International Chamber of Commerce
The world business organization
Department of Policy and Business Practices
Commission on E-Business, IT and Telecoms
Task Force on Telecoms Policy
ICC Background Document on WTO Commitments
WTO BASICS:
Q: What is the World Trade Organization?
A: Besides being the only negotiating forum for liberalizing multilateral trade, the WTO, as
was the GATT, is primarily a legal framework, with rules, procedures and disciplines
established by and for Members to conduct international trade in a transparent and
predictable manner, backed up by an effective dispute settlement mechanism. It was
created as a result of the Uruguay Round of Multilateral Trade Negotiations (1986-93) to
succeed the General Agreement on Tariffs and Trade (GATT) on 1 January 1995.
Whereas the GATT since 1948 had focussed on the reduction of border restrictions on
goods, the WTO also provides rules and disciplines, inter alia, for the liberalization of
trade in services, trade-related investment measures, agriculture and textiles, and seeks
to dismantle non-tariff barriers.
Q: How does the WTO function?
A: The WTO is a purely intergovernmental organization with a Secretariat in Geneva. The
entirety of WTO Members (144 to date) decides all matters concerning the WTO by
consensus. As the General Council, it oversees the management and organization of its
work, and constitutes the dispute settlement body. The Ministerial Conference,
scheduled to meet biennially, is the highest organ of the WTO with ultimate decisionmaking authority over multilateral trade agreements.
International Chamber of Commerce
38, Cours Albert 1er, 75008 – Paris, France
Telephone +33 1 49 53 28 28 Fax +33 1 49 53 28 59
Web site www.iccwbo.org E-mail icc@iccwbo.org
28 June 2002 AH/dhh
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The WTO's main tasks are to implement and administer the WTO Agreement and the
multilateral and plurilateral agreements that form an integral part thereof, as well as the
Dispute Settlement Understanding. Tariff and non-tariff concessions as well as market
access commitments are negotiated among WTO Members (often on a bilateral and
plurilateral basis) and subsequently multilateralised via the most-favoured nation
treatment (MFN principle). The WTO’s guiding principle of non-discrimination - MF N
and national treatment - ensures, respectively, that negotiated trade concessions benefit
all Members and that foreign products and services receive the same treatment as like
domestic ones. Any violation of agreed trade rules can be brought before the WTO’s
dispute settlement body after failure to resolve a dispute through consultations with the
government concerned.
Lastly, the WTO promotes predictable and smooth trade transactions through the
binding of trade concessions and commitments in national schedules and through the
transparency requirement, which obliges Members to keep both trade regulation and
information public and easily accessible so it can be verified and useful to traders.
Members must communicate all administrative or regulatory changes concerning trade
to the WTO.
Q: What are the main agreements?
A: The WTO consists of GATT 1994 (as amended since 1948), a number of
Understandings on Interpretations of certain articles and provisions, and 12 multilateral
agreements on trade in goods ranging from agriculture and sanitary and phytosanitary
measures to subsidies and countervailing measures. In addition, there is the General
Agreement on Trade in Services (GATS), the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS), the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU), the Trade Policy Review Mechanism
(TPRM), and four plurilateral agreements.
Q:
A:
Are any new negotiations taking place?
Yes. At the Ministerial Conference in November 2001 in Doha, Qatar, WTO Members
launched a new round of negotiations dedicated to the needs of developing countries,
hence labeled the Doha Development Agenda.
Q:
A:
Is there a timetable for these negotiations?
Yes. Negotiations are to conclude on 1 January 2005. The new round also provides a
time frame for the conclusion of the built-in agenda (ongoing negotiations) in GATS
(and agriculture).
Q:
A:
What is ICC’s relationship with the WTO?
ICC maintains a flow of business information and advice to the WTO on trade and
investment liberalization and strengthening the rules-based multilateral trading system.
In addition, ICC’s Executive Board meets annually with the WTO Ambassadors.
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THE GATS
Q:
A:
Q:
A:
How does the GATS differ from the GATT or any other WTO agreement?
The GATS deals with trade in services covering 11 broad categories (tourism, financial,
business, communication, transport, construction, recreation, environmental,
distribution, health and education) in turn divided into 160 sub-sectors (e.g. banking,
insurance, basic telecommunications, information technology). There have been
continuous negotiations on services since the end of the Uruguay Round covering rules
towards completing the GATS framework and four sectors (financial services, maritime
transport, movement of natural persons and basic telecoms).
Unlike multilateral agreements like the GATT and WTO agreements, the GATS allows
Members to: exempt measures from the general obligations of the most favoured nation
treatment (MFN) as long as such exemptions are officially recorded; schedule specific
commitments in sectors of their choice, including limitations and conditions on market
access; and introduce conditions and qualifications on national treatment, provided that
these are duly recorded in their national schedules of commitments. The GATS contains
a mandate for progressive liberalisation on a bi-, pluri- and multilateral basis towards the
objective of raising the level of specific commitments undertaken by Members.
Recently, Members agreed on the modalities for future negotiations to be on a request
and offer basis. For the new round, the request phase ends on 30 June 2002 and the offer
phase by 31 March 2003.
How do governments liberalise trade in services?
Trade in services covers the supply of any service in any sector, except that supplied in
the exercise of governmental authority, through four basic modes: Mode 1 corresponds
to the traditional cross border supply of a service from the territory of one Member into
that of any other.
Mode 2 corresponds to the supply of services in one country for the benefit of service
consumers of any other Member, i.e. consumption abroad.
Mode 3 corresponds to services supply through the commercial presence in another
Member’s territory, i.e., the physical establishment, including capital and investment.
Mode 4 refers to the movement of natural persons from one Member to provide a service
in the territory of any another Member.
By scheduling commitments, governments can guarantee existing levels of access
(standstill bindings) assuring traders and investors as to a consistent policy environment,
or by reducing existing regulatory and market access limitations and extending sectoral
coverage, liberalisation of trade in services is accomplished over time.
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Q:
A:
What type of limitations can be maintained?
All Members have to have a national schedule of commitments, but are free to choose
the sectors to be included and the degree of market access and national treatment to be
accorded to foreign service suppliers. About two-thirds of WTO Members listed MFN
exemption. These can be on a sectoral basis (e.g. communications/audiovisual) or on a
horizontal basis applying to all sectors (e.g. discrimination related to mode 3 and mode
4 supply of service). Market access limitations can be in the form of restricting the
value of service transactions through quotas or economic needs tests. A country may
also limit personnel entering the country to perform services to specific categories or
levels of personnel, or they may restrict how long such personnel may stay. In the
absence of tariffs on services, an unqualified market access and national treatment
commitment would correspond to free trade.
Q:
A:
How are services generally scheduled in the GATS?
A specific coding scheme for scheduling services in the GATS was not mandatory.
Most countries used a services coding scheme known as GATS GNS/W/120 or W/120
for short. However, some countries used another methodology known as the United
Nations Provisional Central Product Classification (CPC) codes as identified by the
United Nations Statistics Division. At their highest levels, information technology
services fell into the following categories:
W/120 Code
1.B.
1.B.a.
1.B.b.
1.B.c.
1.B.d.
1.B.e.
2.C.
2.C.h.
2.C.i.
2.C.j.
2.C.k.
2.C.l.
2.C.m.
2.C.n.
W/120 Description
Computer and Related Services
Consultancy services related to the installation
of computer hardware
Software implementation services
Data processing services
Data base services
Other
Telecommunication Services (value-added
services)
Electronic mail
Voice mail
On-line information and data base retrieval
Electronic data interchange (EDI)
Enhanced/value added facsimile services, incl.
store and forward, store and retrieve
Code and protocol conversion
On-line information and/or data processing
(including transaction processing
Corresponding CPC
841
842
843
844
845+849
7523**
7523**
7523**
7523**
7523**
n.a.
843**
**Indicates in this and the following tables that the service specified constitutes only a part of the total range of
activities covered by the CPC concordance (e.g., voice mail is only a component of CPC item 7523, “Data and
Message Transmission Services.”
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Q:
A:
How may a country indicate that it does not allow complete free and open trade in
services?
To not allow complete free and open trade, a country may limit trade in any of the four
modes for a given service by listing exceptions applicable to each mode. For example, a
country may limit personnel entering the country to perform services to specific
categories or levels of personnel, or they may restrict how long such personnel may stay.
TELECOMS AND E-COMMERCE SPECIFIC ISSUES:
Q:
A:
What is the GATS Telecommunications Annex?
A separate Telecommunications Annex established rights concerning access to and use
of public telecommunications networks and services for the delivery of services for
which a member state has scheduled commitments. The Annex requires WTO members
to ensure that service suppliers seeking to take advantage of commitments have access to
and use of public basic telecommunications networks and services on reasonable and
non-discriminatory terms. The Annex applies even when a WTO member has not
scheduled commitments in basic telecommunications.
Q:
A:
What is the status of negotiations on basic telecommunication services?
For the first time ever in a sector considered to be governed by natural monopolies,
negotiations to liberalize basic telecommunication services were completed in 1997 and
entered into force in February 1998. . Some 69 Members scheduled commitments in this
sector, accounting for over 90 per cent of global communications revenues. The results
of these negotiations were incorporated into the Fourth Protocol of the GATS. Since
then, the 12 countries that have acceded to the WTO, including China and Taiwan, have
scheduled basic telecoms commitments plus five other Members, bringing the total to
86. Countries also negotiated an additional set of regulatory principles and disciplines
on the basis of a “reference paper
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Q:
A:
What is the Reference Paper and how many countries have signed on to it?
The Reference Paper contains a set of pro-competitive regulatory principles that
countries could include (in whole or in part) on a voluntary basis as legally binding
additional commitments in their schedules. Issues addressed in the Reference Paper
include competition safeguards, interconnection guarantees, universal service,
transparency in licensing, independence of regulators, and fairness in allocating scarce
resources (e.g. radio spectrum). The principles are intended to safeguard negotiated
commitments against the abuse of market power by former monopolies/major suppliers
of basic telecommunications networks and services. Adherence to the Reference Paper
for basic telecommunication services in its entirety creates a degree of regulatory
certainty and fairness sought by investors.
57 WTO Members assumed these additional obligations in full, 6 made scaled-down
commitments and 6 made no regulatory commitments.
Q:
A:
The Importance of broader market access and national treatment obligations.
Several WTO Members committed to less than full market access and national treatment
for basic telecommunications, value-added services and computer and related services.
ICC has long advocated “meaningful market-opening commitments” including full
liberalization by a certain date, progressive removal of foreign ownership restrictions
and adoption of the Reference Paper in its entirety for basic telecommunications only by
all Members.
Q:
What is the necessary infrastructure for business-to-business and business-toconsumer e-commerce?
This infrastructure includes the bundle of services needed to start and finish an
electronic commerce transaction, beginning with basic telecommunications as the
network and service by which a consumer accesses the Internet to express delivery when
a product is purchased online but delivered physically. Other sectors include valueadded services, computer and related services, distribution services, advertising services,
and financial services, etc.
A:
Q:
A:
What is a “top-down” negotiating approach?
Also referred to as ‘negative listing’, it assumes that all sectors automatically are subject
to market access and national treatment obligations across all modes of supply. Any
exceptions must be listed in schedules of commitments. This contrasts with the
bottom-up approach whereby sectoral commitments must be specified. The GATS
approach is a mixture of the two with schedules being top-down in that where sectoral
commitments have been made, no limitations on access or national treatment may be
maintained, except those explicitly scheduled.
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Q:
A:
What is the Information Technology Agreement (ITA)?
The WTO’s ITA Agreement was negotiated at the WTO Ministerial in Singapore in
December 1996 and entered into force on 1 July 1997. In general, the agreement covers
main categories of products: computers, telecommunications, semiconductors,
semiconductor manufacturing equipment, software, and scientific instruments. It is a
pact among 50 countries to eliminate customs duties on information technology products
by the year 2000. The commitments undertaken require participants to bind these
commitments in the WTO tariff schedules. In general, developing countries have
requested and received extended phasing for at least some products in their schedule. In
no case, however, is the extended phasing period beyond the year 2005.
As of February 2001, the ITA had 40 country participants (covering 55 Members and
States or separate customs territories in the process of acceding to the WTO)
representing 93 percent of the annual world trade in IT services.
Q:
A:
What is the status of ITA II?
As a result of consultations held at the WTO Ministerial in March 1997, it was agreed
that ITA participants would hold expedited consultations to review and expand product
coverage and to address other non-tariff barriers to trade. The consultations, referred to
as “ITA II”, were to have been concluded by July 1998, with ITA II changes
implemented by 1 January 1999. Several countries have been unable to agree upon an
expanded ITA product list. In particular, considerable disagreement exists over the
inclusion of consumer electronic products.
Q:
A:
Why do we seek earlier implementation dates of commitments?
Many Members have made basic telecommunications, value-added services and
computer and related services commitments that are partial or phased-in over a period of
time. However, the dates for effectiveness of scheduled commitments vary considerably
among Members. Some commitments take effect as late as 2013 for specific services,
and some countries have not yet scheduled commitments for full liberalization.
Q:
Are the existing classification schemes flexible enough to accommodate the
technological progress in the delivery of services?
As mentioned above, countries schedule commitments according to classification
schemes (either the W/120 or the CPC) based on sectors (e.g. computer and related
services) and sub-sectors. Rapid technological development and the continuous
evolution of product and service offerings resulting from these developments makes it
impossible for the classification scheme to accommodate this reality, and the concept of
classification flexibility is meant to allow for this continuous evolution.
A:
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Q:
A:
What sanctions or redress are available for breach of commitments by members?
The traditional remedy in case of breach of commitments (nullification or impairment of
rights) under the GATT/WTO is in the first instance consultations between the
concerned governments and compensating the concerned countries. If that fails, a
dispute panel can be set up, which will decide the case. Any decision can be appealed
and the decision of the Appellate Body will stand, including the imposition of sanctions
commensurate with the damage incurred.
Q:
A:
What else is necessary to encourage electronic commerce?
In order for electronic commerce to be possible, Mode 1 commitments need to be made
for services across a broad range of industry sectors such as health, education, financial
services etc.
A complete list of WTO members is available at:
http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm
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