WTO Ministerial Section • Volume 7 • Number 19 • 28th May 2003

Services: WTO Members Review Domestic Regulation Annex, Overall Progress

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The WTO Working Party on Domestic Regulation (WPDR) met on 15 May to consider, inter alia, a revised draft proposal by Japan for a General Agreement on Trade in Services (GATS) Annex on domestic regulation (JOB/(03)/45). Further, the special (negotiating) session of the Council for Trade in Services (CTS) reconvened on 22 May, primarily to review the overall progress made in the ongoing request/offer negotiations.

Proposal for GATS Annex on domestic regulation under development

The initial Japanese proposal for a domestic regulation Annex was presented at the March meeting of the WPDR (see Bridges Weekly, 5 March 2003). At that time, the Japanese proposal received various comments from WTO Members, which Japan tried to address in the recently released revised proposal. The new proposal seeks to develop the content of article VI.4 (domestic regulation) of the GATS and to facilitate trade in services by ensuring that measures relating to licensing and qualifications requirements and procedures, and technical standards do not constitute unnecessary barriers to trade in services.

Such an annex to the GATS could have implications with regard to sustainable development. Licensing and qualification requirements and technical standards are government tools for assuring the competence and ability of a services supplier, whether an entity or a natural person. They also define the characteristics and the manner in which a service is performed. As a result, they can be essential for ensuring quality, expertise, capability, safety, sound environmental and social performance and the use of particular methods of production.

Content of the revised draft annex

The revised draft Annex applies to measures affecting trade in services, including those relating to licensing and qualification requirements and procedures as well as technical standards. The revised draft Annex contains: general transparency provisions; provisions to ensure that measures are not more burdensome than necessary to fulfil national policy objectives (necessity test); due process-like provisions regarding administrative guidance by governments relating to licenses and qualifications; and the availability of administrative and judicial reviews. The reviewed draft annex does not preclude Members from developing disciplines for specific sectors.

New elements and the WPDR debate

The Japanese revised Annex differs from the first in clarifying that it only applies to sectors where specific commitments are undertaken. This was a response to requests by various developing country Members for such a clarification — a view not shared by the US and the EU, who would like to see an Annex on domestic regulation applying horizontally to all sectors, whether commitments have been taken or not.

Regarding the applicability of Mode 4, (temporary movement of persons), the Japanese proposal continues to exclude the disciplines in the revised Annex. Nevertheless, the Japanese introductory note to the proposal indicates the need to examine whether the disciples contained in the Annex should apply to measures regulating the entry of natural persons or if alternative disciplines should be elaborated for this particular mode. In the view of many developing countries, the exclusion of Mode 4 in the Japanese proposal is artificial and responds more to "protectionist" interests regarding visa-granting procedures than to actual considerations of a technical nature.

Various developing countries, including Brazil, Colombia, Chile, Uruguay and Peru reacted positively to the revised Annex. They consider it could be a good base for implementing article VI.4 of the GATS. However, concerns were expressed regarding the necessity test, burdensome procedures for the request of information and public comment procedures, the definition of a "reasonable" period of time and the exclusion of any of specific commitments on Mode 4.

CTS reviews progress made in services negotiations

When Members reconvened on 22 May for a negotiating session of Council for Trade in Services (CTS) (for the first day of the meeting see BRIDGES Weekly, 21 May 2003), the discussions mainly concentrated on a review of the progress made in the services trade negotiations. Sources close to the negotiations reported that several key Members such as the EU and Japan had expressed their concern that some offers tabled by other (primarily developing country) Members were not very substantial. In their reactions, many developing countries reportedly defended their cautious services offers by pointing to certain developed countries’ positioning in other negotiating areas — particularly agriculture — which they said showed a similar degree of ambition as their own offers in services.

Furthermore, so as to provide for adequate transparency with regard to the current request/offer exercise, some Members suggested that the Secretariat could prepare a note on the initial offers received so far — outlining which countries have tabled offers, which sectors have been covered, etc. Nevertheless, no decision was made on this point as various developing countries objected to this proposal. They reportedly said that no such tool was needed, as interested parties could contact the Chair of the CTS special session to get related information on an informal basis.

ICTSD reporting.