SADC Workshop on Trade in Services The Hyatt, June Trade in Services - Key Concepts -

The mysterious world of services trade agreements.. Tanzania participates in trade in services negotiations at three international fora – WTO (GATS) – EAC (Common Market Protocol) – SADC (Draft Protocol on Trade in Services) The basic concepts and rules are the almost the same

3 n MEASURES AFFECTING TRADE IN SERVICES AT ALL GOVERNMENT LEVELS nALL SERVICES (except governmental services and measures affecting air traffic rights) nFOUR MODES OF SUPPLY - Cross-border supply- Consumption abroad - Commercial presence- Presence of nat. persons Coverage of the SADC Protocol on Trade in Services

4 The 4 Modes of Supply Service Supplier Service Consumer Service Supplier supplies service from territory of one Member State Service Consumer receives service in territory of any other Member State Cross border supply - Mode 1 Service supplied into the territory of another Member State

5 The 4 Modes of Supply Service Supplier Service Consumer Consumption abroad - Mode 2 Service Consumer Service supplied in territory of one Member to the service consumer of another Member State Service Consumer receives service in territory of supplier Service Supplier supplies service in territory of one Member State

6 The 4 Modes of Supply Service Supplier Service Consumer Commercial Presence - Mode 3 Service supplier establishes a commercial presence in the territory of another Member State Any type of business or professional establishment Service supplied through commercial presence

7 The 4 Modes of Supply Service supplied through presence of natural persons in the territory of another Member State Service Consumer Natural Persons - Mode 4

8 In what mode are the following services supplied? o A professional accountant from Tanzania travels to Malawi to provide accounting services to a medium-sized company. o An insurance company from Zambia establishes a subsidiary in Tanzania. o A vessel registered in South Africa is repaired in the port of Dar Es Salaam. o Download of music over the internet o Student from A takes a long-distance degree course offered by the London School of Economics o Car insurance bought from company established abroad o Does ownership of company matter?

9 Business Services n Communication n Construction n Distribution n Education n Environmental Services Health Related Services n Financial Services n Tourism n Recreation, Culture, Sports n Transport n Other Services Typical Services sector coverage Plus Energy-related services (elements of Business, Distribution, transport services)

10 Key obligation: MFN Treatment Upon entry into force of this Protocol, with respect to any measure covered by the protocol, each State Party shall accord immediately and unconditionally to services and service suppliers of any other State Party treatment no less favourable than it accords to like services and service suppliers of any other State Party or third country. (Art 4:1)

Exceptions from MFN Services preferences granted between SADC MS (4:2) Future preferential agreements of SADC MS with third countries (4:3) Existing preferential agreements of SADC MS with third countries (4:4) – Obligation to afford reasonable opportunity to other MS to negotiate the preferences on a reciprocal basis MFN Exemption Lists (4:5)

Schedules of Specific Commitments: Basic design

13 First Column: How to describe service sectors? ▪ There is no compulsory system However, according to SADC Negotiating & Scheduling Guidelines (a) clear description of sector or subsector is needed (b) Reference to use of GATS Scheduling Guidelines (S/L/92) ▪ Reference instruments: - Services Sectoral Classification List (W/120) - UN Central Product Classification List (CPC)

14 Second Column: Limitations under Article 14 (Market Access) All restrictions falling under Article 14 must be scheduled, regardless of whether they - apply pre- or post-entry - are discriminatory or not. Quantitative restrictions can be expressed numerically, or through economic needs tests.

15 Examples of Art. 14 limitations Number of suppliers (a) – The number of licenses for cosmetology schools is limited to 48 total licenses Value of transactions or assets (b) – Foreign banks limited to 30 percent of total domestic assets of all banks Number of operations or quantity of output (c) – Restrictions on broadcasting time available for foreign films

16 Examples of Art. XVI limitations (ctd) Number of persons employed (d) – In any artistic production given in a public place, the proportion of national performers shall not be less than 80 % Specific types of legal entity (e) – Foreign companies are required to establish subsidiaries Participation of foreign capital (f) – Foreign investors can hold up to 51 % of the capital

17 Third Column: Limitations under Article 15 (1) Treatment shall be “no less favourable than accorded to own like services and services suppliers”. (2) … “either formally identical or formally different treatment” … (3) relevant benchmark: no modification of “the conditions of competition” in favour of own like services or service suppliers.

18 Typical National Treatment Limitations Discriminatory subsidies and other fiscal measures Nationality and residency requirements (  mode 3) Discriminatory licensing/registration/qualification/ training requirements Technology transfer requirements Prohibitions on foreign land/property ownership Local content requirements See also S/L/92, Attachment 1

19 Food for thought

Which of the following measures are governments allowed to take in non-scheduled sectors: o Prohibiting foreign suppliers from incorporating subsidiaries? o Limiting access to investors from countries with an equally open investment regime? o Liberalizing air links with selected countries under “open skies’ agreements o Denying access to foreign medical practitioners without even verifying their professional competence

To schedule or not to schedule? 1.Foreign companies must provide training to local workers. 2.Board of directors of companies owning ships sailing under X’s flag must be composed of X’s nationals, the majority of which having residency in X. 3.Federal law enables provinces to grant licence for hotels based on economic needs (assessment of economic needs is based on the criteria of touristical interests & number of existing hotels).

To schedule or not to schedule 4.Foreign patients undertaking medical treatment in X must pay a special tax. 5.All banks must operate at least 1 branch per region of the country. 6.Qualifications are as follows: certified engineers, or personnel with Bachelor's degree (or above) and three years of experience in these fields. 7.Condition of one year previous residency in order to obtain licence to provide services in residential building and land sales, and other related intermediary services for purchase and sale of real ‑ estate. 8.All nurses must be registered with the National Association of Nurses.