THE GATS AND ENERGY SERVICES World Trade Organization Trade in Services Division 2001

Energy Services?? Traditionally, no distinction between energy goods and services Traditional market structure: vertically integrated State enterprises engaged in all energy-related activities å energy services = added value to goods Therefore, inadequate definition in the W/120 classification

Energy goods Some energy products are clearly identified as goods: –oil –solid fuel Less evident cases? –Natural gas, when transported by pipeline Even more complex cases? –Electricity (not easily stored and transmitted by grids. Some countries classify it as a service)

5 main producers of energy and electricity

Mercosur, Bolivia and Chile - Energy and Electricity Production

Energy services Activities related to PRODUCTION of primary and secondary energy on a fee or contract basis? TRANSPORT and DISTRIBUTION of energy Various types of services are involved in the energy value-added chain (e.g. construction, engineering, consultancy, etc.)

Existing W/120 Classification No separate heading for energy services Energy sectors mentioned: –1.F(h) Services incidental to mining (on a fee or contract basis at oil or gas deposits, e.g. drilling, repairs and dismantling, etc.) –1.F(j) Services incidental to energy distribution (transmission and distribution on a fee or contract basis of electricity, gaseous fuels, steam and hot water) –11.G(a) Pipeline transportation of fuels (transport of oil and petroleum products and natural gas)

Trade in Energy Services The monopolistic nature and vertical integration of suppliers have hampered trade in energy services (more than the problem associated with network transportation) In any case, geographical and interconnection problems can be overcome by means of mode 3 Mode 1 depends on interconnection Mode 4 is important for the movement of experts and consultants

GATS Commitments (July 2001) Services incidental to mining –37 Members Services incidental to energy distribution –14 Members Pipeline transportation of fuels –7 Members Only Argentina has commitments for services incidental to mining

GATS Commitments (July 2001) Incidental to mining (37): –sectoral coverage limited to consultancy (7) or exclusion of certain activities e.g. prospecting, exploration and exploitation –very liberal MA and NT, few limitations, including for modes 1 and 2 Incidental to energy distribution (14) –sectoral coverage limited to consultancy (2) or gas distribution (1) –very liberal MA and NT, largely for mode 3, though there are also some in modes 1 and 2

Commitments (contd) Pipeline transportation of fuels (7) –complete sectoral coverage –very liberal MA and NT, sole restriction affects mode 3 related to concessions (1), most mode 1, 2 and 3 commitments are without limitations

Negotiating proposals

Negotiating topics Classification Activities to be included - energy production? OFFSHORE activities Neutral versus energy source Technological neutrality Ownership, and access rights and disposal of natural resources –Access to energy services versus access energy goods The implications of monopoly regimes and/or State-run enterprises Subsidies Crossed subsidies

Topics (Contd) National Regulation Transparency –formulation of regulations Competition –government procurement –network interconnection –prevention of anti-competitive practices –independence of the regulatory body –universal service obligations that are not anti- competitive Public interest non-trade objectives –environmental protection –security and stability of supply –public safety –universal service

Provisions/Relevant documents Article III on Transparency Article VI on Domestic Regulation Article VIII on Monopolies –monopoly must no act in a manner inconsistent with commitments and MFN –refraining from abusing the monopolistic position outside the area covered by the monopoly Article IX on business practices

Provisions/Relevant documents Article XIII on government procurement Article XV on subsidies Article XIV on general exceptions Article XVIII on additional commitments (and reference document) –Additional disciplines (e.g. concerning transparency, interconnection, independent regulator, non-discriminatory universal service obligations)