Professor dr. juris Ola Mestad

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• Professor dr. juris Ola Mestad
• Centre for European Law and Scandinavian
  Institute of Maritime Law
• International Economic Law Course Spring 2009

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Character of GATS

• The GATS is basically a framework for
  negotiations
• Much more so that the GATT
• At the same time A legal system
• Negotiating rounds in the WTO
• Including services
• Currently the Doha Round
• Negotiations broke down 29 July 2008

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Importance of Trade in Services

• Services approximately 68 per cent of world GDP
• Only 20 per cent of global cross-border trade
  (Van den Bossche p 476)
• Why?
• Potential gains from liberalisation of trade in
  services two to four times those of liberalistion
  of trade in goods (Van den Bossche p 402)
• Is this possible to calculate?
• Are services more difficult to trade?
• Protectionism?

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Some Main Rules of GATS

• Most-Favoured-Nation (Art. II)
• No discrimination between different foreign
  service providers
• Market access (Art. XVI)
• Right to provide services to or within a country
• National treatment (Art. XVII)
• No discrimination between foreign and national
  providers
• Domestic regulation (Art. VI)
• All general national measures shall be
  administered in a reasonable, objective and
  impartial manner

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The Difficulties in Expressing Opinions on GATS
Law

• The wording of the agreement is vague and
  abstract, without claryfing additional agreements
• The agreement is very new with little
  clarification in case law
• GATT was agreed in 1947 and has much case law
• The US Gambling case is central
• Services are much more complex phenomena than
  goods
• But much of the language in GATS has been drawn
  from GATT

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Complex Areas of Application for GATS-rules

• A few types of services fully excluded
• Some transport services de facto excluded
• Next level Minimum effect coverage only by some
  general rules, e.g. on transparency (Art. III),
  and listed exemptions from the Most-Favoured-Natio
  n clause
• Normal application general rules and
  Most-Favoured-Nation treatment
• Stepping up Sector and, eventually, qualified,
  application with respect to market access and
  national treatment (This can be varied in many
  ways)
• Last step Full unconditional sector commitment

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GATS and Different Sectors

• GATS covers international trade in services
• A broad services concept
• Trade in services include establishment of
  foreign service providers
• GATS covers practically all types of services
• Some annexes to GATS reduce the applicability

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Sector Based Scheduling System

• Each country has its own schedule where it can
  list market access and national treatment
  obligations and exceptions
• The system is taken from the GATT goods system
• See e.g. Chinas list, available on
  www.wto.org/english/tratop_e/serv_e/serv_commitmen
  ts_e.htm
• E.g. 52 members have listed commitments in 11.A
  Maritime Transport Services
• Scheduling based on 4 modes of delivery of
  services
• From one member territory to another (cross
  border)
• In one member territory to service consumer of
  another member (consumption abroad)
• Supplier of one member with commercial presence
  in another territory
• Presence of service supplying natural person in
  territory of another member

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The Four Modes of Supply, Art. I2

• 2.       For the purposes of this Agreement,
  trade in services is defined as the supply of a
  service
• (a)       from the territory of one Member into
  the territory of any other Member cross border
• (b)       in the territory of one Member to the
  service consumer of any other Member
  consumption abroad
• (c)        by a service supplier of one Member,
  through commercial presence in the territory of
  any other Member commercial prescence
• (d)        by a service supplier of one Member,
  through presence of natural persons of a Member
  in the territory of any other Member. prescence
  of natural persons

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Which Modes Are Difficult?

• Importance in current trade
• Mode 1) and 3) 40 per cent of world trade each
• Mode 2) 20 per cent
• Mode 4) insignificant (Van den Bossche p 338)
• Strongest interference with national markets and
  organisation
• Mode 3 and 4?

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The exception for some public services in GATS
Art. I.3

• GATS covers all international trade in services
• except services supplied in the exercise of
  governmental authority, ref. Art I.3.b.
• which means any service which is supplied
  neither on a commercial basis nor in competition
  with one or more service suppliers
• This is a very narrow exception
• Probably mainly not important in most cases

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Article II Most-Favoured-Nation Treatment

• 1. With respect to any measure covered by this
  Agreement, each Member shall accord immediately
  and unconditionally to services and service
  suppliers of any other Member treatment no less
  favourable than that it accords to like services
  and service suppliers of any other country.
• 2. A Member may maintain a measure inconsistent
  with paragraph 1 provided that such a measure is
  listed in, and meets the conditions of, the Annex
  on Article II Exemptions.

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Some Clarifying Definitions Article XXVIII

• (a) measure means any measure by a Member,
  whether in the form of a law, regulation, rule,
  procedure, decision, administrative action, or
  any other form
• (b) supply of a service includes the
  production, distribution, marketing, sale and
  delivery of a service

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Some Clarifying Definitions Article XXVIII Cont

• (c) measures by Members affecting trade in
  services include measures in respect of
• (i) the purchase, payment or use of a service
• (ii) the access to and use of, in connection with
  the supply of a service, services which are
  required by those Members to be offered to the
  public generally
• (iii) the presence, including commercial
  presence, of persons of a Member for the supply
  of a service in the territory of another Member
• (d) commercial presence means any type of
  business or professional establishment, including
  through
• (i) the constitution, acquisition or maintenance
  of a juridical person, or
• (ii) the creation or maintenance of a branch or a
  representative office,
• within the territory of a Member for the purpose
  of supplying a service

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Article XVI Market Access

• 1.         With respect to market access through
  the modes of supply identified in Article I, each
  Member shall accord services and service
  suppliers of any other Member treatment no less
  favourable than that provided for under the
  terms, limitations and conditions agreed and
  specified in its Schedule.
• 2.         In sectors where market-access
  commitments are undertaken, the measures which a
  Member shall not maintain or adopt either on the
  basis of a regional subdivision or on the basis
  of its entire territory, unless otherwise
  specified in its Schedule, are defined as
• (a)        limitations on the number of service
  suppliers whether in the form of numerical
  quotas, monopolies, exclusive service suppliers
  or the requirements of an economic needs test
• (b)        limitations on the total value of
  service transactions or assets in the form of
  numerical quotas or the requirement of an
  economic needs test

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Article XVI Market Access cont

• (c)        limitations on the total number of
  service operations or on the total quantity of
  service output expressed in terms of designated
  numerical units in the form of quotas or the
  requirement of an economic needs test
• (d)        limitations on the total number of
  natural persons that may be employed in a
  particular service sector or that a service
  supplier may employ and who are necessary for,
  and directly related to, the supply of a specific
  service in the form of numerical quotas or the
  requirement of an economic needs test
• (e)        measures which restrict or require
  specific types of legal entity or joint venture
  through which a service supplier may supply a
  service  and
• (f)        limitations on the participation of
  foreign capital in terms of maximum percentage
  limit on foreign shareholding or the total value
  of individual or aggregate foreign investment.

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Article XVII National Treatment

• 1. In the sectors inscribed in its Schedule, and
  subject to any conditions and qualifications set
  out therein, each Member shall accord to services
  and service suppliers of any other Member, in
  respect of all measures affecting the supply of
  services, treatment no less favourable than that
  it accords to its own like services and service
  suppliers.
• 2. A Member may meet the requirement of paragraph
  1 by according to services and service suppliers
  of any other Member, either formally identical
  treatment or formally different treatment to that
  it accords to its own like services and service
  suppliers.
• 3. Formally identical or formally different
  treatment shall be considered to be less
  favourable if it modifies the conditions of
  competition in favour of services or service
  suppliers of the Member compared to like services
  or service suppliers of any other Member.

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Preparation for Next Week

• Read central parts of Appellate Body report
  United States Measures affecting the
  cross-border supply of gambling and betting
  services, 7 April 2005, WT/DS285/AB/R
• Read Markus Krajewski. Public Services and Trade
  Liberalization. Mapping the Legal Framework, 6
  Journal of International Economic Law (2003) pp.
  341-367