RTAs and the GATS

1
RTAs and the GATS

• Ruosi Zhang
• Trade in Services Division
• World Trade Organization

2
Principle GATS Article II (MFN Treatment)

• With respect to any measure covered by this
  Agreement, each Member shall accord immediately
  and unconditionally to services and service
  suppliers of any other Member treatment no less
  favourable than that it accords to like services
  and service suppliers of any other country.

3
Exceptions to Article II

• MFN Exemptions Annex on Article II (MFN)
• Article V Economic Integration
• Article VII Recognition
• Other exceptions

4
Article V Economic Integration

• Article V provides coverage for preferences among
  Members within a framework of economic
  integration.
• No MFN exemption is required if the relevant
  conditions are met.
• RTAs generally cover goods and services Article
  V provides. coverage for the services part or for
  a services-only RTA.

5
Article V Conditions

• Substantial sectoral coverage (volume of trade,
  number of sectors, and modes of supply)
• No a priori exclusion of modes of supply
• Absence or elimination of discrimination in the
  sense of Article XVII (national treatment)
• Should facilitate trade among parties and not
  raise overall barriers vis-à-vis other Members
• If GATS specific commitments are affected,
  renegotiation according to Article XXI is required

6
Article V Flexibility

• Substantial sectoral coverage and elimination of
  all discrimination can be achieved over a
  reasonable timeframe
• Conditions are relaxed if developing countries
  are parties to the agreement
• Consideration may be given to the relationship
  with a wider process of economic integration
• No discrimination of established suppliers
  (juridical persons) of third countries, except
  for agreements among developing countries

7
Article V Examination

• Notification to the Council for Trade in Services
  (CTS) existence, enlargement or significant
  modification of the agreement
• CTS transmits agreement to the Committee on
  Regional Trading Agreements (CRTA) for
  examination
• On conclusion of the examination, the CRTA makes
  recommendations to the CTS
• Since the creation of the GATT (1947), the CRTA
  never concluded the examination of an agreement
  ...
• ... but Article V may nevertheless be adjudicated
  in Dispute Settlement

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Article V Notified RATs (1)

• As of April 2007, the notifications made pursuant
  to Article V7(a) cover 42 RTAs on services. The
  majority were notified in the past 2-3 years.
• Among the notified RTAs, a lot of involve the EC
  and the US, such as the EC-25 EC-EFTA
  EC-Mexico EC-Chile NAFTA US-CAFTA-DR
  US-Australia US-Bahrain US-Chile US-Jordan
  US-Singapore US-Australia US-Morocco.
• A number of new RTAs have yet to be notified
  (e.g. US-Oman, US-Colombia, US-Israel, US-Peru,
  US-korea, US-Panama...)

9
Article V Notified RATs (2)

• Chile, Singapore and Mexico are those developing
  countries who are particularly active in RTAs on
  services. Services RTAS to which they are parties
  include
• Chile-Canada Chile-EC Chile-EFTA Chile-Mexico
  Chile-El Salvador Chile-Korea Chile-Costa Rica
  Chile-US
• Singapore-EFTA Singapore-Australia
  Singapore-New Zealand Singapore-Japan
  Singapore-Jordan Singapore-Korea
  Singapore-Panama Singapore-US
• Mexico-EC Mexico-EFTA Mexico-Chile
  Mexico-Costa Rica Mexico-EL Salvador
  Mexico-Honduras Mexico-Guatemala
  Mexico-Nicaragua Mexico-Japan as well as NAFTA
• More Members have been involved in RTAs on
  services, such as Australia, China, Japan
  Korea Thailand, New Zealand, etc.

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Possible Reasons for Negotiating RTAs on Services

• As part of the regional integration process
  (Protection of local/regional industries from
  global competition, enhance competitiveness)
• Reciprocal benefits easier to identify or deeper
  integration easier to achieve (mutual
  recognition, free movement of persons, etc.) or
  regulatory cooperation easier to achieve
• As first step towards multilateral engagement
• Extension to areas not (fully) covered by GATS
  (e.g. government procurement, strict subsidy
  disciplines)
• Negotiating economy lower administrative costs
  in negotiating with a few partners enhanced
  influence on outcome
• Political, strategic, or other reasons?

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Drawbacks associated with RTAs

• Trade and investment diversion?
• Inefficiencies sectoral and economy-wide?
• Diversion of resources from WTO efforts?
• Resource implications of negotiating and
  administering various arrangements?
• Creation of vested interests opposing more
  comprehensive liberalization?
• Overlapping membership costs for traders,
  regulators and customs officials in meeting
  multiple sets of trade rules?

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Characteristics of RTAs Liberalizing Trade in
Services

• Coverage
• Services only (governed by GATS Art V)
• Goods and services (governed by both GATT Art
  XXIV and GATS Art V)
• Services liberalization under RTAs
• a relatively recent phenomenon, post NAFTA GATS
• growing at a fast pace
• most RTAs concluded recently cover both goods
  services
• keeping track of new RTAs not all have been
  notified to WTO

13
Approaches taken towards liberalization of trade
in services in RTAs

• Positive list or negative list approach?
• GATS type positive list
• Countries make specific commitments for
  liberalization in their Schedules
• NAFTA-type negative list
• Everything is liberalized unless a reservation
  has been made for particular non-conforming
  measures

14
Approaches taken towards liberalization of trade
in services in RTAs

• Methods of liberalization
• Similar disciplines to GATS
• Most significant liberalization taking place
  through better market access and national
  treatment commitments

15
What have RTAs achieved so far?

• Few commitments beyond status quo
• Commitments go beyond GATS in some sectors
• Some innovation in rule-making
• Some success in promoting regulatory cooperation.
• Will future agreements achieve more?

16
Postal and courier services in RTAs

• This is an important service sector in RTA
  negotiations.
• For FTAs to which the US is a party, specific
  commitments on express delivery services are
  usually included.
• Like GATS commitments, parties to RTAs are
  reluctant to make commitments on postal services.
  
• When positive list approach is taken, commitments
  made in this sector are usually only about
  courier services.
• When negative list approach is taken, parties
  tend to make specific reservations on postal
  services, which are usually related to exclusive
  rights.