GATS

1
GATS

• Turin, October, 2007
• ITUC-Geneva Office

2
GATS

• WTO principles
• GATS agreement
• Four modes
• Commitments
• Rules
• Mode 4
• Trade union concerns
• State of play
• Possible action

3
WTO principles MFN

• Most Favoured Nation (MFN)
• In general, any agreement or deal that gives
  rights to one WTO member state must be given to
  all other member states
• A country cannot discriminate amongst WTO member
  states
• If a multinational enterprise (MNE) from one
  country enjoys trade privileges, all other MNEs
  in other countries in that same business must be
  treated the same

4
WTO principles NT

• National Treatment
• In general, if your country has committed itself
  to some trade liberalisation, it must, in that
  area, treat foreign suppliers/investors from
  other WTO member states no less favourably than
  domestic suppliers/investors are treated.
• That does not mean equal treatment for all you
  can treat foreign MNEs better than the way you
  treat your domestic firms - as in export
  processing zones

5
WTO principles Dispute panels

• Country A (and B, C, .) can complain that
  country X is breaching its obligations under one
  or more WTO agreements
• If Country X disagrees, the WTO can set up a
  mutually agreed (or imposed) panel a jury
• The panel hears evidence from all formal parties
  (and may allow external party evidence)
• The panel decision may tell Country X to change
  its behaviour (if guilty) or face punitive
  financial action from the complainants until it
  complies
• An Appellate Body can rule on disputed verdicts

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GATS agreement

• GATS Agreement
• Set of multilateral rules on trade in services
• Negotiated in the Uruguay Round
• Agreement contains general obligations and
  disciplines
• Measures affecting trade in services taken at all
  government levels
• Agreement contains countries commitments for
  access to their services markets
• And agreement contains annexes with rules for
  specific sectors such as financial services

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Services sectors

• Business services (including professional
  services and computer services)
• Communication services
• Construction and related engineering services
• Distribution services
• Educational services
• Environmental services
• Financial services (including insurance and
  banking)
• Health-related and social services
• Tourism and travel-related services
• Recreational, cultural and sporting services
• Transport services
• Other services not included elsewhere

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Mandate

• Request offer process
• 70 initial offers (2003, including Philippines)
• 30 revised offers (2005)
• Rules negotiations

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Four Modes of Supply

• Buying a service across a border, such as
  telemedicine diagnostics Mode 1
• Going to another country to buy a service, such
  as going abroad for cheaper health services Mode
  2
• Establishing a commercial presence abroad to
  provide services, such as opening a clinic Mode
  3
• A service worker moving abroad on a temporary
  basis to provide a contracted service, such as an
  engineer whose firm has won a contract to build a
  bridge Mode 4

10
MFN in GATS

• In the context of the GATS, the MFN obligation
  (Article II) is applicable to any measure that
  affects trade in services in any sector falling
  under the Agreement, whether specific commitments
  have been made or not. Exemptions could have been
  sought at the time of the acceptance of the
  Agreement (for acceding countries date of
  accession). They are contained in
  country-specific lists, and their duration must
  not exceed ten years in principle.

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Market Access and GATS

• The market access provisions of GATS, laid down
  in Article XVI, cover six types of restrictions
  that must not be maintained in the absence of
  limitations. The restrictions relate to
• the number of service suppliers
• the value of service transactions or assets
• the number of operations or quantity of output
• the number of natural persons supplying a service
  
• the type of legal entity or joint venture
• the participation of foreign capital
• These measures, except for (e) and (f), are not
  necessarily discriminatory, i.e. they may affect
  national as well as foreign services or service
  suppliers.

12
National Treatment

• National treatment (Article XVII) implies the
  absence of all discriminatory measures that may
  modify the conditions of competition to the
  detriment of foreign services or service
  suppliers. Again, limitations may be listed to
  provide cover for inconsistent measures, such as
  discriminatory subsidies and tax measures,
  residency requirements, etc. It is for the
  individual Member to ensure that all potentially
  relevant measures are listed
• The national treatment obligation applies
  regardless of whether or not foreign services and
  suppliers are treated in a formally identical way
  to their national counterpart. What matters is
  that they are granted equal opportunities to
  compete.

13
Schedule of Commitments

• All commitments on services liberalization are
  put in a schedule
• The schedule is divided into two parts. While
  Part I lists horizontal commitments, i.e.
  entries that apply across all sectors that have
  been scheduled, Part II sets out commitments on a
  sector-by-sector basis.
• Such are commitments on market access and
  national treatment, and possible additional
  commitments.

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Application to individual sectors

• Three possible Scenarios
• I. Not covered Governmental services and large
  segments of air traffic services
• II. Covered but no access commitments
• Main consequence
• Most-favoured-Nation Treatment
• III. Covered access commitments undertaken
• Specific Commitments
• Market Access National Treatment

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GATS and Public services

• Public service protections
• Article I 3 of the GATS is claimed to protect
  public services. In fact, it protects services
  provided under government authority provided
  that they are neither provided on a commercial
  basis nor in competition with another service
  provider. No defintions or case law exists for
  these two conditions.
• Many public services are provided on some kind of
  fee/payment basis. Is that commercial?
• Many public services have private sector
  alternatives. Are these in competition?
• There is no clear answer to these two questions.
  Does the GATS protect public services?

16
Schedules of commitments

• Schedules specify the extent of liberalization a
  Member guarantees in designated sectors.
• General layout
• Sector limitations on market access limitations
  on national treatment additional commitments

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Levels of commitment

• Options
• Full No limitations (none)
• Partial Specified limitations apply (e.g.
  foreign equity participation limited to 49)
• Unbound Fully policy discretion (unbound)

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Specific commitments

• Selection of sectors
• Inscription of limitations, by mode and by Market
  Access/National Treatment
• (i) Less than status quo
• (ii) Status quo
• (iii) More liberal
• - With immediate effect
• - Pre-commitment

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Current pattern of commitments

20
Sector pattern of commitments (Number of
Members, March 2005, source WTO)
21
Modal pattern of commitments (Number of MA
commitments in selected sectors, per cent, July
2000, Source WTO)
22
Sectoral pattern of offers (Number of offers
with commitments per sector), source WTO
23
Characteristics of Offers
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Sub-sectors committed Before and after offers
(all Members), source WTO
Qualifications - LDCs are not expected to
undertake new commitments - Does
not reflect economic importance of individual
sectors or quality of commitments
25
Rules Domestic Regulation

• Governments can continue to pass regulations in
  areas where they have made a GATS commitment. But
  in such cases or in any area affecting MFN,
  governments can be challenged if their
  regulations on licences, qualifications and
  technical standards are deemed more burdensome
  than is neccessary to trade. Again, no
  definition but it means that a regulation, law,
  policy or any other measure, democratically
  passed by a national or local government can
  effectively be overturned by a WTO disputes
  panel.

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Domestic Regulation

• Negotiations on DR are still ongoing
• Chairmans text has been proposed
• Main issues are transparency in regulations and
  prior consultation, and necessity test
• Current language on necessity test is better, but
  there is still a modified necessity test
  regulatory requirements have to be relevant to
  the service supplied and regulations have to be
  based on objective criteria

27
Rules

• Other rules and issues
• With regard to subsidies and a definition of a
  subsidy
• With regard to rules governing public procurement
  (not on procurement policies and commitments per
  say)
• With regard to the establishment of an emergency
  safeguard mechanism (ESM).

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Mode 4

• Natural persons can be service suppliers of a
  member that supply a service in another member,
  self employed. Or a natural person who is sent
  abroad by his company to supply a service, OR a
  company setting up a subsidiary and employing the
  natural person there.

29
Mode 4 contd

• The GATS does not cover natural persons seeking
  access to the employment market. It is not clear
  however how it can be ensured that people leave
  after their contract finishes.
• Governments are free to regulate entry and
  temporary stay, provided these measures do not
  nullify or impair the commitments.

30
Mode 4 contnd

• The GATS does not cover measures regarding
  citizenship, residence or employment on a
  permanent basis. However, there is no definition
  of temporary, and even 5 years is quite long.
  Also, some DCs would like to ensure that
  temporary contracts can be renewed.

31
Few mode 4 commitments

• Politically sensitive. There are political and
  regulatory concerns resulting in less
  commitments.
• There are also ENTs, Economic Needs tests, many
  commitments contain these. Also quotas and
  pre-employment requirements.
• 50 countries have scheduled conditions related to
  domestic wage legislation, working hours and
  social security.
• 22 countries have reserved the right to suspend
  commitments in the case of a labour dispute
  (mainly with regard to intra corporate
  transferees)
• commitments made in mode 4 especially for higher
  skilled service suppliers (business visitors,
  intra corporate transferees etc.)

32
Barriers

• - structure and coverage of existing commitments
• - Economic Needs Test (ENT)
• - definitional problems
• - administrative practices, transparency and
  access to information
• - recognition of qualifications.

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Concerns with mode 4

• Collective agreements, minimum wages and safety
  measures might even be challenged under GATS as
  they could be interpreted as unnecessary barriers
  to trade in services.
• Developing countries (India) have already argued
  for the removal of the EU offer condition that
  work and pay standards of the host country should
  be complied with.
• some rules, which were established to regulate
  the market (for example on opening hours in
  supermarkets) can be considered illegal under
  GATS once a commitment is made.

34
Concerns with mode 4

• Services can be broadly interpreted and
  agriculture work could be easily renamed as
  agricultural services
• Once commitments have been made a country cannot
  change them. In theory they can withdraw a
  commitment after three years but then they have
  to negotiate with the benefiting countries and
  offer them compensation
• GATS mode 4 is a business driven agenda.
  Companies want free movement of personnel, bring
  them where they need them, no barriers, and no
  protection

35
Multilateral framework on migration

• should promote managed migration (including
  bilateral and multilateral agreements),
• look at labour market needs and demographic
  trends, licensing and supervision of recruitment
  and contracting agencies,
• promote decent work for migrants and awareness of
  migrants rights,
• non-discrimination and covered by national laws
  and social regulations, portability of social
  security entitlements, etc.
• It should focus on the protection of migrant
  workers, but it should also provide receiving
  countries with the right to regulate.

36
Right to regulate

• US-gambling case shows that the GATS prohibits
  government measures if market access is committed
  whether they are discriminatory or not.
• Local governments who are responsible for many
  services regulations will be affected and
  restricted in their regulatory capacity.
• If a country makes commitments in a sector or
  subsector, for full market access (no
  restrictions) then even regulations that are not
  mentioned in the GATS but that do restrict MA can
  be prohibited, regulations such as prohibition of
  billboard advertising, pesticide spraying, casino
  gambling and garbage incineration that restrict
  the market access can be ruled illegitimate by a
  dispute panel.

37
TRADE UNION CONCERNS

• So, what are the problems from a union
  perspective?
• GATS has no social objectives, its only about
  business interests
• Competition in services will be for profit
• Profit can prevent access, equity and quality of
  service
• Multinational companies will be the big winners
• Governments may no longer control the provision
  of key public or other strategic services such as
  health, education, water, social security, postal
  services, financial services.
• For-profit providers will be operating in all
  these sectors, sometimes exclusively

38
TRADE UNION CONCERNS

• GATS doesnt allow unnecessary barriers to
  trade
• Barriers too burdensome to trade include
  legislation to protect the environment, foreign
  ownership limits, labour and affirmative action
  laws, consumer protection, licensing standards
• All foreign providers have to be treated at least
  as well as domestic providers, including in
  access to subsidies
• A panel of trade experts in Geneva decides what
  is a barrier and what is less burdensome to
  trade than is necessary

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TRADE UNION CONCERNS

• The GATS process in negotiating services
  commitments is secret
• Governments can offer to commit services under
  these rules without parliamentary discussion
• Regional/Provincial/State and municipal tiers of
  government have no say, but their services are
  included
• GATS over-rides national laws that are barriers
  to trade if a service is covered by these rules
• Commitments are irreversible

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State of play

• Plurilateral negotiations decided in Hong Kong
• 2 rounds of plurilaterals took place in 2006
  based on 22 collective requests
• Some were positive others not
• Suspension before revised offers in july 2006
• Resumption in february 2007

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State of play

• NAMA and Agriculture revised modalities in
  October/November
• Also some language on services
• Possible benchmarking might come up again
• Improved offers will be asked for
• Text on Domestic Regulation
• Regional distribution uneven (developed, LA and
  some Asia)
• Countries wait with these for Ag and NAMA first
  to be decided

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Possible areas of action

• Analyze your countrys offer
• Get information on the possible revised offer
• Identify which sectors and subsectors should not
  be committed or which restrictions should be put
  in place when committing them.
• Identify sectors and subsectors that were
  committed and where commitments should be
  withdrawn or reduced