Published on October 22, 2007
RTAs and the GATS: RTAs and the GATS Ruosi Zhang Trade in Services Division World Trade Organization Principle: GATS Article II (MFN Treatment): Principle: GATS Article II (MFN Treatment) “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.” Exceptions to Article II: Exceptions to Article II MFN Exemptions: Annex on Article II (MFN) Article V: Economic Integration Article VII: Recognition Other exceptions Article V: Economic Integration: Article V: Economic Integration Article V provides coverage for preferences among Members within a framework of economic integration. No MFN exemption is required if the relevant conditions are met. RTAs generally cover goods and services: Article V provides. coverage for the services part or for a services-only RTA. Article V: Conditions: Article V: Conditions Substantial sectoral coverage (volume of trade, number of sectors, and modes of supply) No a priori exclusion of modes of supply Absence or elimination of discrimination “in the sense” of Article XVII (national treatment) Should facilitate trade among parties and not raise overall barriers vis-à-vis other Members If GATS specific commitments are affected, renegotiation according to Article XXI is required Article V: Flexibility: Article V: Flexibility Substantial sectoral coverage and elimination of all discrimination can be achieved over a reasonable timeframe Conditions are relaxed if developing countries are parties to the agreement Consideration may be given to the relationship with a wider process of economic integration No discrimination of established suppliers (juridical persons) of third countries, except for agreements among developing countries Article V: Examination: Article V: Examination Notification to the Council for Trade in Services (CTS): existence, enlargement or significant modification of the agreement CTS transmits agreement to the Committee on Regional Trading Agreements (CRTA) for examination On conclusion of the examination, the CRTA makes recommendations to the CTS Since the creation of the GATT (1947), the CRTA never concluded the examination of an agreement ... ... but Article V may nevertheless be adjudicated in Dispute Settlement Article V: Notified RATs (1): Article V: Notified RATs (1) As of April 2007, the notifications made pursuant to Article V:7(a) cover 42 RTAs on services. The majority were notified in the past 2-3 years. Among the notified RTAs, a lot of involve the EC and the US, such as: the EC-25; EC-EFTA; EC-Mexico; EC-Chile; NAFTA; US-CAFTA-DR; US-Australia; US-Bahrain; US-Chile; US-Jordan; US-Singapore; US-Australia; US-Morocco. A number of new RTAs have yet to be notified (e.g. US-Oman, US-Colombia, US-Israel, US-Peru, US-korea, US-Panama...) Article V: Notified RATs (2): Article V: Notified RATs (2) Chile, Singapore and Mexico are those developing countries who are particularly active in RTAs on services. Services RTAS to which they are parties include: Chile-Canada; Chile-EC; Chile-EFTA; Chile-Mexico; Chile-El Salvador; Chile-Korea; Chile-Costa Rica; Chile-US Singapore-EFTA; Singapore-Australia; Singapore-New Zealand; Singapore-Japan; Singapore-Jordan; Singapore-Korea; Singapore-Panama; Singapore-US; Mexico-EC; Mexico-EFTA; Mexico-Chile; Mexico-Costa Rica; Mexico-EL Salvador; Mexico-Honduras; Mexico-Guatemala; Mexico-Nicaragua; Mexico-Japan; as well as NAFTA More Members have been involved in RTAs on services, such as: Australia, China, Japan; Korea; Thailand, New Zealand, etc. Possible Reasons for Negotiating RTAs on Services: Possible Reasons for Negotiating RTAs on Services As part of the regional integration process (Protection of local/regional industries from global competition, enhance competitiveness) Reciprocal benefits easier to identify or deeper integration easier to achieve (mutual recognition, free movement of persons, etc.) or regulatory cooperation easier to achieve As first step towards multilateral engagement Extension to areas not (fully) covered by GATS (e.g. government procurement, strict subsidy disciplines) Negotiating economy: lower administrative costs in negotiating with a few partners; enhanced influence on outcome Political, strategic, or other reasons? Drawbacks associated with RTAs: Drawbacks associated with RTAs Trade and investment diversion? Inefficiencies: sectoral and economy-wide? Diversion of resources from WTO efforts? Resource implications of negotiating and administering various arrangements? Creation of vested interests opposing more comprehensive liberalization? Overlapping membership: costs for traders, regulators and customs officials in meeting multiple sets of trade rules? Characteristics of RTAs Liberalizing Trade in Services: Characteristics of RTAs Liberalizing Trade in Services Coverage Services only (governed by GATS Art V) Goods and services (governed by both GATT Art XXIV and GATS Art V) Services liberalization under RTAs: a relatively recent phenomenon, post NAFTA & GATS growing at a fast pace most RTAs concluded recently cover both goods & services keeping track of new RTAs: not all have been notified to WTO Approaches taken towards liberalization of trade in services in RTAs: Approaches taken towards liberalization of trade in services in RTAs Positive list or negative list approach? GATS type: positive list Countries make specific commitments for liberalization in their Schedules NAFTA-type: negative list Everything is liberalized unless a reservation has been made for particular non-conforming measures Approaches taken towards liberalization of trade in services in RTAs: Approaches taken towards liberalization of trade in services in RTAs Methods of liberalization Similar disciplines to GATS Most significant liberalization taking place through better market access and national treatment commitments What have RTAs achieved so far?: What have RTAs achieved so far? Few commitments beyond status quo Commitments go beyond GATS in some sectors Some innovation in rule-making Some success in promoting regulatory cooperation. Will future agreements achieve more? Postal and courier services in RTAs: Postal and courier services in RTAs This is an important service sector in RTA negotiations. For FTAs to which the US is a party, specific commitments on express delivery services are usually included. Like GATS commitments, parties to RTAs are reluctant to make commitments on postal services. When positive list approach is taken, commitments made in this sector are usually only about courier services. When negative list approach is taken, parties tend to make specific reservations on postal services, which are usually related to exclusive rights.