Services
General introduction
This Note has been produced at the request of the Council for Trade in Services in the framework of the review of the Air Transport Annex which stipulates in paragraph 5 that “the Council for Trade in Services shall review periodically and at least every five years developments in the air transport sector and the operation of this Annex with a view to considering the possible further application of the Agreement in this sector”. The Secretariat has been asked by Council for Trade in Services to update document S/C/W/59 dated 5 November 1998 and document S/C/W/129 dated 15 October 1999.
Air Transport and the GATS
This special compilation describes air transport services from a regulatory and economic point of view with a special focus on market access questions. Each volume contains original material and up-to-date insights written on the basis of close cooperation with industry professionals. In preparation for the second air transport review mandated by the GATS Annex on Air Transport Services the Secretariat has gathered in the present booklet the documentation produced in 2000-1 for the first review.
Determining "Likeness" under the GATS
The concept of "like services and service suppliers" used in the General Agreement on Trade in Services (GATS) is still very much uncharted territory. The few dispute cases involving national treatment and most-favoured-nation treatment claims under the GATS are vague concerning the criteria which should be used to establish "likeness". Discussions among WTO Members on this subject have remained limited and inconclusive. Perhaps the only point on which everybody agrees is that a determination of "likeness" under the GATS gives rise to a wider range of questions – and uncertainties – than under the GATT. The intangibility of services the difficulty to draw a line between product and production the existence of four modes of supply the combined reference to like services and like service suppliers and the lack of a detailed nomenclature are some of the factors which complicate the task of establishing "likeness" in services trade. This contribution focuses on the concept of “likeness” in the context of the national treatment obligation (Article XVII of the GATS). It discusses the possible implications of the combined reference to “like services and service suppliers” as well as the relevance and role of the modes of supply in determining “likeness”. It also examines whether the criteria developed by GATT case-law (physical properties classification end-use and consumer tastes) can be mechanically transposed to services trade and how far they may contribute to establishing “likeness” under the GATS. It then discusses whether other parameters such as the regulatory context or an “aim and effect” type approach could be relevant.
Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs)
This paper attempts to fill a gap in the trade literature by providing a comprehensive overview of services liberalization commitments in the new generation of preferential trade agreements (PTAs) as compared to prevailing GATS commitments and Doha Round offers. By developing a new database the paper reviews the commitments undertaken by 29 WTO Members (counting the EC as one) under mode 1 (cross-border supply) and mode 3 (commercial presence) in 28 PTAs negotiated since 2000. The paper presents a general analysis from both a cross-country and cross-sector perspectives and also examines in more detail the GATS+ commitments undertaken in a number of key sectors (audiovisual distribution education financial professional and telecommunication services). The paper also discusses the potential economic costs arising from these preferential agreements as well as the potential implications for the multilateral trading system and for the Doha round of negotiations in particular. The paper concludes by discussing possible approaches to overcome the potential downsides of PTAs including proposals for a more pro-active role for the WTO in the surveillance of these agreements.
Services Trade Liberalization at the Regional Level
This paper discusses the opportunities and challenges for Southern and Eastern African ACP countries of services negotiations in the context of European Partnership Agreements. The paper provides an overview of existing flows in services from and to Southern and Eastern Africa an overview that suffers from the paucity of relevant data. Given the significant differences among services sectors the paper provides a separate discussion for several of them including financial services tourism and business services. The latest developments in each sector are described and the issues that are at stake in trade negotiations. In this context the competitive position of Southern and Eastern African countries is compared with the position of the European Union and other global players. The paper attempts to identify possible export opportunities for Southern and Eastern African ACP countries and discusses the advantages and disadvantages of giving preferential access to EU suppliers in those services sectors where African countries are likely to import. Particular attention is paid to the role of mode 4 in the discussed services sectors.
Liberalizing Financial Services Trade in Africa
This paper analyses the possible gains from regional and multilateral liberalization of financial services trade for African countries taking into account the implications of such liberalization for financial regulation and capital account liberalization. It also describes existing efforts to integrate financial markets within four African regions (WAEMU CEMAC SADC and COMESA) and discusses the existing GATS commitments of the relevant countries with respect to financial services. Although the regions differ significantly there is scope for further regional integration in all of them. Significant scope also exists for further multilateral liberalization of financial services in particular with respect to Mode 3.
The Impact of Mode 4 Liberalization on Bilateral Trade Flows
This paper gives insights into the possible trade creating effects of service trade liberalization via Mode 4. In particular we expect that temporary movements of persons like permanent movements have the potential to reduce transaction costs for merchandise trade between home and host country. Exploiting data on H-1B beneficiaries from different origins in the United States and using a gravity model of trade we find significantly positive effects of temporary movements of persons on bilateral merchandise trade. In addition to this the paper provides insights into the determinants of temporary movements of persons.
Public Services and the GATS
The status of public services is one of the most hotly debated issues surrounding the GATS. There are two approaches to distinguish such services from any other services: an institutional approach that focuses on the legal and institutional conditions governing supply (e.g. ownership status market organisation) and a functional approach based on the policy objectives that may be involved (e.g. distributional and quality-related considerations concepts of universal access). Given the wide range of institutional arrangements that exist in different jurisdictions with significant variations over time the former approach does not appear appropriate. The services provided by government-owned facilities whose costs are covered directly by the State may well be indistinguishable for all practical purposes from the services provided by private commercial operators whose users (students patients passengers etc.) are reimbursed. This paper discusses the relevance of the GATS for different organisational settings - from government monopolies to regulated and/or subsidized private provision - that may be used by WTO Members to meet typical public service objectives. It turns out that virtually all forms of organisation can be accommodated within the framework of the Agreement. To fully exploit its opportunities and avoid unpleasant surprises however governments would need to thoroughly analyse the relevant provisions in the light of their own policy objectives.
Turning Hills into Mountains?
Over the past months it has become increasingly clear that the services negotiations under the Doha Development Agenda will not produce significant improvements on current commitments unless major new impetus is provided. In an introductory section this paper discusses various impediments from the perspective of participating governments that may explain the lack of negotiating momentum to date. It then provides an overview of existing commitments under the GATS (by sector mode of supply and level of development) and of the initial offers that had been tabled by early 2005. Despite the substantial benefits that may be associated with the liberalization of services trade the GATS has obviously not yet lived up to ambitious expectations. For example on average across all WTO Members only one-third of all services sectors have been included in current schedules of commitments; and many entries have been combined with significant limitations on market access and national treatment or with the complete exclusion of particular types of transactions (modes of supply) from coverage. While the ongoing services negotiations provide an opportunity to complement the rule-making efforts of the Uruguay Round with genuine market opening many governments apparently have found it difficult despite generally more restrictive access regimes and thus potentially higher gains from liberalization than in merchandise trade to undertake or envisage economically significant bindings across a broad range of services. Five years after the inception of the services round current negotiating arrangements based mainly on (bilateral) exchanges of requests and offers may need to be complemented by common points of reference to provide greater focus and guidance.
Dominican Republic - Measures Affecting the Importation and Internal Sale of Cigarettes
On 8 October 2003 Honduras requested consultations with the Dominican Republic concerning certain measures affecting the importation and internal sale of cigarettes. This request is a new and expanded version of a complaint filed by Honduras on 28 August 2003 (WT/DS300/1).
Developing Countries in the WTO Services Negotiations
The aim of this paper is to analyse developing countries’ participation so far in the current round of services negotiations under the Doha Development Agenda. The paper analyses developing countries’ negotiating positions as evidenced by their multilateral negotiating proposals; their initial offers; and to the extent allowed by the incomplete and sketchy information available their participation in bilateral market access negotiations. A number of basic themes are raised: the essential role of services for economic development; the high costs imposed by trade protection; the benefits of liberalization; the need to make use of the WTO forum to enhance credibility and sustain domestic regulatory reform programmes; the challenges of regulatory reform and the importance of appropriate sequencing; and the benefits arising from seeking further market access overseas in those areas where developing countries have a comparative advantage.
United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services
On 21 March 2003 Antigua and Barbuda requested consultations with the US regarding measures applied by central regional and local authorities in the US which affect the cross-border supply of gambling and betting services. Antigua and Barbuda considered that the cumulative impact of the US measures is to prevent the supply of gambling and betting services from another WTO Member to the United States on a cross-border basis. According to Antigua and Barbuda the measures at issue may be inconsistent with the US obligations under the GATS and in particular Articles II VI VIII XI XVI and XVII thereof and the US Schedule of Specific Commitments annexed to the GATS.
The Impact of Mode 4 on Trade in Goods and Services
This paper estimates the impact of liberalization of temporary movements of individual service suppliers on trade in goods and services. In particular the paper looks at the impact of the so-called forth mode to provide a service on trade in services under the other three modes: cross-border service supply (Mode 1) consumption abroad (Mode 2) and commercial presence abroad (Mode 3). Estimates are obtained using a gravity model of trade augmented for a measure of temporary movements of service suppliers. Estimates of the size of a country’s Mode 4 trade in services are based on specific information regarding the number of temporary foreign workers occupied in the service sector and their estimated average earnings thus overcoming the limitations of traditional measures of Mode 4 based on remittances or compensation for employees. We find a positive and significant effect of temporary movements of service providers on merchandise trade and services trade under Mode 1 and 3. No significant relationship is found between services trade under Mode 2 and Mode 4.