Services Liberalization and Services Liberalization and Domestic RegulationDomestic Regulation

Ramesh ChaitooRamesh ChaitooHead - Services Trade Unit, CRNMHead - Services Trade Unit, CRNM

rchaitoo@crnm.orgrchaitoo@crnm.org

CUTS/FICCI Conference on CUTS/FICCI Conference on Global Partnership for Development: Where do Global Partnership for Development: Where do

we Stand and Where to Go?we Stand and Where to Go?Delhi, August 12-13, 2008Delhi, August 12-13, 2008

GATS PreambleGATS Preamble

Recognizes the right of Members to Recognizes the right of Members to regulate, and to introduce new regulations, regulate, and to introduce new regulations, on the supply of services within their on the supply of services within their territories in order to meet national policy territories in order to meet national policy objectives …objectives …

But the vast majority of barriers to services But the vast majority of barriers to services trade are regulatorytrade are regulatory

Regulations as Barriers to tradeRegulations as Barriers to trade

Non-discriminatory (not listed in Non-discriminatory (not listed in schedules)schedules)

Discriminatory (listed in GATS schedules)Discriminatory (listed in GATS schedules)

- Nationality or citizenship requirements- Nationality or citizenship requirements

- Residency requirements- Residency requirements

These practically close a market to foreign These practically close a market to foreign professionals if they are part of regulations professionals if they are part of regulations to get licence or to qualify.to get licence or to qualify.

GATS Article VI:1GATS Article VI:1

In sectors where specific commitments In sectors where specific commitments are undertaken, each Member shall are undertaken, each Member shall ensure that all measures of general ensure that all measures of general application affecting trade in services are application affecting trade in services are administered in a administered in a reasonable, objective reasonable, objective and impartial mannerand impartial manner..

WTO Negotiations re GATS Article VI:4WTO Negotiations re GATS Article VI:4

Multilateral attempt to craft generic Multilateral attempt to craft generic disciplines on disciplines on 1. Qualification requirements & procedures 1. Qualification requirements & procedures 2. Technical standards 2. Technical standards 3. Licensing requirements3. Licensing requirements

1998 - Guidelines for accountancy sector;1998 - Guidelines for accountancy sector;

Such disciplines shall aim to ensure that Such disciplines shall aim to ensure that such requirements are, such requirements are, inter aliainter alia::

(a)(a) based on objective and transparent based on objective and transparent criteria, such as competence and the ability to criteria, such as competence and the ability to supply the service;supply the service;(b)(b) not more burdensome than necessary to not more burdensome than necessary to ensure the quality of the service;ensure the quality of the service;(c)(c) in the case of licensing procedures, not in in the case of licensing procedures, not in themselves a restriction on the supply of the themselves a restriction on the supply of the service.service.

Limited mandate of DR negotiationsLimited mandate of DR negotiations

NOTE - Market Access (Art XVI) or National NOTE - Market Access (Art XVI) or National Treatment (Art XVII) limitations or barriers that Treatment (Art XVII) limitations or barriers that are scheduled are not the subject of rule-making are scheduled are not the subject of rule-making on DR.on DR.

Also, in OECD countries professions are Also, in OECD countries professions are regulated by associations; governments have regulated by associations; governments have little control, only broad principles are set out in little control, only broad principles are set out in laws. In DCs professional associations are not laws. In DCs professional associations are not powerful.powerful.

Disciplines on DR- Jan 08 “Chair’s text”Disciplines on DR- Jan 08 “Chair’s text”

TransparencyTransparency - Publish information on all - Publish information on all requirements & processes that foreign requirements & processes that foreign suppliers must meet. suppliers must meet.

Issues re how to publish - electronically, Issues re how to publish - electronically, print, etc. print, etc.

Licensing requirementsLicensing requirements

1.1. Should not act as trade barrier - Cumbersome Should not act as trade barrier - Cumbersome ones in devp’d states make it very difficult for ones in devp’d states make it very difficult for the mainly services SMEs in DCs to meet;the mainly services SMEs in DCs to meet;

2.2. Transparent & predictable.Transparent & predictable.3.3. Impartial procedures.Impartial procedures.4.4. Reasonable time frame for processing.Reasonable time frame for processing.5.5. Reasons for rejecting application.Reasons for rejecting application.6.6. Fees - should reflect admin cost (except Fees - should reflect admin cost (except

auctions like telecoms).auctions like telecoms).

Qualification requirements & proceduresQualification requirements & procedures

1.1. Must be competent.Must be competent.2.2. Procedures should not be barrier to Procedures should not be barrier to

trade.trade.3.3. Verification & assessment - accreditation Verification & assessment - accreditation

body.body.4.4. Timeframes - “reasonable”.Timeframes - “reasonable”.5.5. Explain why if application is rejected.Explain why if application is rejected.6.6. Fees charged - reflect admin cost & not Fees charged - reflect admin cost & not

prohibitive to foreign suppliers.prohibitive to foreign suppliers.

Technical StandardsTechnical Standards

1.1. Domestic or international?Domestic or international?2.2. If purely domestic, should not be overly difficult If purely domestic, should not be overly difficult

or different from most other countries.or different from most other countries.3.3. What level of “participation” in development of What level of “participation” in development of

standards?standards?4.4. Small countries do not have capacity to Small countries do not have capacity to

develop standards; some rich countries think develop standards; some rich countries think international standards are lowest common international standards are lowest common denominator & they want higher.denominator & they want higher.

Development CooperationDevelopment Cooperation

1.1. Should DCs be allowed a long time to Should DCs be allowed a long time to apply any disciplines on Dom Reg?apply any disciplines on Dom Reg?

2.2. Should SVEs or LDCs be exempt from Should SVEs or LDCs be exempt from rules?rules?

3.3. Lower fees for suppliers from DCs?Lower fees for suppliers from DCs?

4.4. What kind of TA from rich countries to What kind of TA from rich countries to DCs? - Develop regulations? Help firms DCs? - Develop regulations? Help firms meet regulations overseas? meet regulations overseas?

Other issuesOther issues

How to liberalize if you do not have regulatory How to liberalize if you do not have regulatory regimes?regimes?But once you schedule a service sector or But once you schedule a service sector or activity, then clear signal that government will activity, then clear signal that government will regulate it - telecoms, finance, etc. regulate it - telecoms, finance, etc. Most DCs are at fault in terms of not focusing on Most DCs are at fault in terms of not focusing on services sector development or regulatory services sector development or regulatory regimes in TA programs; preoccupied with regimes in TA programs; preoccupied with goods.goods.

Will WTO rules on DR help?Will WTO rules on DR help?

To some extent but big barriers are in To some extent but big barriers are in schedules.schedules.Mutual recognition of qualifications among Mutual recognition of qualifications among professional associations would be good but professional associations would be good but tough to do MRAs - engineering in NAFTA took tough to do MRAs - engineering in NAFTA took 10 years & only Texas signed it; neither Ontario 10 years & only Texas signed it; neither Ontario or Quebec.or Quebec.Perhaps greater issue is economic needs tests - Perhaps greater issue is economic needs tests - muddy MA concessions & make it difficult to muddy MA concessions & make it difficult to actually contest services markets.actually contest services markets.Outsourcing contracts can avoid the hassles of Outsourcing contracts can avoid the hassles of DR DR