RECTIFICATIONS IN SERVICES SCHEDULES Non-trade liberalising - - PowerPoint PPT Presentation

TRAINING PROGRAMME FOR THE GOVERNMENT OF INDONESIA

SESSION 9: The GATS

Jogjakarta, Indonesia 26-29 March 2019

AGENDA

I.

Importance of Services

II.

The GATS

III.

GATS Schedules

1.

Structure of a GATS Schedule

2.

Types of Modifications or Rectifications in Services Schedules

3.

What are the applicable legal instruments?

4.

With which WTO Members does the initiating Member have to negotiate?

5.

How to determine the compensatory adjustment?

6.

What procedures should be followed?

7.

GATT-GATS comparison

IMPORTANCE OF SERVICES

At 22% of global trade, services are the largest and fastest-growing sector in the world economy.

THE GATS IN A NUTSHELL

• The GATS applies to "measures of members affecting trade in services".

"Services" are defined to include all services, except those supplied in the exercise of governmental authority.

• "Trade in Services" include four modes of supply:
• Mode 1: Cross-border supply (e.g. banking or architectural

services transmitted via telecommunications or mail);

• Mode 2: Consumption abroad (e.g. tourist or patient moves into

another Member's territory to obtain a service);

• Mode 3: Commercial presence (e.g. domestic subsidiaries of

foreign insurance companies or hotel chains); and

• Mode 4: Presence of natural persons (e.g. accountants, doctors
• r teachers).

IMPORTANCE OF SERVICES

• There are different types of obligations:
• MFN: no discrimination between services and services

suppliers of different Members. This applies generally to all services (even those not listed in a Member's Schedule), but derogations are possible in the form of so-called Article II-Exemptions.

• Market Access: no more less favourable treatment than

that provided in the Schedule. Treatment may be subject to various limitations listed in GATS Article XVI:2. E.g. the number of services suppliers or the legal form of the service supplier

• NT: no more less favourable treatment than that

accorded to domestic like services and service suppliers

• Additional commitments: e.g. Reference Paper

Applies to all services Applies

• nly to

services that are listed in a Member's Schedule

STRUCTURE OF GATS SCHEDULE

Structure of a GATS Schedule: Column 1 Description of sectors and sub-sectors in which commitments are undertaken Column 2 Limitations on market access - Article XVI Column 3 Limitations on national treatment - Article XVII Columns 2 and 3:

• Four modes of delivery
• Level of commitments
• Horizontal and sector-specific commitments

Column 4 Additional commitments - Article XVIII

STRUCTURE OF GATS SCHEDULE

TYPES OF MODIFICATIONS OR RECTIFICATIONS IN SERVICES SCHEDULES

• Non-trade liberalising modifications/withdrawals:
• Withdrawal of an existing commitment
• Modification of an existing commitment (e.g. to implement

DSB rulings and recommendations)

• Modification of an existing commitment as a result of

economic integration, e.g. EU enlargements.

• Trade liberalising modifications and rectifications:
• Improvements to existing commitments
• New commitments
• Rectifications
• Changes of a purely technical character that do not alter the

scope of the substance of the existing commitment

REFERENCE PAPER

REFERENCE PAPER

Indonesia adhered to the Reference Paper on Telecommunications

• Services. It committed to abide by it by including this reference in

its GATS Schedule.

WHAT ARE THE APPLICABLE

LEGAL INSTRUMENTS?

Modification or Withdrawal of Concessions in Services Schedules

• Article XXI of the GATS and Procedures
• Article V of the GATS

S/L/80 (Certification of a Modification) S/L/84 (New commitments, Improvements to existing ones, rectifications, and changes of a purely technical character)

S/L/106 (Terminations, reductions and rectifications of MFN exemptions)

Certification of Services Schedules

ARTICLE XXI

• 1. (a) A Member (referred to in this Article as the "modifying

Member") may modify or withdraw any commitment in its Schedule, at any time after three years have elapsed from the date

• n which that commitment entered into force, in accordance with

the provisions of this Article. [...]

• 5. The Council for Trade in Services shall establish procedures for

rectification or modification of Schedules. Any Member which has modified or withdrawn scheduled commitments under this Article shall modify its Schedule according to such procedures.

ARTICLE V:5

5. If, in the conclusion, enlargement or any significant modification of any agreement under paragraph 1, a Member intends to withdraw or modify a specific commitment inconsistently with the terms and conditions set out in its Schedule, it shall provide at least 90 days advance notice

• f

such modification

• r

withdrawal and the procedure set forth in paragraphs 2, 3 and 4 of Article XXI shall apply.

WITH WHICH WTO MEMBERS DOES THE

INITIATING MEMBER HAVE TO NEGOTIATE?

• No designated category of Members
• Any "affected" Member
• "any Member the benefits of which under this

Agreement may be affected […] by a proposed modification or withdrawal" (Article XXI:2(a) of the GATS).

• "[a]ny Member which considers that its interests

under the Agreement may be affected by the proposed modification or withdrawal" (Para. 3 of S/L/80)

• Lower standard in comparison to Goods. No INR, PSI
• r SI.

HOW TO DETERMINE

COMPENSATORY ADJUSTMENT?

• GATT: historical trade shares in the relevant tariff lines
• Difficulty of calculating trade in services
• How to determine compensatory adjustment?
• Value of the commitment at the time it was negotiated
• Current trade in services
• Expected revenues
• Past

practice EU enlargements(-): confidential negotiations

• Shortcomings: availability of statistical data, modification
• f services commitments may affect different countries

in different manners

HOW TO DETERMINE

COMPENSATORY ADJUSTMENT?

• Article XXI:2(a) of the GATS provides that the Members

concerned shall endeavour to maintain a general level of mutually advantageous commitments not less favourable to trade than that provided for in Schedules of specific commitments prior to such negotiations

• Article XXI:2(b) of the GATS provides that

compensatory adjustments shall be made on a most- favoured-nation basis.

WHAT PROCEDURES

SHOULD BE FOLLOWED?

Article XXI:5 provides:

• 5. The Council for Trade in Services shall establish

procedures for rectification or modification of

• Schedules. Any Member which has modified or

withdrawn scheduled commitments under this Article shall modify its Schedule according to such procedures.

MODIFICATION OR WITHDRAWAL OF EXISTING COMMITMENTS → ARTICLE XXI OF THE GATS, S/L/80

• Circulation of the result of negotiations or findings of the arbitration body.
• Certification.
• Notification of intention 3 months before intended implementation.
• Claim of interest by "affected Member(s)" within 45-day period.

Initiation

• Negotiation on compensation within 3 months (extension is possible).

Negotiation

• If agreement is reached, conclusion of negotiation.
• If no agreement is reached, objecting Member can request arbitration.

Agreement

• r Arbitration

Certification

EXAMPLE OF NOTIFICATION ARTICLE XXI AND S/L/80

NEW COMMITMENTS, IMPROVEMENTS TO EXISTING ONES,

RECTIFICATIONS, AND CHANGES OF A PURELY TECHNICAL CHARACTER → S/L/84

• If objections are not withdrawn, withdrawal of request for

certification; or modification process pursuant to Article XXI and S/L/80.

• If there are no objections, conclusion of certification.

Circulation of proposed changes

• Objections can be submitted within 45-day period indicating, to

the extent possible, the specific elements of the modification that gave rise to the objection. Objections

• If objections are withdrawn, conclusion of certification.
• If draft Schedule is modified as a result of consultations, re-start
• f certification procedures.

Consultations Withdrawal or Modification Process

EXAMPLE OF OF OBJECTION LETTER S/L/84

TERMINATIONS, REDUCTIONS AND RECTIFICATIONS OF MFN EXEMPTIONS → S/L/106

• If there are no objections, conclusion of certification.

Circulation of proposed changes

• Objections can be submitted within 45-day period, identifying

specific elements of the modifications which gave rise to

• bjection. A Member shall not cite loss of preferential

treatment as the basis for an objection. Objections

• If objections are withdrawn as a result of consultations,

conclusion of certification.

• If draft Schedule is modified, re-start of certification

procedures.

• If objections are not withdrawn, no certification.

Consultations

GATT-GATS COMPARISON

GATT GATS Relevant legal instruments Article XXVIII of the GATT 1994, Interpretative Notes to Article XXVIII, Understanding on Article XXVIII, 1980 Procedures and 1980 Guidelines (certification, modification) Article XXI of the GATS, Article V of the GATS, Procedures for the Implementation of Article XXI of the General Agreement on Trade in Services (GATS) (Modification of Schedules) (S/L/80), Procedures for the Certification of Rectification or Improvement to Schedules of Specific Commitments (S/L/84) (non-trade liberalising modifications vs. trade liberalising modifications). → S/L/80 includes arbitration Designated categories INRs, PSI and SSI Any "affected" Member Determination

• f

compensatory adjustment Historical trade shares and, in the case of TRQs, future trade prospects Difficult to determine Retaliation Triggered by unilateral withdrawal

• r modification by the initiating

Member Triggered by the modification or withdrawal without following the Arbitration's determination