Trade Policy Note Final-rev08 - Development
Trade Policy Note Final-rev08 - Development
Trade Policy Note Final-rev08 - Development
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principle of progressive liberalization, but also that commitments should aim at<br />
strengthening the service sectors of developing countries through access to<br />
technology and to distribution channels and information networks as well as the<br />
liberalization of services of export interest to them. The GATS itself does not impose<br />
access commitments and these are to be negotiated in successive “rounds”. However,<br />
the current GATS negotiations seem aimed at reaching agreement on a formula<br />
approach, requiring a certain degree of commitment from all participating countries.<br />
Developing countries have all made commitments in their WTO Service Schedules,<br />
and are in the process of negotiating further “progressive liberalization” in the Doha<br />
Round. FTAs include much more extensive commitments in services, often according<br />
to a structure and based on definitions that depart from GATS.<br />
A Strong Regulatory Framework is Require d<br />
<strong>Trade</strong> in services is normally subject to detailed regulation. Some of the “tools” for<br />
such regulation are the subject of negotiation in GATS, (as set out in GATS Article<br />
XVI), and include limitations on the number of suppliers, or service operations, or the<br />
numbers of persons employed in the supply of services, or on the value of service<br />
assets or transactions, usually enforced by economic need tests, as well as measures<br />
which require specific types of legal entities or limit the participation of foreign<br />
capital. In most sectors, the focus of negotiations is on investment measures. In<br />
particular, there is no obligation under the GATS Agreement to grant national<br />
treatment to foreign suppliers. Rather, the national treatment of foreign firms is a<br />
subject for negotiations on a sectoral basis. It does not constitute a “right” for foreign<br />
firms. Governments are free to regulate services so long as these regulations do not<br />
constitute “unnecessary barriers to trade” in services. Regulations that apply equally<br />
to domestic and foreign suppliers would be in conformity with national treatment<br />
commitments. On the other hand, where commitments are made on commercial<br />
presence, and the cross border movement of capital is an essential part of the service<br />
itself, members are committed to allow such movement of capital. 63<br />
Performance requirements aimed at strengthening the service sectors in developing<br />
countries by acquiring access to technology or to distribution channels and<br />
information networks are specifically permitted by GATS. In their negotiations for the<br />
further liberalization of services, developing countries should focus on the extent to<br />
which imports of services effectively contribute to development. Liberalization of<br />
trade in services can have a positive impact on the development of the national<br />
services sector so long as there is a strong prior regulatory framework in place that<br />
supports national policy objectives. It is thus essential that the domestic regulations<br />
for the use of such imports be in place before engaging in negotiations on trade in<br />
services.<br />
In addition, other measures that affect trade in services such as qualification<br />
requirements and procedures, technical standards and licensing requirements are<br />
subject to the general provision that such requirements should not constitute<br />
unnecessary barriers to trade in services. WTO members should be encouraged to<br />
enter into mutual recognition arrangements to overcome problems of this nature.<br />
63 See footnote 2 to GATS Article XVI.<br />
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