Outcome unlikely on domestic regulation in services at MC11

Prospects of an agreement at Buenos Aires to discipline domestic regulation of services trade appear slim, with many countries arguing that more time is needed to resolve prevailing differences in this area.

by D. Ravi Kanth

GENEVA: The multilateral outcome on enhanced disciplines for domestic regulation in trade in services proposed by major developed and some developing countries for the upcoming WTO ministerial meeting in Buenos Aires almost evaporated on 23 October following unbridgeable divisions on the need to finalize any decision at this juncture, trade negotiators told the South-North Development Monitor (SUNS).

At a meeting of the Doha negotiating body on services on 23 October, several developed countries and their developing-country allies pressed for an outcome based on their revised draft proposal for MC11.

The sponsors demanding an outcome at Buenos Aires include the European Union, Argentina, Australia, Canada, Chile, Colombia, Costa Rica, Hong Kong (China), Iceland, Israel, Japan, Kazakhstan, Korea, Liechtenstein, Mexico, Moldova, New Zealand, Norway, Peru, Switzerland, Chinese Taipei, Turkey and Uruguay.

In their latest revised proposal, the sponsors maintained that “the main body of text (Articles 1 to 6.1) has been jointly developed by all the Members listed above as a basis for further work.” Several bracketed texts in the draft, according to the sponsors, “indicate areas where the Members listed above have not reached agreement.” The sponsors, however, called for further discussions.

The enhanced disciplines on domestic regulation (DR) as proposed by the sponsors cover areas such as licensing requirements and procedures, qualification requirements and procedures, and technical standards affecting trade in services where specific commitments are undertaken.

The sponsors argued that an outcome on DR disciplines is essential at Buenos Aires, suggesting that they are willing to discuss with other members all aspects in their text.

The six-page draft text suggested in “general provisions” that “these disciplines apply to measures by Members relating to licensing requirements and procedures, qualification requirements and procedures, and technical standards affecting trade in services where specific commitments are undertaken.”

The sponsors said that “they do not apply to any terms, limitations, conditions, or qualifications set out in a Member’s schedule pursuant to GATS [the WTO’s General Agreement on Trade in Services] Article XVI or XVII.”

Further, the sponsors maintained that “Members recognize the right to regulate, and to introduce new regulations, on the supply of services within their territories in order to meet [national] policy objectives. These disciplines shall not be construed to prescribe or impose particular regulatory approaches or any particular regulatory provisions in domestic regulation.”

A group of countries which are not among the DR sponsors, including China,  maintained that they would support an outcome on the DR disciplines at Buenos Aires, according to a trade negotiator who asked not to be quoted.

However, another group of countries, including India and Bangladesh, suggested that an outcome on DR must be finalized after MC11, the negotiator said.

India also indicated at the 23 October meeting that it is not seeking any outcome on its own proposal for trade facilitation in services at Buenos Aires. India said while it wants credible improvements in trade in services as set out in its proposal, the time is not ripe for immediate discussions.

More than 10 countries from Africa and South America – South Africa, Uganda, Zimbabwe, Cameroon, Rwanda, Kenya, Venezuela and Cuba, among others – firmly maintained that it would not be possible to have an outcome on domestic regulation in services at Buenos Aires.

South Africa suggested that it is realistically impossible to have a multilateral outcome on DR at MC11, said another negotiator who asked not to be quoted.

It would be difficult to address the concerns raised by the African Group of countries on the sponsors’ DR proposals through text-based negotiations before the Buenos Aires meeting, the negotiator said.

Call for clarity

In its restricted document issued on 27 September, the African Group had said that it has “always approached domestic regulation from a perspective that gives paramount importance and affirmation to, amongst other things, the right to regulate and the inter-linkages between regulations and broader domestic economic imperatives.”

“In building the Africa we want, the African Group places great importance on having further clarity from the proponents [the sponsors] in the development of future disciplines on domestic regulation,” the African Group maintained.

It raised many questions including “general questions,” “questions on administration of measures,” “questions on transparency,” “questions on development of measures,” and “questions on development”.

The general questions raised by the African Group included the following:

a.  In accordance with GATS Article VI.4, which disciplines do you think are necessary, and why?

b.  What were the circumstances or specific issues that led to the suspension of the negotiations on DR in the past, and have those circumstances changed?

c.  Is there a clear economic rationale for adopting DR disciplines, and what is the evidence that benefits from the proposed disciplines will accrue to all members?

d.  Is there any evidence of the costs entailed by introducing these new obligations, and who would bear those costs?

e.  Is there any consideration that there are different capabilities amongst members, and amongst their firms and stakeholders, to take greater advantage of these proposed new disciplines?

f.   Have the proponents undertaken an economic impact assessment that demonstrates that their stakeholders are losing out on economic opportunities in the absence of multilateral DR disciplines?

g.  In which members have your stakeholders experienced problems that the disciplines are seeking to address, and has there been any attempt to resolve them bilaterally? Have domestic remedies been exhausted?

h.  In instances where you have felt aggrieved, has the issue been taken up with the competent authorities in the member?

i.   To what extent has the application of GATS Article VI.5 been insufficient in meeting the objectives being sought?

j.   How will these disciplines contribute to supporting structural transformation and industrialization for Africa?

k.  Can proponents indicate the basis for making their proposal/s differently from the approaches taken in 2009-11 where separate rules were considered for licensing requirements and procedures and qualification requirements and procedures?

l.   Can proponents clarify whether their proposals would impose obligations only on existing commitments?

m.   Are there linkages between the proposed DR disciplines and e-commerce and investment?

n.  What are the proponents’ perspectives on DR in an increasingly digital world economy, how do each of the DR elements relate to e-commerce, and what are the implications?

Even a plurilateral outcome on DR as suggested by WTO Director-General Roberto Azevedo in Washington recently is not possible in Buenos Aires as it would be unwise to move from a multilateral solution to a plurilateral outcome in less than seven weeks, the negotiator suggested.

On behalf of the African Group, Rwanda’s trade envoy Ambassador Francois Xavier Ngarambe expressed “profound concern at attempts to manufacture consensus where there is none on domestic regulation disciplines.”

During the informal heads-of-delegation meeting on 24 October, Ngarambe said: “There are systemic divergences and conceptual differences in understanding about the scope of application, regulatory capture, preservation of policy space, regulatory models, regulatory autonomy, intrusive GATS-plus transparency obligations, and the sovereign right to regulate, to name a few.”

“Simply ignoring these serious concerns is neither pragmatic nor realistic, and it will not bring us any closer towards convergence,” he warned.

Meanwhile, the EU, which circulated a proposal on addressing e-commerce-related issues in services for Buenos Aires, has suggested that it is ready to take up the issue only after MC11.

In short, the prospects for an outcome on enhanced disciplines in domestic regulation at Buenos Aires seem extremely bleak and close to nil if the mood at the Doha services negotiating group meeting on 23 October is any indication, the negotiator argued. (SUNS8560)     

Third World Economics, Issue No. 649, 16-30 September 2017, pp8-9