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How do WTO Rules Affect the Accountancy Profession?. Peter K Morrison Trade in Services Division WTO. IFAC SMP/SME and Developing Nations Consultative Conference Prague, March 10-11, 2005. What we need to cover. What is the WTO and the GATS?

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How do wto rules affect the accountancy profession l.jpg

How do WTO RulesAffect the Accountancy Profession?

Peter K Morrison

Trade in Services Division


IFAC SMP/SME and Developing Nations Consultative Conference

Prague, March 10-11, 2005

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What we need to cover

  • What is the WTO and the GATS?

  • How does the GATS affect the accountancy profession?

  • How are SME/SMPs and developing country status taken into account?

  • Where is the WTO headed on liberalization of accountancy rules?

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What is the WTO?

  • An institution

    • 148 member governments

  • A set of agreements

    • GATT: trade in goods

    • GATS: trade in services

    • TRIPS: intellectual property

  • A court to enforce obligations

    • Panel and Appellate Body procedures

  • A negotiating forum

    • Uruguay Round (1986-94)

    • Doha Round (2000 - ?)

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General Agreement on Trade in Services: (GATS): What does it cover?

  • “measures by Members”

    • laws, regulations, actions of any type

    • by governments at any level, or

    • private bodies acting under delegated powers

  • ... affecting trade in services

    • in any service sector except

      • in the exercise of government authority

      • air transport services

    • directly or indirectly

  • ... through any of 4 modes of supply

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Trade in services: 4 modes of supply it cover?

  • Cross-border

    • e.g. accountancy advice over the internet

  • Consumption abroad

    • e.g. accounting services received in other countries or over the internet

  • Commercial presence

    • e.g. foreign offices of accountancy firms

  • Movement of natural persons

    • e.g. accountants practising abroad individually or through an established foreign accountancy firm

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Most-Favored Nation Treatment (MFN) (Art II) it cover?

  • no discrimination between two foreign suppliers or services

    • covers both explicit and de facto discrimination

  • applies to all Members and all services

    • whether or not service sector is scheduled

    • unless exemption obtained on joining WTO

  • example

    • acceptance of accountants only from a closed list of countries

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Market Access (Art XVI) it cover?

  • no quantitative-type restrictions

    • whether discriminatory or not

  • no limitations on

    • number of service suppliers

    • total value of service transactions or assets

    • number of service operations or output

    • number of persons that may be employed

    • form of legal entity used to supply service

    • maximum foreign investment permitted

  • but, does not cover measures resulting in de facto quantitative limitations

  • applies only to extent listed in a country’s Schedule

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National Treatment (Art XVII) it cover?

  • no discrimination between national and foreign suppliers

    • covers both formal and de facto discrimination

  • examples:

    • citizenship requirement: formal national treatment inconsistency

    • residence requirement: de facto national treatment inconsistency

  • applies only to extent listed in a country’s Schedule

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Additional Commitments (Art XVIII) it cover?

  • any other undertaking that a Member may wish to take on

  • Example: regulatory undertakings on

    • transparency

    • maintenance of pro-competitive market

    • future phase-ins

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Mutual Recognition Agreements (MRAs) (Art VII) it cover?

  • a Member may recognize qualifications or experience granted in a particular foreign country

    • through harmonization or otherwise

    • through agreement or autonomously

  • Provided

    • not in discriminatory way and not a disguised restriction on trade in services

    • adequate opportunity is given to other Members be similarly recognized

    • where appropriate, based on international standards

  • 1997 Guidelines on MRAs in Accountancy (S/L/38)

    • practical guidelines on how to negotiate MRAs

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MFN it cover?

discriminatory measures

National Treatment

discriminatory measures

Market Access

quantitative restrictions

Additional commitments

any other undertakings

Trade Barriers and GATS:Main provisions adequate?

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MFN it cover?

discriminatory measures

National Treatment

discriminatory measures

Market Access

quantitative restrictions

Additional commitments

any other undertakings

Disciplines on Domestic Regulation

“good governance”

“qualitative” requirements


technical standards


Needed: Disciplines on Domestic Regulation (Art VI)

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Domestic Regulation: it cover?Good Governance Obligations

  • In all sectors:

    • Review of administrative decisions: must be in place for decisions affecting trade in services (Art VI:2)

  • In sectors where commitments undertaken:

    • Administration of measures of general application: must be reasonable, objective and impartial (Art VI:1)

    • Decisions on applications: must be given in reasonable period (Art VI:3)

    • Verification of competence of professionals: must be adequate procedures: (Art VI:6)

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Domestic Regulation: it cover?Negotiation of further disciplines (Art VI:4)

  • Purpose: to ensure that measures relating to

    • qualification requirements and procedures

    • technical standards and

    • licensing requirements

      do not constitute unnecessary barriers to trade

  • Negotiating mandate: to develop disciplines to ensure that these measures are:

    • based on objective and transparent criteria

    • not more burdensome than necessary to ensure the quality of the service

    • in the case of licensing procedures, not in themselves a restriction on supply

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Result: 1998 Accountancy Disciplines it cover?

  • Necessity test

    • Accountancy measures may not be more trade-restrictive than necessary to fulfil a legitimate objective:

      • the protection of consumers

      • the quality of the service

      • professional competence

      • integrity of the profession

  • Does not cover

    • Measures within scope of GATS Articles XVI (market access) and XVII (national treatment)

  • Implementation

    • Applies to all Members with accountancy commitments

    • Takes effect at end of the current trade round

    • In the interim, no Member to take new measures contrary to these principles

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1998 Accountancy Disciplines: it cover?Matters covered

  • transparency of regulations (paras 3-7)

  • residency requirements (para 9)

  • membership of professional organizations (para 10)

  • use of firm names (para 11)

  • administrative fees (para 13)

  • licensing procedures (paras 14-18)

  • equivalency and verification (paras 19-24)

  • use of international standards (para 26)

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Current Doha Round Negotiations: Issues in Accountancy Services

  • Improved specific commitments

    • Better access for online services

    • Better access for natural persons (mode 4)

  • Necessity test

    • What are legitimate policy objectives?

    • When are less restrictive trade measures reasonably available?

  • Transparency

    • beyond those already in GATS Article III?

  • Equivalence

    • Members to take account of requirements fulfilled in other countries?

  • International standards

    • presumption in favour of, or requirement to base regulation on, international standards?

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Developing countries, SME/ SMPs and the GATS Services

  • Request-Offer procedure

  • Respect for the following principles:

    • progressive liberalization

    • increasing participation of developing countries

    • appropriate flexibility for individual developing countries

    • special priority for least-developed countries

    • consideration for needs of small services suppliers especially from developing countries

      (GATS Arts IV, XIX; Negotiating Guidelines (S/L/93, March 2001); Modalities for the Special Treatment of Least Developed Countries (TN/S/13, Sept. 2003))

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The way ahead ... Services

May 2005: Submission of revised services offers

Dec 2005: Hong Kong Ministerial Conference

End 2006: Conclusion of Doha Round?