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Specific GATS Commitments. Pierre Latrille, Trade in services division. World Trade Organization Organisation Mondiale du Commerce Organización Mundial del Comercio. slide 1. Objectives. Inspired by GATT practice Force of Law Transparency of commitments - PowerPoint PPT Presentation
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Specific GATS Commitments
Pierre Latrille, Trade in services division
World Trade OrganizationOrganisation Mondiale du CommerceOrganización Mundial del Comercio
slide 1
Objectives
Inspired by GATT practice
Force of Law
Transparency of commitments
Possibility of progressive liberalization
slide 2WTOOMC
Schedules of Specific Commitments (Article XX)
Content of schedules
Domain common to Articles XVI and XVII
Guide for the preparation of schedules
slide 3WTOOMC
General Obligations
Unconditional Obligations Conditional Obligations
MFN
Transparency (publication)
Domestic Regulation (review of decisions)
Business Practices
Monopolies (MFN)
Transparency (notification)
Domestic Regulation (administration of measures of general application;
licensing requirements)
Behaviour of monopolies (MA and NT)
Payments and Transfers
slide 4WTOOMC
A blank Schedule...
SCHEDULE OF SPECIFIC COMMITMENTS OF MEMBER X
Sector or
Sub-Sector Limitations on Market
Access Limitations on
National Treatment Additional
Commitments (1) (1) (2) (2) (3) (3)
(4) (4)
(1) (1) (2) (2) (3) (3)
(4) (4)
slide 5WTOOMC
The GATS approach to scheduling...
SCHEDULE OF SPECIFIC COMMITMENTS OF MEMBER X
Sector or
Sub-Sector Limitations on Market
Access Limitations on
National Treatment Additional
Commitments (1) (1) (2) (2) (3) (3)
(4) (4)
(1) (1) (2) (2) (3) (3)
(4) (4)
Positive Element: selectionof sectors
in which Market Access and National Treatment is granted
Negative Element: inscription of any
limitations on Market Access and National Treatment
Negotiated commitments
not subject to scheduling under
MA or NT
slide 6WTOOMC
GATS approach to scheduling of commitments
Positive list of sectors/sub-sectors “bottom up”
Negative list of limitations
“top down”
Commitments to MA and NT undertaken only for those sectors/subsectors listed
MA and NT apply except for limitations listed or for “unbound” modes of supply
slide 7WTOOMC
The 4 Modes of Supply
ServiceSupplier
Service Consumer
Service Supplier supplies servicefrom territory of
one Member
Service Consumer receives service
in territory of anyother Member
Cross border supply - Mode 1
Service supplied into the territory
of another Member
slide 8WTOOMC
The 4 Modes of Supply
Service Supplier Service
Consumer
Consumption abroad - Mode 2
Service Consumer
Service supplied in territory of one Member to the service consumer of another Member
Service supplied in territory of one Member to the service consumer of another Member
Service Supplier supplies service in territory of
one Member
Service Supplier supplies service in territory of
one Member
Service Consumer receivesservice in territory of supplierService Consumer receivesservice in territory of supplier
slide 9WTOOMC
The 4 Modes of Supply
Service Supplier
Service Consumer
Commercial Presence - Mode 3
Service supplier establishes a commercial presence in the
territory of another Member
Any type of business or professional establishment
Service supplied through commercial presence
slide 10WTOOMC
The 4 Modes of Supply
Service Consumer
Natural Persons - Mode 4Service supplied through
presence of natural persons of a Member in
territory of another Member
slide 11WTOOMC
The Sectors...
Business and professional Communications, all types Construction Distribution Education Environment Financial Health and social Tourism Recreation & cultural Transport, all types Other
Sectors
Precise definition is critical as itdefines thescope of acommitment
slide 12WTOOMC
Description of the Sectors
• MTN. GNS/W/120 of July 1991 divides sectors into 12 groups
• Altogether ~ 160 sub-sectors identified
• Corresponding number of the Central Product classification (CPC), Provisional version
• Note: CPC is a tool, Members may describe sectors by using other definitions
slide 13WTOOMC
What types of limitations mustbe scheduled?
• MARKET ACCESS (Article XVI)• Absence of six types of restrictions• (mostly quantitative)
• NATIONAL TREATMENT (Article XVII)
• Non-discrimination with regard to all measures affecting the supply of a service• Any limitations must be inscribed in Schedules for each relevant modes(s).
slide 14WTOOMC
Market Access can be conditioned through 6 types of measures to be specified in the Schedule:
(a) Number of service suppliers (e.g. new entries subject to economic needs)
(b) Value of transactions or assets(e.g. assets of foreign banks limited to x percent of total
bank assets)(c)Total number of operations or quantity of output
(e.g. restrictions on broadcasting time for foreign films)(d) Total number of natural persons
(e.g. no more than x foreigners per outlet)(e) Type of legal entity or joint venture (e.g. foreign presence only via subsidiaries)(f) Maximum foreign capital participation
(e.g. foreign equity limited to 49 percent)
slide 15WTOOMC
Scheduling Market Access limitations
Each measure must be described concisely indicating the elements which make it inconsistent with Article XVI, including whether it is discriminatory
Numerical Ceilings to be expressed in defined (maximum) quantities in either absolute numbers or percentages
Economic Needs Tests entry should indicate the main criteria on which the test is based e.g. if the authorisation to establish a facility is based on a population criterion, the criterion should be described concisely
Economic Needs Tests (Art. XVI:2 (a)-(d)
• > 250 ENTs by ~ 90 Members
• majority of entries do not specify criteria
• Significance of unspecified ENTs unclear ...
slide 17WTOOMC
Article XVI.2(a)
NUMBER OF SUPPLIERS
Public convenience and necessity test (criteria related to approval include: examination of the adequacy of current levels of service; market conditions establishing the requirement for expanded service; the effect of new entrants on public convenience, including the continuity and quality of service, and the fitness, willingness and ability of the applicant to provide proper service).
slide 18WTOOMC
Article XVI.2(a)
NUMBER OF SUPPLIERS
The number of licenses for cosmetology schools in Kentucky is limited to 48 total licenses, with a total of 8 licenses allowed for operation of such schools per congressional district.
slide 19WTOOMC
Article XVI:2(b)VALUE OF TRANSACTIONS OR ASSETS
20 per cent of the volume of maritime traffic open to competition of all shipping companies.
slide 20WTOOMC
Article XVI.2(b)
VALUE OF TRANSACTIONS OR ASSETS
In banking, the Monetary Board shall ensure that at all times seventy per cent (70%) of the resources or assets of the Philippine banking system is held by domestic banks
slide 21WTOOMC
Article XVI.2(c)
NUMBER OF TRANSATIONS OR QUANTITY
A foreign bank will be permitted to set up only one local subsidiary.
slide 22WTOOMC
Article XVI.2(c)
NUMBER OF TRANSATIONS OR QUANTITY
Import of titles restricted to 100 per year.
slide 23WTOOMC
Article XVI.2(d)
NUMBER OF PERSONS EMPLOYED
A speciality restaurant with a minimum of 75-seat capacity shall be allowed to employ one (1) alien Speciality Chef or Sous Chef. In the initial stage of operation of a speciality restaurant and for a maximum period of two (2) years, three (3) more alien speciality chefs or sous chefs may be employed.
slide 24WTOOMC
Article XVI.2(d)
NUMBER OF PERSONS EMPLOYED
Access restricted to natural persons only. Economic needs test for medical doctors and dentists who are authorized to treat members of public insurance schemes. The criterion is shortage of doctors and dentists in the given region.
slide 25WTOOMC
Article XVI.2(d)
NUMBER OF PERSONS EMPLOYED
In any artistic production or entertainment given in a public place in Peru the proportion of Peruvian performers shall not be less than 80 per cent of the total.
slide 26WTOOMC
Article XVI.2(e)
TYPE OF LEGAL ENTITY
Provision through a “GmbH & CoKG” and “EWIV” is prohibited.
slide 27WTOOMC
Article XVI.2(e)
TYPE OF LEGAL ENTITY
Provision through SEL (anonyme, à responsabilité limitée ou en commandite par actions) or SCP only.
slide 28WTOOMC
Article XVI.2(e)
TYPE OF LEGAL ENTITY
A separate incorporation in Italy in the form of a securities company is required for firms other than banks in order to provide services related to securities dealing.
slide 29WTOOMC
Article XVI.2(f)
SHARE OF FOREIGN CAPITAL
Foreign investment up to 49 per cent of the registered capital of enterprises.
slide 30WTOOMC
Article XVI.2(f)
SHARE OF FOREIGN CAPITAL
Foreign investors can hold up to 49 per cent of the equity of such enterprises.
slide 31WTOOMC
Standard of National Treatment (Article XVII)
• Treatment shall be “no less favourable than accorded to own like services and services suppliers”.
• … “either formally identical or formally different treatment” …
• benchmark: no modification of “the conditions of competition” in favour of domestic like services or service suppliers.
slide 32WTOOMC
Typical National Treatment Limitations
Discriminatory subsidies and other financial measures Nationality of certain personnel and residency
requirements Licensing, qualification and registration requirements Technology transfer/training requirements Local content requirements Prohibitions on land/property ownership Limitations on insurance portability, use of education
grants, etc.
See also S/L/92, Anne 1
slide 33WTOOMC
Terminology related to “limitations”
• No limitation (full commitment) = “None”
• No commitment technically feasible =
“Unbound*”
• No commitment = “Unbound”
For each mode of supply, Members may enter the following:
slide 34WTOOMC
To schedule or not to schedule?
• Measures relating to licensing, qualification, approval, authorisation, registration etc.• Under Market Access only those restrictions
falling under XVI (a)-(f)• Under National Treatment only those
requirements or procedures that are discriminatory
• Additional information (for transparency reasons) should not be scheduled.
slide 35WTOOMC
Measures that do not belonginto a schedule?
Do not schedule measures falling under other provisions Article VI (Domestic Regulation) Article XI (Payments and Transfers) Article XII (Balance of Payments) Article XIV (General Exceptions) and relevant Annexes (e.g. prudential
measures in financial services)
slide 36WTOOMC
Market Access, Mode 3Number of limitations by type
slide 37WTOOMC
National Treatment, Mode 3Number of limitations, 10 most frequent types
0
200
400
600
800
1000
1200
1400
1600
1800
A B D E F G H L M N
Tax Subsidies,grants
Nationalityreq.
Residencyreq.
Licensing,stand., qualif.
Registrat.req.
Authoriz. req. Land Other NT MAlimitations
Horizontal and sectoral limitations Sectoral limitations only
slide 38WTOOMC
Overlap between Market Access and National Treatment
Article XX:2:
Relevant measures (e.g.discriminatory quotas, joint venture requirements) shall be inscribed in the column relating to Article XVI (MA). This provides a condition and qualification to Article XVII (NT) as well.
See also S/L/92, para. 18
slide 39WTOOMC
How Schedules of Commitments are structured:
slide 40WTOOMC
Horizontal Commitments
Tool to avoid repetition in sector specific commitments where measures cover all sectors in a schedule.
Can apply to all or some modes of supply
No legally different character from specific commitments
slide 41WTOOMC
Typical Horizontal Commitments
• Measures can relate to one or more modes of supply: restrictions on land ownership, investment, entry of natural
persons discriminatory tax measures
• Horizontal commitments condition all other entries unless otherwise specified: “None” in sector-specific section ->except as set out in
horizontal section Departures must be clearly and consistently indicated
slide 42WTOOMC
Scheduling Mode 4 Commitments
• Sector-Specific commitments typically refer to Horizontal commitments• “Unbound, except as indicated in the
horizontal section of the schedule”
• Horizontal Commitments in form of “undertaking”• identifying categories of natural persons;
• duration of temporary stay
slide 43WTOOMC
Structure of Mode 4 Commitments(horizontal commitments, 2002)
Executives, Managers, Specialists
28%
Other4%
Contractors3%
Business Visitors
23%
Intra-Corporate Transferees
42%
slide 44WTOOMC
Typical Horizontal Commitments in Mode 4
Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence ofnatural persons
Sector orsubsector
Limitations onmarket access
Limitations onnational treatment
Additionalcommitments
I. Horizontal CommitmentsALL SECTORSINCLUDED INTHISSCHEDULE
4) Unbound, except for thetemporary presence for up tothree years of the followingcategories of persons:A. Services Salespersons …B. Intra-corporate Transferees … Executives … Managers … Specialists … Professionals …C. Personnel Engaged in Establishment …
4) Unbound , except formeasures concerning thecategories of naturalpersons referred to in theMarket Access column.
slide 45WTOOMC
MFN Exemptions
• Relevant for:
• Bilateral agreements covering services trade
• National laws requiring reciprocal treatment or extending special preferences
• Regional or other economic agreements that do not satisfy the criteria of GATS Article V, e.g. do not cover all sectors, cover a single mode of supply, or do not aim at full liberalization within the grouping
slide 46WTOOMC
Relationship between MFN Exemptions and Commitments:
• Possible: More generous treatment of specified trading partners than provided for under scheduled limitations
• Inadmissible: Reciprocity conditions and other discriminatory provisions which would reduce the scope of a commitment
• Precondition: Properly defined MFN exemption
The specific commitments guarantee the minimum conditions owed to all Members
slide 47WTOOMC
Relationship between MFN obligations and specific commitments in individual sectors
Specific Commitment?
Envisagedtreatment
Yes No
MFN +(Preferential)
MFN exemptionpossible*
MFN exemptionpossible*
MFN -(Reciprocity)
MFN exemptionimpossible
MFN exemptionpossible*
* To be applied for at the date of entry into force of GATS or under Article IX:3 of the WTO Agreement.
slide 48WTOOMC
How an MFN exemption works ...
Type of MFN Exemption
Scheduled Commitment
Result
Preferences on foreign equity participation in retail distribution services
Foreign equity limited to 49%
All suppliers are entitled to 49%. The exemption only permits granting some countries > 49%
Bilateral agreements covering road transport
No commitments scheduled on road transport
Any preferences or discrimination is permissible
Commercial presence of foreign accounting firms is based on reciprocity
Accountancy commitments show no limitations on commercial presence
The exemption is inoperable since all Members must be granted scheduled access
slide 49WTOOMC
Relationship between modes of supply
• Commitments extend to the mode of supply in which they are taken
• Mode 4 commitments often related directly only to Mode 3 commitments
• Recommendation: Assess modal links for effective services delivery when making requests and offers
slide 50WTOOMC
Role of Additional Commitments (Article XVIII)
Scheduling of measures not falling under Articles XVI or XVII. Such measures may relate to qualifications, standards, licenses,competition disciplines, etc.
See also S/CSC/W/34
slide 51WTOOMC
Additional Commitments
• The definition of possible undertakings is open-ended
• They can be unique to a particular Member or Members can agree to a common set of additional commitments
• The Telecom Reference Paper is the first example of plurilatural negotiation of a common set of such undertakings
slide 52WTOOMC
Relationship between Schedules and ‘Permissible’ Provisions
• Measures taken in context of Article V (Economic Integration) and Article VII (Recognition) do not need to be scheduled as limitations…
• ...Neither do they need to be listed as MFN exemptions
slide 53WTOOMC
• Any limitations and qualifications pertaining to Articles XVI and XVII must be inscribed in Schedules
• Measures falling under other provisions (Articles VI, XII, XIV) should not be scheduled
• Market Access or National Treatment limitations applying across all scheduled sectors may be presented in a horizontal section
• Measures inconsistent with both Market Access and National Treatment obligations must be inscribed in the Market Access column only (Art. XX:2)
Remember ..
slide 54WTOOMC
• Avoid confusion between Horizontal Commitments (applying across all scheduled sectors) and Sectoral Commitments
• Schedule limitations as precisely as possible• No general references to domestic laws• No unspecified economic needs tests
• Avoid uncertainties about sector scope and coverage• Use of CPC-numbers whenever possible• Clear definition of sub-sectors if coverage is limited
Recommendations
slide 55WTOOMC
Relationship between commitments and actual market conditions:
• Commitments guarantee minimum levels of Market Access and National Treatment
• Members remain free to offer better conditions (subject to MFN principle)
• Commitments may be upgraded at any time to reflect the improved conditions
slide 56WTOOMC
Measures/policies not affected by commitments
• Non-discriminatory domestic regulation (standards, licensing requirements, etc.)
• Government procurement
• Private commercial actions (beyond the scope of GATS)
• Actions beyond the modal definition of services trade (e.g. export subsidies or restrictions)
slide 57WTOOMC
Must commitments berespected at all costs?
No. The GATS allows Members to renegotiate their commitments against compensation (Article XXI), ignore them for health and other public policy reasons (Article XIV, ‘prudential carve-out’ in financial services) or security concerns (Article XIVbis), and introduce restrictions to protect the Balance of Payments (Article XII).
slide 58WTOOMC
Modification of Schedules (Article XXI)
Three-year moratorium
Procedure
Negotiated compensatory adjustments
Arbitration if needed
slide 59WTOOMC