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

T RAINING P ROGRAMME F OR T HE G OVERNMENT O F I NDONESIA S ESSION 9: The GATS Jogjakarta, Indonesia 26-29 March 2019

A GENDA Importance of Services I. The GATS II. GATS Schedules III. Structure of a GATS Schedule 1. Types of Modifications or Rectifications in Services 2. Schedules What are the applicable legal instruments? 3. With which WTO Members does the initiating Member 4. have to negotiate? How to determine the compensatory adjustment? 5. What procedures should be followed? 6. GATT-GATS comparison 7.

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

T HE 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 or teachers).

I MPORTANCE OF S ERVICES • There are different types of obligations: • MFN: no discrimination between services and services Applies suppliers of different Members. This applies generally to to all all services (even those not listed in a Member's services 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 Applies to various limitations listed in GATS Article XVI:2. E.g. the only to number of services suppliers or the legal form of the services that are service supplier listed in a • NT: no more less favourable treatment than that Member's accorded to domestic like services and service suppliers Schedule • Additional commitments: e.g. Reference Paper

S TRUCTURE OF GATS S CHEDULE 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

S TRUCTURE OF GATS S CHEDULE

TYPES OF MODIFICATIONS OR RECTIFICATIONS IN SERVICES SCHEDULES Non-trade liberalising modifications/withdrawals: • Withdrawal of an existing commitment o Modification of an existing commitment (e.g. to implement o DSB rulings and recommendations) Modification of an existing commitment as a result of o economic integration, e.g. EU enlargements. Trade liberalising modifications and rectifications: • Improvements to existing commitments o New commitments o Rectifications o Changes of a purely technical character that do not alter the o scope of the substance of the existing commitment

R EFERENCE P APER

R EFERENCE P APER Indonesia adhered to the Reference Paper on Telecommunications Services. It committed to abide by it by including this reference in its GATS Schedule.

W HAT 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 • Certification of Services Schedules S/L/84 S/L/106 (New commitments, S/L/80 (Terminations, Improvements to (Certification of a existing ones, reductions and Modification) rectifications, and rectifications of changes of a purely MFN exemptions) technical character)

A RTICLE 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 on 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.

A RTICLE 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 of such modification or withdrawal and the procedure set forth in paragraphs 2, 3 and 4 of Article XXI shall apply.

W ITH WHICH WTO M EMBERS DOES THE INITIATING M EMBER HAVE TO NEGOTIATE ? • No designated category of Members • Any "affected" Member o " 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). o "[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 • or SI.

H OW TO DETERMINE COMPENSATORY ADJUSTMENT ? GATT: historical trade shares in the relevant tariff lines • Difficulty of calculating trade in services • How to determine compensatory adjustment? • o Value of the commitment at the time it was negotiated o Current trade in services o Expected revenues o Past practice EU enlargements(-): confidential negotiations o Shortcomings: availability of statistical data, modification of services commitments may affect different countries in different manners

H OW 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.

W HAT 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.

M ODIFICATION OR WITHDRAWAL OF EXISTING COMMITMENTS → A RTICLE XXI OF THE GATS, S/L/80 • Notification of intention 3 months before intended implementation. Initiation • Claim of interest by "affected Member(s)" within 45-day period. • Negotiation on compensation within 3 months (extension is possible). Negotiation • If agreement is reached, conclusion of negotiation. Agreement or Arbitration • If no agreement is reached, objecting Member can request arbitration. • Circulation of the result of negotiations or findings of the arbitration body. Certification • Certification.

E XAMPLE OF N OTIFICATION A RTICLE XXI AND S/L/80

N EW COMMITMENTS , I MPROVEMENTS TO EXISTING ONES , RECTIFICATIONS , AND CHANGES OF A PURELY TECHNICAL CHARACTER → S/L/84 Circulation of proposed • If there are no objections, conclusion of certification. changes • Objections can be submitted within 45-day period indicating, to the extent possible , the specific elements of the modification Objections that gave rise to the objection. • If objections are withdrawn, conclusion of certification. Consultations • If draft Schedule is modified as a result of consultations, re-start of certification procedures. Withdrawal or • If objections are not withdrawn, withdrawal of request for certification; or modification process pursuant to Article XXI and Modification S/L/80. Process

E XAMPLE OF OF OBJECTION LETTER S/L/84

T ERMINATIONS , REDUCTIONS AND RECTIFICATIONS OF MFN EXEMPTIONS → S/L/106 Circulation of proposed • If there are no objections, conclusion of certification. changes • Objections can be submitted within 45-day period, identifying specific elements of the modifications which gave rise to Objections objection. A Member shall not cite loss of preferential treatment as the basis for an objection. • If objections are withdrawn as a result of consultations, conclusion of certification. Consultations • If draft Schedule is modified, re-start of certification procedures. • If objections are not withdrawn, no certification.