons

ääAir transport services, which areAir transport services, which arelimited to:limited to:

»» aircraft repair and maintenanceaircraft repair and maintenance

»» selling & marketing of servicesselling & marketing of services

»» computer reservation systems (CRSs)computer reservation systems (CRSs)

ääFinancial servicesFinancial services

ääBasic telecommunicationsBasic telecommunications

ääDisciplines related to accountancyDisciplines related to accountancy

There are five areas in which specific agreements have been

reached, which can be found in the Annexes to the GATS:

1. A limited number of WTO members have signed an agreement

on the terms for Mode 4 trade.2. WTO members have agreed to exclude air transport landingrights from the GATS negotiations.

3. A substantial number of WTO members have signed anagreement on liberalisation of financial services and havescheduled commitments.

4. Similarly, a substantial number of WTO members have signedan agreement on liberalisation of basic telecommunications and

have scheduled commitments.5. Guidelines for a multilateral approach to the recognition of accountancy credentials and the regulation of the accountancyprofession have been developed. They are not binding at thepresent time; however, they are being considered for applicationto other professions, especially legal services, architecturalservices, and engineering services.

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