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Specific GATS Commitments

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

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Specific GATS Commitments

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  1. Specific GATS Commitments Pierre Latrille, Trade in services division World Trade OrganizationOrganisation Mondiale du CommerceOrganización Mundial del Comercio slide 1

  2. Objectives • Inspired by GATT practice • Force of Law • Transparency of commitments • Possibility of progressive liberalization WTOOMC slide 2

  3. Schedules of Specific Commitments (Article XX) • Content of schedules • Domain common to Articles XVI and XVII • Guide for the preparation of schedules WTOOMC slide 3

  4. General Obligations Unconditional Obligations Conditional Obligations MFN Transparency (notification) Transparency (publication) Domestic Regulation (administration of measures of general application; licensing requirements) Domestic Regulation (review of decisions) Behaviour of monopolies (MA and NT) Business Practices Monopolies (MFN) Payments and Transfers WTOOMC slide 4

  5. A blank Schedule... WTOOMC slide 5

  6. The GATS approach to scheduling... Negotiated commitments not subject to scheduling under MA or NT 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 WTOOMC slide 6

  7. 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 GATS approach to scheduling of commitments WTOOMC slide 7

  8. The 4 Modes of Supply Cross border supply - Mode 1 Service supplied into the territory of another Member Service Consumer Service Supplier Service Supplier supplies service from territory of one Member Service Consumer receives service in territory of any other Member WTOOMC slide 8

  9. The 4 Modes of Supply Consumption abroad - Mode 2 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 Service Consumer Service Consumer Service Consumer receives service in territory of supplier WTOOMC slide 9

  10. The 4 Modes of Supply Commercial Presence - Mode 3 Service supplier establishes a commercial presence in the territory of another Member Any type of business or professional establishment Service Supplier Service Consumer Service supplied through commercial presence WTOOMC slide 10

  11. The 4 Modes of Supply Natural Persons - Mode 4 Service supplied through presence of natural persons of a Member in territory of another Member Service Consumer WTOOMC slide 11

  12. Business and professional Communications, all types Construction Distribution Education Environment Financial Health and social Tourism Recreation & cultural Transport, all types Other The Sectors... Sectors Precise definition is critical as it defines the scope of a commitment WTOOMC slide 12

  13. 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 WTOOMC slide 13

  14. 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). WTOOMC slide 14

  15. 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) WTOOMC slide 15

  16. 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

  17. 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 ... WTOOMC slide 17

  18. 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). WTOOMC slide 18

  19. 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. WTOOMC slide 19

  20. 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. WTOOMC slide 20

  21. 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 WTOOMC slide 21

  22. Article XVI.2(c) NUMBER OF TRANSATIONS OR QUANTITY A foreign bank will be permitted to set up only one local subsidiary. WTOOMC slide 22

  23. Article XVI.2(c) NUMBER OF TRANSATIONS OR QUANTITY Import of titles restricted to 100 per year. WTOOMC slide 23

  24. 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. WTOOMC slide 24

  25. 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. WTOOMC slide 25

  26. 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. WTOOMC slide 26

  27. Article XVI.2(e) TYPE OF LEGAL ENTITY Provision through a “GmbH & CoKG” and “EWIV” is prohibited. WTOOMC slide 27

  28. Article XVI.2(e) TYPE OF LEGAL ENTITY Provision through SEL (anonyme, à responsabilité limitée ou en commandite par actions) or SCP only. WTOOMC slide 28

  29. 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. WTOOMC slide 29

  30. Article XVI.2(f) SHARE OF FOREIGN CAPITAL Foreign investment up to 49 per cent of the registered capital of enterprises. WTOOMC slide 30

  31. Article XVI.2(f) SHARE OF FOREIGN CAPITAL Foreign investors can hold up to 49 per cent of the equity of such enterprises. WTOOMC slide 31

  32. 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. WTOOMC slide 32

  33. 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 WTOOMC slide 33

  34. 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: WTOOMC slide 34

  35. 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. WTOOMC slide 35

  36. 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) WTOOMC slide 36

  37. Market Access, Mode 3Number of limitations by type WTOOMC slide 37

  38. National Treatment, Mode 3Number of limitations, 10 most frequent types WTOOMC slide 38

  39. 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 WTOOMC slide 39

  40. How Schedules of Commitments are structured: WTOOMC slide 40

  41. 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 WTOOMC slide 41

  42. 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 WTOOMC slide 42

  43. 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 WTOOMC slide 43

  44. Structure of Mode 4 Commitments(horizontal commitments, 2002) WTOOMC slide 44

  45. Typical Horizontal Commitments in Mode 4 WTOOMC slide 45

  46. 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 WTOOMC slide 46

  47. 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 WTOOMC slide 47

  48. Relationship between MFN obligations and specific commitments in individual sectors WTOOMC slide 48

  49. 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% No commitments scheduled on road transport Any preferences or discrimination is permissible Bilateral agreements covering road transport Accountancy commitments show no limitations on commercial presence The exemption is inoperable since all Members must be granted scheduled access Commercial presence of foreign accounting firms is based on reciprocity WTOOMC slide 49

  50. 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 WTOOMC slide 50

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