Progressive Liberalization

In services, the Uruguay Round was only a first step in a longer-term process of multilateral rule-making and trade liberalization. Observers tend to agree that, while the negotiations succeeded in setting up the principle structure of the Agreement, the liberalizing effects have been relatively modest. Barring exceptions in financial and telecommunication services, most schedules have remained confined to confirming status quo market conditions in a relatively limited number of sectors. This may be explained in part by the novelty of the Agreement and the perceived need of Members to gather experience before considering wider and deeper commitments. Moreover, many administrations needed time to develop the necessary regulation — including quality standards, licensing and qualification requirements — that ensures that external liberalization is compatible with, and conducive to, core policy objectives (quality, equity, etc.) in socially or infrastructurally important services.

More than six years have passed since the Agreement's inception, and the economic importance of services — in terms of production, income, employment and trade — has continued to rise. There thus appears ample scope for new and/or improved commitments in new negotiations.

 

The Annexes: Services Are Not All The Same

 

International trade in goods is a relatively simple idea to grasp: a product is transported from one country to another. Trade in services is much more diverse. Telephone companies, banks, airlines and accountancy firms provide their services in quite different ways. The GATS annexes reflect some of the diversity.

Movement of natural persons

This annex deals with negotiations on individuals’ rights to stay temporarily in a country for the purpose of providing a service. It specifies that the agreement does not apply to people seeking permanent employment or to conditions for obtaining citizenship, permanent residence or permanent employment.

Financial services

Instability in the banking system affects the whole economy. The financial services annex says governments have the right to take prudential measures, such as those for the protection of investors, depositors and insurance policy holders, and to ensure the integrity and stability of the financial system. It also excludes from the agreement services provided when a government exercising its authority over the financial system, for example central banks’ services. Negotiations on specific commitments in financial services continued after the end of the Uruguay Round, ended in late 1997 and entered into force 1 March 1999.

Telecommunications

The telecommunications sector has a dual role: it is a distinct sector of economic activity; and it is an underlying means of supplying other economic activities (for example electronic money transfers). During the Uruguay Round, many governments made commitments in value-added telecommunication services, however very few offered commitments on basic telecommunications. The annex says governments must ensure that foreign service suppliers are given access to the public telecommunications networks without discrimination. Negotiations on specific commitments in telecommunications resumed after the end of the Uruguay Round. This led to a new liberalization package agreed in February 1997.

Air transport services

Under this annex, traffic rights and directly related activities such as the carriage of passengers or freight are excluded from GATS’s coverage. They are handled by other bilateral agreements. However, the annex establishes that the GATS will apply to aircraft repair and maintenance services, marketing of air transport services and computer-reservation services.

Maritime transport

Maritime transport negotiations were originally scheduled to end in June 1996, but participants failed to agree on a package of commitments. The talks have resumed with the new services round which started in 2000. Some commitments are already included in some countries’ schedules covering the three main areas in this sector: access to and use of port facilities; auxiliary services; and ocean transport.

 

Questions

 

1. Does the GATS define "service" as a legal term?

2. When is e-commerce a service, when is it trade in goods?

3. Consider the economic role of services in developed and developing countries as it evolved since the end of World War II. Why has the liberalization of trade in services not surfaced earlier?

4. What kind of services are tradables and non-tradables?

5. Why do you think there have never been tariffs levied on the cross-border provision of services? Consider reasons of historical coincidence, but also aspects of practicability.

6. Consider the nature of regulatory restrictions which impede the cross-border provision of services. Think of typical examples in professions you know where specific licenses, diplomas etc. are required for the lawful exercise of a professional activity

7. Look up those provisions of the GATS which relate to competition and investment. Are such rules more important in the context of services than in connection to goods?

8. Why does the GATS highlight the importance of “domestic regulation” so much?

 

References

 

1. John H. Jackson, The World Trading System: Law and Policy of International Economic Relations (2nd ed., Cambridge, MA: MIT Press, 1997). p. 247-277.

2. Jackson/Davey/Sykes, 666-756, 757-814, 815-843.

3. OECD Secretariat. 2004. “Services Trade Liberalisation Opportunities & AMP.”

4. Trading into the Future – WTO, 3rd edition, Revised August 2003

5. www.wto.org see Trade topics; Trade in Services; GATS

 

Lecture 7. TRIPS

World trade organization

Ideas and knowledge are an increasingly important part of trade. Most of the value of new medicines and other high technology products lies in the amount of invention, innovation, research, design and testing involved. Films, music recordings, books, computer software and on-line services are bought and sold because of the information and creativity they contain, not usually because of the plastic, metal or paper used to make them. Many products that used to be traded as low-technology goods or commodities now contain a higher proportion of invention and design in their value — for example brand-named clothing or new varieties of plants. Creators can be given the right to prevent others from using their inventions, designs or other creations. These rights are known as “intellectual property rights” (IPRs).

Ideas and knowledge are an increasingly important part of trade. Most of the value of new medicines and other high technology products lies in the amount of invention, innovation, research, design and testing involved. Films, music recordings, books, computer software and on-line services are bought and sold because of the information and creativity they contain, not usually because of the plastic, metal or paper used to make them. Many products that used to be traded as low-technology goods or commodities now contain a higher proportion of invention and design in their value — for example brand-named clothing or new varieties of plants. Creators can be given the right to prevent others from using their inventions, designs or other creations. These rights are known as “intellectual property rights” (IPRs).