Domestic Regulation and Cross- Border Trade in Services

Joel P. TrachtmanThe Fletcher School of Law and Diplomacy

WTO Symposium on Cross-Border Supply of Services 28-29 April 2005

Cross-Border Trade in Services as a Challenge to Regulation

Territorial limits of enforcement jurisdiction

Responses: Enforcement cooperation Harmonization and recognition Requirement of establishment Exclusion

The right to regulate (4th preamble)

Regulation as a Challenge to Cross-Border Trade in Services

Regulatory protectionism Discriminatory regulation

De facto De jure

Unnecessary regulation Unnecessarily heterogeneous regulation

Existing GATS Disciplines on Domestic Regulation

Transparency (III, VI:2, VI:3) Market Access (XVI) National Treatment (XVII) VI:1; VI:4; VI:5 Accountancy Disciplines Financial Services Telecoms Reference Paper

Article XVI after Gambling

Can apply to qualitative regulation Compare relationship between GATT III

and GATT XI Overlap with GATS Article VI? Limited to foreclosure of entire “means of

delivery”? Or is any qualitative regulation that has quantitative effect covered?

Occasion for interpretation under Article XI:2 of WTO Charter?

Scheduling Article XVI Commitments after Gambling

Qualitative measures should be scheduled under Article XVI Especially if may foreclose a “means of delivery”

as that term is used in Gambling But even if it does not foreclose an entire

“means of delivery”—may be ”zero quota” on some portion of service, or may be understood to reduce quantity of service and therefore covered under XVI

Limits of the AB opinion are unclear In the past, some states have felt there was

no overlap between Article VI and XVI

National Treatment

“treatment no less favourable than that it accords to its own like services and service suppliers” (can be different)

Like services and like service providers How to read Art. XVII? In disjunctive

Asbestos: examine competitive relationship Or like risks approach?

Treatment “no less favourable” defined with reference to conditions of competition

The Limitations of Anti-Discrimination

Difficult to apply The “like products” problem Inefficiency without discrimination Supplemented for goods in TBT and SPS Link to regulatory reform Link to domestic motivations for reform

Domestic producers may have adapted to inefficient regulation

Scope of GATS VI

VI:1—reasonable, objective, and impartial administration in committed sectors

VI:4—CTS to develop disciplines as to qualification requirements and procedures, technical standards and licensing requirements Ensure against unnecessary barriers

VI:5—in committed sectors, pending VI:4 disciplines, prohibition of nullifcation or impairment under certain circumstances

GATS VI:5

Requires nullification or impairment See Kodak-Fuji Complaining party must show nullification;

legitimate expectations And

Not based on objective and transparent criteria, or More burdensome than necessary to ensure the

quality of the service, or In the case of licensing, itself a restriction

The Weakness of GATS VI:5

A standstill, at best—burden on GATS VI:4 A “grandfathering” advantage for

developed countries? Compare to SPS and TBT

requirements of proportionality

The VI:4 Work Program

Accountancy Disciplines Other sectors Horizontal? Japanese proposal.

Equivalent to TBT and SPS? Horizontal with possibility of sectoral? Linked to specific commitments

See NAFTA coverage of goods and services together in Chapter IX

1998 Accountancy Disciplines Strengthen necessity discipline Broadened concept of legitimate objectives Take account of equivalency of education,

experience and examination requirements With respect to technical standards, take

account of internationally recognized standards Prepared by “relevant international

organizations” open to all WTO members

Recognition and Equivalence

Relation of equivalence to necessity MFN issues GATS VII: requires opportunity for

other members Inclusion in disciplines GATS VI:6—verifying competence in

professional services

Role of International Standards

Participation by developing countries Compare VI:4 work program Relation to VI:5(b): take account of

international standards of “relevant international organizations”

SPS/Codex: Interfunctional Networking?

WTO goods law defers to standards set by Codex, International Office of Epizootics and International Plant Protection Convention SPS 3.1: members shall base their SPS measures

on international standards SPS 3.2: if conform to international standards,

presumed consistent with SPS Agreement Relevance to services?

Semi-soft law easier to make; insulates WTO from criticism

Expertise

International Standards

Deference to functional organizations? In financial services, FATF, Basle

Committee, IOSCO, IAIS, OECD Not “relevant international organizations” How do they differ from the WTO

Committee on Financial Services? Toward integrated “inter-functional”

decision-making

Horizontal versus Sectoral

Possibility of request-offer negotiations on regulatory barriers Relate to LAN Computers decision GATS XVIII commitments

Relation to commitments Horizontal as general

Judicially applied Negative integration

Sectoral can be more specific Legislatively formulated Positive integration

Conclusion