Trade & Development Symposium
Bali, 3-6 Dec 2013
THE LDC SERVICES WAIVER:
CONTEXT, LEGAL BASIS,
OPERATIONALISATION
High-Level Meeting
OPERATIONALISING THE LDC WAIVER
An Introduction
Hannes Schloemann, Director, WTI Advisors
hannes.schloemann@wtiadvisors.com
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Overview
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The Waiver: An LDC-Only Enabling Clause for Services
Scope: What does the Waiver Cover?
Market Access Preferences (“Small Window”) – Examples
Regulatory and Other Preferences (“Large Window”) –
Examples
Rules of Origin: Who is an LDC Provider?
What the Waiver is and is not About
What the Waiver Can and Cannot Achieve
How to Make it Work? Some Ideas
“Coda”: MFN Exemptions – an Interesting Proxy Explored
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The Waiver: An LDC-Only Enabling
Clause for Services
• Recalled – before December 2011:
– MFN applies (GATS Art. II)
– No authorization for preferences for DCs/LDCs (no
Enabling Clause  no GSP for services)
• Dec 2011 Waiver now authorizes preferential
treatment…
• …but does not oblige Members to grant preferences
• Covers preferences only for LDC services/service
providers
• But for all LDCs, not only WTO Members
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Scope: What does the Waiver Cover?
• Automatically covered: Market Access preferences
“of the type referred to in GATS Art. XVI” (“Small
Window”)
• Potentially covered: Other preferences (“Large
Window”)
– Regulatory preferences (e.g. easier procedures)
– Preferential national treatment (e.g. subsidies,
support mechanisms)
– Other preferences (e.g. tax exemptions)
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– But: Authorization from CTS required
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Market Access Preferences: Examples
(“Small Window”)
• Allow midwifes, stone masons or fashion models from
LDCs to provide services (mode 4) under LDC-only quota
• Waive for LDC providers the otherwise applicable ENT for
restaurant or hotel licenses (possibly limited to subsets,
e.g. specialty restaurants)
• Allow LDC contractors coming into the country as
contractual service suppliers (mode 4) to use up to 25
qualified building professionals from LDCs, while suppliers
from other countries can only bring in up to 10 own staff
• Allow LDC tour operators to maintain a local presence
(mode 3) in the form of “rep offices” while others must
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establish full branches or subsidiaries
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Regulatory and Other Preferences:
Examples (“Large Window”)
• Recognition of qualifications based on practical experience
(e.g. X years of experience) for LDC professionals while
requiring formal qualifications (diplomas etc.) for others
• Facilitated licensing procedures for LDC providers (e.g.
possibility to submit papers in home language)
• Concessional application fees for LDC applicants for
trucking licenses
• Facilitated vehicle registration for LDC providers
• Lower capital requirements for banks from LDCs
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Regulatory and Other Preferences:
Examples (“Large Window”) (cont’d)
• “LDC Helpdesk” for LDC service providers (assistance in
meeting licensing, qualification requirements; standards)
• Import VAT exemption for services imported from LDCs
• Facilitated/delayed payment of withholding tax for LDC
performers & IT professionals (mode 4)
• Automatic coverage of state-sponsored health insurance in
developed country X for its tourists when travelling to LDC
destinations (mode 2)
• Education grants for studies in LDC universities (mode 2)
 Unrealistic? Look at Members’ MFN Exemption
Lists & RTAs!
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No Preference without Rules of Origin:
Who is an LDC Service Provider?
• The issue: Potential for abuse – “shell companies”
• LDC interests are mixed:
– Liberal rules make life easy and incentivise investments
– But also risk: diluted preferences, political backlash
• The Waiver rule (quite usable, reasonable balance):
– LDC natural persons: (obviously) eligible
– LDC juridical persons:
• If LDC-owned or controlled: eligible, no further Qs
• If Non-LDC (Member) owned: eligible IF “substantive
business operations” in (any) LDC
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Avoiding Misunderstandings:
What the Waiver is not about
• The waiver is not about donors and donees
• The waiver is not about commitments
• The waiver is not even (primarily) about preferences and
preference margins…
…but rather improving effective market access for LDC
services and service providers)
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Reflection 1: Who could, who should
grant preferences?
• Recall: All Members are covered
• Important: (Most) services preferences are not aid, and
preference grantors are not donors.
 Avoid dichotomy “LDCs–Donors” – intuitive but
misleading!
• Preferences will often be most useful in the context of
geographic proximity (incl. for Mode 1) and may be a
supplementary tool for regional integration
• Even LDCs themselves may be interested and willing to
grant preferences
 Systemic Note 1: Selective market opening / regulatory
relaxation can be an attractive trial/pilot for any Member!
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Reflection 2: Why This is Not
(Primarily) About Margins
• Services are different, services trade barriers are
different!
• Unlike tariff preferences, services preferences rarely
create quantifiable “margins”
– (some may, e.g. quotas for mode 4)
• Preferences (esp. LDC prefs) will often enable or
facilitate effective market entry (first rungs of the ladder)
 Systemic Note 2: Selective market opening / regulatory
relaxation can be an attractive trial/pilot to test national
flexibilities  good for the system as a whole.
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Reflection 3: (Actual) Preferences v. (Only)
Commitments
• Many PTA “preferences” only reduce the “water”
between GATS commitments and the applied regime –
what you get is still MFN treatment, just more secure
• The Waiver covers actual preferential treatment (“applied
regime”) – when MFN is actually breached
• No need for the Waiver if a Member just wants to treat
others better than promised in GATS commitments
• Applying the Waiver means more than concluding a PTA
(more in unilateral applied reality, but less legal
commitment)
 Systemic Note 3: Services preference mean actual
liberalization, unlike most commitments  good exercise
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for the system as a whole.)
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Avoiding Misunderstandings:
What the Waiver is about
• Actual trade facilitation for services re:
– All sectors and subsectors – not just tourism &
transportation (although they matter)
– All modes of supply – not just mode 4 (although it
matters)
– All countries as current or potential importers of LDC
services – not just major developed countries (although
they matter)
• Big steps are welcome, but incremental steps can make a
difference as well – smart design is key
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Avoiding Misunderstandings:
What (use of) the Waiver can and cannot do
• It cannot (directly) solve all issues and challenges that
LDC service suppliers face when exporting – it can’t, e.g.
– Boost supply-side capabilities
– Solve business management issues
– Provide capital or generate critical size
– Solve regulatory issues at home
• BUT It can:
– Eliminate or reduce regulatory/administrative challenges
LDC service exporters face in export markets
 Make no mistake: These matter BIG TIME
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How to Make it Work? Some Reflections
• What we need, in a nutshell:
– Understand LDC interests
• Which services LDCs export/cound export
• Which (market access/regulatory) obstacles they
face
• What preferences could help them
– Understand Feasibility
• What can potential preference grantors do
• What will they likely not do
– Generate political will & momentum
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– Secure results
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How to Make it Work? Some Reflections for
LDCs & Friends
• Concretize interests & demands
– Systematic approach – looking for barriers/challenges &
the meaningful preference
(1) Identify actual and potential services exports
(2) Identify relevant regulatory/administrative
challenges (barriers)
(3) Design smart, targeted preferences - creativity &
fine-tuning is paramount!
( 16 country studies under way)
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How to Make it Work? Some Reflections for
potential pref. granting Members (= All!)
• Identify and concretize potential preferences - check e.g.:
– Any RTA-based preferences? Could some/all of them be
expanded to LDCs?
– Any national preferences? Some/all expandable to LDCs?
– Any admin/regulatory issues service providers have complained
about? Can some be relaxed on a selective (LDC-only) basis?
– Any taxes/charges that could be reduced for LDC providers?
– Any support system that can be expanded to cover LDC
services/providers?
– Any other support that can be provided?
• Again: Creativity and fine-tuning is key
( 5 studies under way – more welcome)
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How to Make it Work?
Cross-check: What role for the WTO?
• Recall: Waiver authorizes unilateral preferences – in
principle the multilateral work is done
• But: Waiver keeps CTS in the loop
– CTS receives notifications
– CTS needs to sanction “Large Window “ Preferences
• More importantly at this stage:
– There is a major role for the community in generating
actual outcomes (political process, de facto desire for
harmony)
– The WTO is the community’s forum  should serve as
facilitator
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The LDC Services Waiver
Discussion
(What’s your favourite LDC preference? Send us a mail!)
hannes.schloemann@wtiadvisors.com
In cooperation with:
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“Coda”:
MFN Exemptions: An Interesting Proxy
• Listed MFN Exemptions (under GATS Article II:2)
– reflect actual preferences (current or past)
– provide insight into what Members (are ready to)
do
– could possibly be extended to LDCs as one step
in the operationalization of the Waiver
– could be taken as examples by other Members
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences
MFN Exemption Listed
Armenia grants operators of
passenger road transport from
certain countries exemptions from
road taxes and operation charges
on reciprocity basis
Possible Waiver Preference
Grant similar privileges to LDC
operators (on a non-reciprocal
or reciprocal basis)
(Many other countries maintain
similar privileges in road transport
services, often specifically for
neighbours.)
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences (cont’d)
MFN Exemption Listed
Albania, the EU, Ukraine,
Venezuela and many other
Members grant national treatment
or a similar status (treatment as
locally produced movies) to
audiovisual co-productions with
certain countries under facilitated
conditions.
Possible Waiver Preference
Grant same treatment to coproductions with LDCs.
(While usually such treatment
relies in addition on a
corresponding reciprocal G2G
agreement, it is conceivable to
apply similar treatment on a
unilateral preferential basis
under the Waiver.)
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences (cont’d)
MFN Exemption Listed
Possible Waiver Preference
Cambodia maintains special
Apply similar preferential
administrative procedures for ships procedures unilaterally to all
from neighbouring countries for
LDC providers (ships).
both internal waterways and
maritime transport.
Costa Rica grants membership in
national professional service
bodies to providers from other
Members on the basis of
reciprocity.
Grant access to membership in
professional bodies to LDC
service providers (without
reciprocity).
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences (cont’d)
MFN Exemption Listed
Possible Waiver Preference
Spain (EU Member) grants
exemptions from otherwise
applicable distribution licenses for
dubbed movies for children to films
from members of the Council of
Europe.
The UK (EU Member) waives the
need for a work permit for citizens
from Commonwealth Countries
who have a UK-born grandparent.
Apply same or similar exemption
to LDC movie productions.
Extend the same privilege to
LDC citizens under the same
conditions (a UK-born
grandparent).
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences (cont’d)
MFN Exemption Listed
Possible Waiver Preference
Turkey grants foreign exchange
guarantees to providers from
certain countries in case their
transfers of funds are temporarily
halted by Turkish BoP measures.
Extend the same privileged
guarantee to LDC providers.
Turkey grants recognition of
accountancy service providers’
qualifications (and the resulting
right to act as “financial advisor” in
Turkey) to accountants from certain
countries on the basis of
reciprocity.
Grant same recognition to LDC
accountants, without reciprocity,
- on a blanket basis (unlikely)
- or by applying facilitated
recognition requirements /
procedures (quite possible).
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences (cont’d)
MFN Exemption Listed
Possible Waiver Preference
Michigan, a state in the United
States, permits corporate central
credit unions to place deposits in
banks chartered in Canada and the
EU, but not elsewhere.
A privilege like this (which
significantly improves the banks’
ability to provide mode 1 and
mode 2 services to potent US
depositors) could, in principle,
be extended to banks in LDCs.
Not possible on a blanket basis?
 Deposits in LDCs could be
allowed under certain
thresholds.
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MFN Exemptions: Exploring Examples…
Did you Notice?
 (Almost) all of the above examples were
regulatory preferences  “Large Window” (the type
requiring CTS approval)
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences (cont’d)
MFN Exemption Listed
Peru grants higher quotas to
artistes from Latin American
countries (promoting Latin culture)
Possible Waiver Preference
Special quotas for LDC artists
and entertainers
The Philippines grant special visas
and waives labour market test
(ENT) for foreign “traders and
investors” from certain countries
(on the basis of reciprocal treaties)
Waive ENTs also for LDC
providers (possibly certain
categories, e.g. business
visitors)
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MFN Exemptions: Exploring Examples,
Imagining Waiver Preferences (cont’d)
MFN Exemption Listed
Switzerland grants easier access
(work permits) to distribution
service providers from EFTA
countries (flanking measure to
support trade in goods)
Possible Waiver Preference
Grant similar treatment to
distribution service providers
(mode 4) from LDCs
Venezuela has reserved market
Extend market access to LDC
access for certain professional
providers on a non-reciprocal
services to providers from certain
basis
countries on the basis of reciprocity
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The LDC Services Waiver
Discussion
(What’s your favourite LDC preference? Send us a mail!)
hannes.schloemann@wtiadvisors.com
In cooperation with:
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