1. 1 SERVICES, TRADE IN SERVICES AND THE WTO Hamid Mamdouh Director Trade in Services Division, WTO April 2011

2. 2 SERVICES IN THE ECONOMY Share in GDP Share in employment Growth rates Investment in Services Determinant of economic competitiveness Determinant of quality of life

3. 3 SERVICES PARADIGM SHIFT The old model: Public utility/government functions The new model: Private sector leads competitive market Fundamentally different role for governments

4. 4 Higher quality, lower prices and wider variety of services Stimulating innovation in services Promoting investments in the sector Raising overall competitiveness of the economy Major contribution to social welfare OPPORTUNITIES OF THE NEW PARADIGM

5. 5 Policy vision and direction of reform The regulatory challenge –Rules –Institutions Flanking policies Political leadership (policy vision, institutions, infrastructure) CHALLENGES OF THE NEW PARADIGM

6. 6 THE REGULATORY CHALLENGE Rules –Content (clarity, objectivity, coherence, avoidance of discretionary decisions) –Design (legislation, regulation, decrees, administrative guidelines) –Scope/jurisdiction (central/sub-central, sectoral/cross-cutting) –Transparency (clarity of rationale, accessibility, transparency of process)

7. 7 THE REGULATORY CHALLENGE (continued) Institutions –Mandate –Independence of regulator (commercially and politically) –Interface (governmental, private sector, think tanks, civil society) –Accountability –Human resources

8. 8 THE GATS Response to the Paradigm Shift Institutionalizing new realities Defines new trade concepts Provides the legal framework A forum for continuing negotiations

9. 9 Conceptual Basis Liberalization as a means of growth and development Liberalization, not deregulation –the meaning of liberalization (market access and national treatment) –the right to regulate and need to regulate The role of liberalization in the process of development Progressivity of liberalization

10. 10 Structure of the GATS A set of Rules and Disciplines –Articles of the Agreement –General Obligations –Specific Commitments –Annexes Schedules of Specific Commitments –Market Access –National Treatment

11. 11 Scope and Definition oALL MEASURES AFFECTING TRADE IN SERVICES (At all government levels, including non-governmental bodies exercising delegated authority) oDEFINITION OF TRADE IN SERVICES o(1) Cross border supply o(2) Consumption abroad o(3) Commercial presence o(4) Presence of natural persons oUNIVERSAL COVERAGE OF GATS (All services, except those provided in the exercise of governmental authority and air transport )

12. 12 General Obligations and Disciplines Unconditional obligations –Most-Favoured-Nation Treatment –Transparency* –Domestic Regulation* –Monopolies* and Business Practices –Increasing participation of developing countries (contact points) Conditional Obligations (specific commitments) –Transparency* –Domestic Regulation* –Monopolies* –Payments and Transfers Permissive provisions –Economic integration –Recognition Exceptions –Restrictions on Balance of Payments grounds –General and Security Exceptions To be negotiated –Emergency Safeguards –Government Procurement –Subsidies Disciplines for domestic regulation

13. 13 Specific commitments Article XVI (Market Access) “… each Member shall accord services and service suppliers of any other Member treatment no less favourable than that.. Specified in its Schedule” no limitations on the number of service suppliers* no limitations on the value of transactions and assets* no limitations on number of operations or quantity of output* no limitations on the total number of persons employed* no restrictions on the types of legal entity or joint venture no limitations on foreign capital participation * or requirement of an economic needs test

14. 14 Specific commitments (contd.) Article XVII (National Treatment) “… each Member shall accord services and service suppliers of any other Member, in respect of all measures affecting the supply of services, treatment no less favourable than it accords to its own like services and service suppliers” Article XVIII (Additional Commitments) Commitments with respect to measures not subject to scheduling under Articles XVI or XVII Examples: Qualifications, standards, licensing.

15. 15 Country Schedules (specific commitments by service sector and mode of supply) Country X - Schedule of Specific Commitments Modes of supply:1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons

16. 16 Annexes to the Agreement Types of Annexes On provisions –Article II (MFN Exemptions) –Movement of Natural Persons On sectors –Air Transport –Telecommunications –Financial Services On negotiations –Basic Telecommunications –Second Annex on Financial Services –Maritime Transport

17. 17 Progressive Liberalization Article XIX (Negotiation of Specific Commitments) “…Members shall enter into successive Rounds of negotiation…with a view to achieving a progressively higher level of liberalization…” Due respect for national policy objectives and the level of development Flexibility for individual developing country Members (to open fewer sectors, liberalize fewer types of transactions) Negotiating guidelines and procedures based on an assessment of trade in services

18. 18 Progressive Liberalization (contd.) Article XXI (Modification of Schedules) “…A Member may modify or withdraw any commitment in its schedule, at any time after three years … (from entry into force) –Negotiations on compensation with any Member whose benefits may be affected –Compensation on a most-favoured-nation basis “The Council for Trade in Services shall establish procedures for rectification or modification of Schedules”.

19. 19 Development-related Provisions Article IV Increasing participation of developing countries in world trade through negotiated specific commitments Article V Preferential trade agreements must have substantial sectoral coverage and eliminate substantially all discrimination –Flexible interpretation in accordance with development level –Possibility of preferential treatment for companies owned or controlled by nationals from participating developing countries Article XII Trade restrictions in reaction to serious balance-of-payments and external financial difficulties –Recognition of the particular pressure on the balance-of-payments of developing countries and the need to ensure adequate levels of financial reserves, etc.

20. 20 Development-related Provisions (contd.) Article XIX successive Rounds of negotiation to achieve a progressively higher level of liberalization –Due respect for national policy objectives and development levels. Appropriate flexibility for developing country Members. Annex on Telecommunications Developing countries may place reasonable restrictions on access to and use of public telecommunications transport networks and services.

21. 21 The Doha Round of Negotiations Built-in agenda rolled into the DDA The Guidelines: –Higher levels of liberalization –Choice of sectors to commit –Flexibility for developing countries –No a priori exclusion of sectors or modes –Request/offer process

22. 22 Hong Kong Ministerial Dec. 2005 Detailed objectives Plurilateral request/offer negotiations (as opposed to bilateral) Rule-making –Domestic regulation –GATS Rules LDCs not expected to undertake commitments

23. 23 Mini-Ministerial July 2008 Signalling Conference New indications of significant commitments Clear expressions of linkages with agriculture and NAMA negotiations

24. 24 CURRENT STATE OF PLAY Negotiations are in low gear Process of liberalization continues - for good reasons Widening gap between WTO commitments and current regimes

25. 25 THE WAY AHEAD Focus on policy and regulatory reform Distinguishing liberalization as defined in the GATS (access and non- discrimination) from deregulation Mobilize capacity to face the “regulatory challenge” Conclude the DDA with satisfactory levels of binding commitments