UNCTAD
THE NEGOTIATIONS ON THE
RULES OF THE GENERAL
AGREEMENT ON TRADE IN
SERVICES
Commercial Diplomacy Programme
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UNCTAD
THE GATS RULES
• SAFEGUARDS
• SUBSIDIES
• GOVERNMENT PROCUREMENT
The negotiating mandate:
Art. X: « there shall be multilateral negotiations on the
question of emergency safeguard measures… »
Art. XV: « Members shall enter into negotations with the
view to developing the necessary multilateral disciplines… »
Art. XIII: « there shall be multilateral negotiations on
government
procurement
in
services
under
this
Agreement… »
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UNCTAD
SAFEGUARD MEASURES IN
THE TRADE IN SERVICES
• Definition and scope:
- Commercial defense measure, I.e. a temporary exception to the
commitments of the GATS
- Can be “horizontal” or sectorial (under the sectorial model,
safeguards apply only to services sectors that really need special
protection v. horizontal: general)
• The safeguards can be applied:
- Because of unpredictable circumstances or an emergency
situation
- In case of an increase in the supply or in the consumption or a
similar service
- In case of threaten or a serious damage to the national industry
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- Debate on “unforeseen developments”
UNCTAD
SAFEGUARD MEASURES
• Criteria of the “like
products” as applied
to the trade in
goods:
- Nature and physical
features of the product
- Final utilization
- Tariff classification
- Consumers’
preferences
- Elasticity of
substitution and supply
• Possible criteria inspired by
the “like product” applied to
the trade in services:
- Technical features
- Final utilization
- Classification of the CPC or W120
- Consumer preference
- Elasticity of substitution and supply
- Conditions provided for in the
contracts
- How the service is introduced into
the market
- the consumer needs that it is 4
sought to satisfy
UNCTAD
THE PROS OF THE
SAFEGUARD MEASURES IN
SERVICES
• To provide for an exceptional commercial defense
• To support the goals of the national policy
• To facilitate a domestic adjustment, i.e. to
counter the possible negative effects of
liberalization programmes
• To strengthen the domestic capacity
• Safeguards are useful in the trade of goods
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UNCTAD
THE CONS OF THE
SAFEGUARD MEASURES IN
SERVICES
• Safeguards may be used against services exported
by developing countries
• Developing countries may have difficulties in
implementing these measures
• The main users of safeguard measures in the
trade in goods are the developed countries
• Statistical data on trade in services is weak and
can undermine the implementation of safeguards
• Safeguards are easy to apply in mode 4, but
difficult in mode 3
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UNCTAD
SAFEGUARD MEASURES IN
MODE 3 (COMMERCIAL
PRESENCE)
The issue of the domesti industry and the
acquired rights:
Option 1: do not apply the safeguard to mode
3: the foreign suppliers have a local presence
and so have acquired rights. Domestic industry
could invoke the safeguard but it would not
apply to foreign suppliers with a commercial
presence.
This option guarantees investment involving
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mode 3 of supply.
UNCTAD
SAFEGUARD MEASURES IN
MODE 3 (COMMERCIAL
PRESENCE)
Option 2: retroactive application.
Safeguard is applied to all foreign suppliers
regardless the commercial presence. The
foreign suppliers with a commercial presence
do not have a recognized right to expand
operation.
Quantitative restrictions could be applied
through the prohibition of future expansion for
foreigners with a commercial presence
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UNCTAD
SAFEGUARD MEASURES IN
MODE 3 (COMMERCIAL
PRESENCE)
Option 3: retroactive application limited to the
rights effectively exerted (does not protect the
commercial expectations of new investors)
Entitlements are limited to the application of
the schedules of commitments of the member
concerned.
Very attractive option for countries that do not
guarantee national treatment in their domestic
regulation
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UNCTAD
RESTRICTIONS TO MFN
• Article X of the GATS: safeguard measures
in services must be based on the MFN
principle but
• Bilateral Investment Treaties: under
certain BIT, foreign suppliers are entitled to
NT and are not considered as foreign any
more. Should the rights given to foreign
suppliers with a commercial presence be
determined on a case-by-case basis?
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UNCTAD
RESTRICTIONS TO MFN
• Suggestion that any safeguard mechanism
should protect acquired rights and exclude the
possibility of disinvestments: depends on the
definition of acquired rights.
- Should the definition be based on ownership?
(e.g. Art. XXVIII) so established foreign suppliers
would still be allowed to retain their current
equity holdings? Would it be possible to freeze
the status quo as a form of safeguard action,
preventing any increase in holdings?
- Broader definition of acquired rights? Ownership
and right from being allowed to operate within
a Member’s territory?
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UNCTAD
SAFEGUARD MEASURES
• How to determine an increase of the supply or
the consumption and the threaten or the damage
to the national industry:
- Indicators provided by:
- Taxes
- Regulatory mechanisms and chambers of
commerce
- Balance of payments
- Transborder transactions
- Criteria based on income, sales, competitivity
indicators
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- Global or national statistical data
UNCTAD
SAFEGUARD MEASURES
• Provisional measures: proposal by
ASEAN. Measures to remedy situations in
which there is a threat of serious injury
before any such injury materialized. Proof
would be prima facie evidence.
• Procedures and time limits: safeguard
mechanism should be based on investigation
that should respect transparency and due
process
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UNCTAD
SAFEGUARD MEASURES
• Measures
to
be
applied
and
their
effectiveness:
- Mode 1: difficulty to monitor but the best
option
would
be
through
internal
consumption taxes (more suitable and
possibility of disaggregated taxes, e.g.
taxes on luxury, etc)
- Mode 2: WTO paper on horizontal and
sectorial limitations scheduled under Mode
2. Restrictions in this mode are used
normally before consumption of the
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services abroad.
UNCTAD
SAFEGUARD MEASURES
- Mode 3: Safeguards to companies with a
commercial
presence
could
lead
to
disinvestments in the sector concerned.
But disinvestments could be avoided through
the use of quotas based on historical market
share.
The measures could take the form of
limitations on access by new investors, on the
types of activities undertaken.
- Mode 4: no interests for developing countries
but very easy to apply (e.g. easy to collect
statistics). Developed countries could use
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safeguard in this area more easily.
UNCTAD
•
-
-
SAFEGUARD MEASURES:
CONCERNS FROM THE POINT
OF VIEW OF THE DEVELOPING
COUNTRIES
Provisions
on
special
and
differential treatment that could
be considered:
De minimis provisions
Greater
periods
for
the
investigations realized by the
developing countries and for the
implementation of the measures
Do not apply safeguards to mode
4
Possibility to renew the safeguard
if the conditions continue
Technical cooperation
•
-
-
-
Other considerations:
Need to strengthen the national
authorities in charge of the
investigations
Need to introduce flexibility in
the provisions on national
treatment when implementing
safeguards
Introduce national rules on
competition
Link this negotiation to the
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overall results of the mandated
UNCTAD
SUBSIDIES IN THE TRADE IN
SERVICES
• How to obtain the information
• The economic theory:
– The distortions created by the
subsidies vs. the development goals
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UNCTAD
•
-
-
SUBSIDIES IN THE TRADE IN
SERVICES
Definition of
subsidy in the
trade in goods:
financial contribution
by a public body
Any form of income
or price support
A benefit is thereby
conferred
Subsidy is specific
•
-
-
General principles of
the Agreement on
Subsidies and
possible application
to services:
Active
or
passive
financial
contribut6ionprice
support
Specificity
Prohibited subsidies
Actionable subsidies
Non-actionable
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subsidies
UNCTAD
SUBSIDIES IN THE TRADE IN
SERVICES
• Main problems faced in the trade in services:
- Lack of statistical data
- Classification (subsidy should be classified and
then compared with existing classification system)
- Non-differentiation in budget (some budget do
not differentiate between goods and services)
- Difficulties to measure the commercial impact
(experience limited in the area of subsidies in
services)
- Some services are intertwined
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UNCTAD
SUBSIDIES IN THE TRADE IN
SERVICES
• Link between the subsidies in services and the
national treatment:
- Under the GATS, subsidies are subject to
the general principles, e.g. NT and market
access.
- Subsidies can be listed as a particular
commitment or included as part of a wider
commitment in a member’s schedules
- It would therefore be impossible to
discriminate in granting subsidies, as the
same rights would have to be given to
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foreigners.
UNCTAD
SUBSIDIES IN THE TRADE IN
SERVICES
• How to deal with the distortions created by the
subsidies in services:
- Assessment of each activity: prohibited,
actionable and non-actionable? But how to
classify subsidies to promote development
- Sectorial assessment: illustrative list made
by each country? Each country would
establish its own priorities.
- Elements for a national list of criteria (by
mode, sector or kind or subsidy)? (cf:
passive subsidies in Tourism sector such as
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non –collection of taxes)
UNCTAD
SUBSIDIES IN THE TRADE IN
SERVICES
• Cross subsidies
• Some procedural issues:
- How to determine the damage
- How to measure the impact of the
distortion
- How to calculate the compensatory
measures
- How to determine which measures can be
applied
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UNCTAD
•
-
-
-
SUBSIDIES IN THE TRADE IN
SERVICES: CONCERNS FROM
THE POINT OF VIEW OF THE
DEVELOPING COUNTRIES
Special and differential
treatment:
Allow for subsidies on
mode 1 such as financing
of research and
development.
No countervailing
measures for the least
developed countries and
restrain for other
developing countries
Greater de minimis
provisions
•
-
Other considerations:
Recognize the need for
development goals
Make an inventory of
frequent subsidies in the
developing countries
Prepare a national list of
prohibited subsidies
Determine national criteria
for the investigations on
subsidies
Identify policy spaces to 23
be preserved
UNCTAD
GOVERNMENT PROCUREMENT
IN SERVICES
• Art. XIII.1 of the GATS
« the procurement by governmental agencies of
services purchased for governmental purposes
and not with a view to commercial resale or
with a view to use in the supply of services for
commercial sale »
• The official goals:
- Transparency
- Liberalization of the market for government
procurement
- Gradual elimination of national preferences24
UNCTAD
GOVERNMENT PROCUREMENT
IN SERVICES
• Definition and scope:
Who makes the procurement? Public body,
private body under concession contract,
central, regional or local public authorities?
- What kind of transaction? “services
purchased for governmental purposes and
not with a view to commercial resale or
with a view to use in the supply of
services for commercial sale”
- What is being procured? All the services
sectors under the classification list W120?
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UNCTAD
GOVERNMENT PROCUREMENT
IN SERVICES
• The link with the WTO Working Group on
transparency in government procurement
• Possible content of the negotiations:
- MFN
- National treatment and market access
- Transparency
- Dispute settlement
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GOVERNMENT PROCUREMENT
UNCTAD
IN SERVICES: CONCERNS FROM
THE POINT OF VIEW OF THE
DEVELOPING COUNTRIES
•
-
Special
and
differential
treatment:
Provisions in case of balance of
payments deficit
Support to productive industries
Gradual implementation of the
commitments
Promotion of the national industry
Technical cooperation
Include a list of national or
subregional exceptions
Flexibility for the offers of small and
medium enterprises
•
-
-
-
Other considerations:
Recognize the development
goals
Link the negotiations on this
issue to implementation of
art. IV and the mandated
negotiations under art. XIX
Avoid commitments too
complicated
to
be
implemented
Identify national sectors
that need to be supported
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UNCTAD
THE GATS RULES
• Conclusions:
- General conclusions:
- The important link with the negotiations on
the progressive liberalization
- Paradoxes in the utilization of exceptions
(e.g. Would the safeguard mechanism be
used more often by developed countries
than developing countries, as it has been
the case for safeguards in goods?)
- The value of joint actions (explain)
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UNCTAD
THE GATS RULES
•
Specific conclusions from the national point of
view:
-
On safeguards: horizontal set of rules on emergency safeguards
would give developing countries a legitimate way to suspend GATS
obligations. Need to establish appropriate structure to apply these
measures. Concern with regard to safeguards applied to mode 4.
Consistency between the safeguards applied under WTO and regional
agreements.
On subsidies: List of priorities for developing countries would allow
them to support their domestic suppliers. Distinction between passive
and active subsidies should be done
On government procurement: Lest interest for developing
countries. Each individual country should determine whether it should
allow concession to foreign suppliers, in would allow them to support
their domestic suppliers, in order to suit the best its political and
economic programme.
-
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