REGIONAL LIBERALIZATION ON
SERVICES IN ACCORDANCE WITH
MULTILATERAL DISCIPLINES
Commercial Diplomacy Programme
UNCTAD
The GATS and
Regional economic integration
The GATS enables its members to be a party to, or to
enter into preferential agreements liberalising trade in
services: art.V of GATS is the equivalent to art.XXIV
and to the Enabling Clause of the GATT.
Art.V provides for an exception to the general
obligation of MFN treatment contained in art.II of
GATS for parties of a regional trade agreement in
services, meaning that the preferential treatment they
apply among members of the regional agreement does
not have to be extended to other GATS members.
Regional agreements liberalising services must comply
with the conditions established in Art.V, i.e.:
To be notified to the Council of Trade in Services of
the WTO, and fulfil 2 basic conditions:
• have a “substantial sectoral coverage” in terms of
sectors, volume of trade affected and modes of
delivery, and
• provide for national treatment for services’ providers,
eliminating “substantially” all discrimination.
These conditions must be met at the entry into force of
the agreement or on the basis of a “reasonable” timeframe.
Flexibility of art.V:
Art.V provides for flexibility in the implementation of these
requirements when the agreement :
 involves developing countries, and
 is related to a wider process of economic integration of
trade liberalisation.
BUT: how and who will determine “substantial sectoral
coverage” and the appropriate time-frame ?
Regional integration agreements among developing countries
such as the MERCOSUR and the Andean Community have
set a time-frame of 8-10 years to achieve a “substantial
sectoral coverage” and full liberalisation of trade in services.
Other provisions contained in Art.V:
• The level of barriers to trade in the sectors covered
by the regional agreement should not be raised
compared to the level applicable before the agreement
when signing the regional agreement.
• Para. 3(b) of art.V allows to grant more favourable
treatment to juridical parties owned or controlled by
natural persons of the parties of the regional
agreement., i.e.:it allows to introduce or to maintain a
preferential treatment on the basis of nationality.
Implications of these GATS provisions when
negotiating regional agreements on services:
• The higher the level of commitments adopted in the GATS,
less space is left for regional preferential treatment,
for example:
if a country binds in the GATS an unrestricted market
access to all members (MFN) in all service sectors and for
all modes of delivery, it will not be able to grant a
preferential treatment in any sector nor mode to the
members of the regional agreement. Therefore, the regional
agreement will be less attractive for all parties concerned
compared to the multilateral agreement.
The “margins of preference” determine the relevance of the
regional agreement compared to the multilateral agreement.
The importance of the “margins of preference” in
the negotiation of a regional agreement:
• The “expected value” of regional integration for its
members depends on what they can reasonably expect
as the result of the regional negotiation.
• If they expect to receive the same market access from
their regional partners as in the multilateral
framework, their offers will be less significant.
• While some countries will not benefit of a regional
margin of preference, others could benefit from them.
• By definition, regional agreements in services should
provide for a “GATS plus” treatment for their
members. The approach of “positive lists” allows for
preferential treatment for regional agreements.
The importance of multilateral negotiations of
GATS 2000 for regional agreements:
• New disciplines to be developed in GATS 2000 such as
subsidies, emergency safeguards, government
procurement, will have an impact on what has been or
could be agreed at the regional level.
• Any new regional agreement should be compatible with
the current GATS provisions and with future
provisions.
• To maintain its relevance, the regional agreement
should go beyond future GATS provisions.
Main elements to be considered for the
negotiation of a regional agreement in services:
 The COVERAGE of the liberalisation, i.e.: how many
sectors, what modes of delivery, what volume of trade
involved, will there be exemptions (permanent or
temporary)? what measures will be covered (i.e.
subsidies, government procurement?).
 The KIND of liberalisation, i.e.: MFN treatment and
national treatment with preferences for the partners n
the regional agreement?
 Related disciplines, i.e.: the provisions that address
specific issues of trade in services, such as
transparency, monopolies and competition, safeguards,
subsidies, rules of origin, dispute settlement.
Regional liberalisation of trade in services:
the example of the Andean Community
WHAT IS THE ANDEAN COMMUNITY:
• A subregional integration scheme established in
1969 among 5 Latin American countries (Bolivia,
Colombia, Ecuador, Peru, Venezuela) = all
members are middle-income developing countries.
• It adopts supranational decisions that are
automatically incorporated into the national legal
frameworks without ratifications (as in the EU).
• It has a common external tariff for trade in goods
and aims at achieving a common market for goods
and services in 2005.
Andean commitments regarding trade in services:
• The “General Framework of Principles and Rules
for Liberalising the Trade in Services in the Andean
Community” was adopted as the supranational
decision number 439 in June 1998.
• Its main objective is to create a common market of
services among andean countries through the
elimination of restrictive measures.
Andean commitments regarding trade in services:
• Coverage: all sectors, all modes and all measures. Only
exclusion: air transport services and services provided by
governmental authority. But: there were common regimes
prior to this decision for transport services, maritime services,
road transport and air transport.
• 5 liberalising principles: MFN, national treatment, market
access, right to free transit and temporal presence, automatic
recognition of qualifications and licenses.
Negative lists, with the possibility of registering reservations and total
liberalisation are set as objectives for the year 2005 through annual
negotiations where progressive liberalisation is to be achieved.
• Related disciplines: rules of origin, safeguards, subsidies, and
special and differential treatment for 2 of the 5 members.