“ Analysis of the outcomes of agreements in GATS: Services”

1. For SARPN & FOCCISA Burgers Park Hotel 6 April 2006 “Analysis of the outcomes of agreements in GATS: Services”

2. Structure Context Approaches Globally GATS Hong Kong and Negotiation Process Issues Comments Theoretical underpinnings Broader Perspective Strategic and Tactical Questions

3. Approaches What is needed to make discerning judgement? Choice Engage Aggressively Reluctantly Not engage Reluctantly Defensively Affirmative Defensive Agenda: middle road Strategic value Tactical value

4. Context Services Trade Services as % of GDP Global 2.9% Low income countries – 3.2 % (faster rate of growth) Middle income countries – 3.6 % Developing countries 40 – 70% of GDP 30 – 50% of employment 60% of FDI in services 12 developing countries lead service exports in 1998 – 66%, 2004 – 71% (potentially divisive)

5. Context EU and US EU doubled services surplus 2000 to 2003 US in 1990’s tripled, since 1995 increased 69% US Export $340 billion 2004 (30% of US Exports) US firms established abroad earn $400 billion 30% of exports bought by US firms US 75% GDP and 80% of jobs Aggressive Demandeurs at WTO Finance, Telecoms, Environment, Distribution Free Trade Areas alternatives to multilateralism

6. GATS Introduction Characteristics of services? Impediments to Services Trade Complexity What is a public service? Characteristics

7. Goods vs. Services Trade Services are not like goods when traded Country X Regulation Goods Border measures as main obstacles Services Regulation as main obstacles – beyond border

8. Key Elements GATS applies to many different types of actions (known as measures) that a state governments may take. The GATS applies to all levels of government, national, state, and local. Market access limits a government’s ability to regulate services and service providers. National treatment requires governments to treat foreign services and suppliers no less favourably than domestic ones. A GATS general exception allows governments to maintain a challenged measure if they can demonstrate that it is “necessary” to protect human health. GATS limitations on Domestic Regulation require that all regulations be necessary and “least trade restrictive” to be valid

9. How GATS structured Modes Top Down Elements Domestic Regulation Most Favoured Nation Treatment Bottom Up Elements National Treatment Formally equal or formally unequal Market Access Equivalent of “quantitative restrictions”

10. How negotiate GATS process Request – offer Bilateral Special and Differential Treatment for developing countries Hong Kong Changes Plurilateral Negotiating process Proposed: Shall engage in Plurilateral Negotiations Resolved: Shall consider Plurilateral Requests Change in the GATS agreement What quid pro quo? Impact on participation of African countries

11. Trade in Services Consumption of services abroad (Mode 2): hospital treatment overseas Trade in services Commercial presence (Mode 3): establishment of health facilities abroad Cross-border supply of services (Mode 1): telemedicine Presence of natural persons (Mode 4): nurses working in other countries WHO, Drager

12. Public Services... Does GATS Apply? S T A R T Is the health-related service supplied by a private actor pursuant to delegated governmental authority? No Is the health-related service supplied by the government? Yes Yes Is the health-related service supplied on a commercial basis? No Yes No Is the health-related service supplied in competition with one or more service providers? Yes GATS applies to measures of WTO members that affect trade in health-related services No GATS does not apply WHO, Drager

13. Domestic Regulation Domestic regulation refers to the power of a country to make non-discriminatory laws, regulations or policies to address its needs or objectives Covers licensing, standards and qualifications Must be no “more burdensome than necessary to ensure the quality of the service.”

14. Right to Regulate The specific right to regulate depends unscheduled Scheduled changes to regulations must be anticipated DSU makes decisions where limited guidance from texts and context

15. Mode 4 Temporary movement of natural persons Right in GATS “by a service supplier of one Member, through presence of natural persons of a Member in the territory of any other Member” Art. I.2.d Parameters “not apply to measures affecting natural persons seeking access to the employment market of a Member, nor shall it apply to measures regarding citizenship, residence or employment on a permanent basis.” “not prevent a Member from applying measures to regulate the entry of natural persons into, or their temporary stay in, its territory, including those measures necessary to protect the integrity of, and to ensure the orderly movement of natural persons across, its borders, provided that such measures are not applied in such a manner as to nullify or impair the benefits … Annex on Movement of Natural Persons “The sole fact of requiring a visa for natural persons of certain Members and not for those of others shall not be regarded as nullifying or impairing benefits under a specific commitment. “ Footnote to Annex

16. ESM There shall be multilateral negotiations on the question of emergency safeguard measures based on the principle of non-discrimination. The results of such negotiations shall enter into effect on a date not later than three years from the date of entry into force of the WTO Agreement. Sub-Paragraph 1 Article X ESM suspend liberalisation commitments if: Import surge Result Serious threat/injury to domestic industry

17. Developing country interests Mode 4 ESM Others Outcomes of Domestic Regulation rules Emergency Safeguard Measure Assessment and Review Development Special & Differential Treatment Development Less commitments than Developed countries

18. Comment

19. Value of Concessions Comment GATS that liberalisation commitments may not be meaningful: export supply capacity; high barriers to market entry in highly competitive foreign markets; offers made by foreign federal governments may not be binding on provinces or states under their jurisdiction Link to development of other sectors Demand for reciprocity

20. Lack of Data Comment UN acknowledged that there is a lack of data in terms of the GATS modes Caution: as not evidence based and evidence led Classification Issues Comment clarity should be provided for the nature and scope of the service liberalization as classification issues are important

21. Domestic Regulation Comment The Concession may be quite narrow if outcome grants governments wide authority to regulate Conversely, the Concession may be wide if the Rules Committee removes a great deal of government’s rights to regulate. The GATS formulation is imprecise and undermines legal precision Art. VI.5.a – requires crystal ball lock in of current regulations Realm of possibility defined Periodic review built into schedule All offers that are made should be made conditional upon a satisfactory outcome of the Rules negotiations.

22. Update on Domestic Regulation DOMESTIC REGULATION: PREPARATION FOR THE SIXTH MINISTERIAL CONFERENCETECHNICAL STANDARDS” Working Party On Domestic Regulation 25 October 2005 Transparency requirements “opportunity for comments and taking the results into account” Plus “review of necessity” a legally binding obligation.   Requires proactive government review Technical Standards  imposition of international norms as the ceiling for services standards because there would be a “presumption of consistency” with disciplines if in compliance with relevant international standards.” 

23. Update on Domestic Regulation LICENSING REQUIREMENTS AND PROCEDURES: Setting as a requirement “the  relevance of licensing requirements to the activities for which authorization is sought”   “Imposition of a relevance test would be as problematic as imposition of a necessity test, potentially restricting requirements to very narrowly defined criteria. ” Gould 2005

24. ESM Comment ESM (recap) suspend liberalisation commitments if: Import surge that results serious threat/injury to domestic industry Context Developing countries chronic forex problems Casino currency price effects Limited competitive domestic industry & domestic market to withstand surges Mandated but no conclusion

25. ESM Comment Foreign competition may displace local suppliers and lead to erratic service supply Value of GATS concessions without increase it dramatically

26. Market Access Comment Measures to protect local investments and to prevent destructive competition should be included in the schedule. Economics Needs Tests must be protected

27. National Treatment Comment Lack of precision in language Not define what level terrain of competition is Foreign access to domestic subsidies

28. Slippery Slopes Issues in negotiations Investment Clause: Crystal Ball provision – domestic regulation Competition What terrain of competition is – national treatment Subsidies: problem of content of boxes – risk current flexibilities Transparency in Government Procurement Application of GATS Bilateral clarifications Bilateral definitional issues (should be multilateral) Trade Facilitation Sectors: transport, distributional services, logistics, insurance Change of negotiating process Within GATS New Director General

29. Negotiation Issues Understand trade offs – need more certainty No additional offers till more clarity and quality concessions Protect current negotiation flexibilities Any agreement conditional upon satisfactory outcomes in: Domestic regulation Emergency Safeguard Subsidies Mode 4

30. Broader View – Service Provision Subsidy to wages Preventative measures rather than curative Social Investments Increase aggregate demand Efficient use from effective regulation? Regulatory rents as distribution

31. Theoretical Gaps Factor price equalisation impeded because: Liberalisation between countries that have similar levels AND quality of development may be beneficial, whereas liberalisation between countries of different levels and quality of development is positively harmful. This is especially the case where exchange for increasing return goods is made for decreasing return goods. Reinert – The Other Canon

32. Approach Revisit Middle ground? Affirmative agenda Strategically - sound because safeguard interests on broad basis Tactically – many issues to trade off on to reach “improved” arrangements and engaged Not detract that GATS unsuited instrument for Services Development Plan