Trade Policy Note Final-rev08 - Development

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