Domestic Regulation and Cross- Border Trade in Services Joel P. Trachtman The Fletcher School of Law and Diplomacy WTO Symposium on Cross- Border Supply of Services April 2005

Cross-Border Trade in Services as a Challenge to Regulation Territorial limits of enforcement jurisdiction Responses:  Enforcement cooperation  Harmonization and recognition  Requirement of establishment  Exclusion The right to regulate (4 th preamble)

Regulation as a Challenge to Cross-Border Trade in Services Regulatory protectionism  Discriminatory regulation De facto De jure  Unnecessary regulation  Unnecessarily heterogeneous regulation

Existing GATS Disciplines on Domestic Regulation Transparency (III, VI:2, VI:3) Market Access (XVI) National Treatment (XVII) VI:1; VI:4; VI:5 Accountancy Disciplines Financial Services Telecoms Reference Paper

Article XVI after Gambling Can apply to qualitative regulation  Compare relationship between GATT III and GATT XI  Overlap with GATS Article VI?  Limited to foreclosure of entire “means of delivery”? Or is any qualitative regulation that has quantitative effect covered?  Occasion for interpretation under Article XI:2 of WTO Charter?

Scheduling Article XVI Commitments after Gambling Qualitative measures should be scheduled under Article XVI  Especially if may foreclose a “means of delivery” as that term is used in Gambling  But even if it does not foreclose an entire “means of delivery”—may be ”zero quota” on some portion of service, or may be understood to reduce quantity of service and therefore covered under XVI  Limits of the AB opinion are unclear In the past, some states have felt there was no overlap between Article VI and XVI

National Treatment “treatment no less favourable than that it accords to its own like services and service suppliers” (can be different) Like services and like service providers How to read Art. XVII? In disjunctive  Asbestos: examine competitive relationship  Or like risks approach? Treatment “no less favourable” defined with reference to conditions of competition

The Limitations of Anti-Discrimination Difficult to apply The “like products” problem Inefficiency without discrimination Supplemented for goods in TBT and SPS Link to regulatory reform Link to domestic motivations for reform  Domestic producers may have adapted to inefficient regulation

Scope of GATS VI VI:1—reasonable, objective, and impartial administration in committed sectors VI:4—CTS to develop disciplines as to qualification requirements and procedures, technical standards and licensing requirements  Ensure against unnecessary barriers VI:5—in committed sectors, pending VI:4 disciplines, prohibition of nullifcation or impairment under certain circumstances

GATS VI:5 Requires nullification or impairment  See Kodak-Fuji  Complaining party must show nullification; legitimate expectations And  Not based on objective and transparent criteria, or  More burdensome than necessary to ensure the quality of the service, or  In the case of licensing, itself a restriction

The Weakness of GATS VI:5 A standstill, at best—burden on GATS VI:4  A “grandfathering” advantage for developed countries? Compare to SPS and TBT requirements of proportionality

The VI:4 Work Program Accountancy Disciplines Other sectors Horizontal? Japanese proposal. Equivalent to TBT and SPS?  Horizontal with possibility of sectoral?  Linked to specific commitments See NAFTA coverage of goods and services together in Chapter IX

1998 Accountancy Disciplines Strengthen necessity discipline Broadened concept of legitimate objectives Take account of equivalency of education, experience and examination requirements With respect to technical standards, take account of internationally recognized standards  Prepared by “relevant international organizations” open to all WTO members

Recognition and Equivalence Relation of equivalence to necessity MFN issues GATS VII: requires opportunity for other members Inclusion in disciplines GATS VI:6—verifying competence in professional services

Role of International Standards Participation by developing countries Compare VI:4 work program Relation to VI:5(b): take account of international standards of “relevant international organizations”

SPS/Codex: Interfunctional Networking? WTO goods law defers to standards set by Codex, International Office of Epizootics and International Plant Protection Convention  SPS 3.1: members shall base their SPS measures on international standards  SPS 3.2: if conform to international standards, presumed consistent with SPS Agreement Relevance to services?  Semi-soft law easier to make; insulates WTO from criticism  Expertise

International Standards Deference to functional organizations?  In financial services, FATF, Basle Committee, IOSCO, IAIS, OECD  Not “relevant international organizations”  How do they differ from the WTO Committee on Financial Services? Toward integrated “inter-functional” decision-making

Horizontal versus Sectoral Possibility of request-offer negotiations on regulatory barriers  Relate to LAN Computers decision  GATS XVIII commitments Relation to commitments Horizontal as general  Judicially applied  Negative integration Sectoral can be more specific  Legislatively formulated  Positive integration

Conclusion