TWN Info Service on WTO and Trade Issues (Nov09/11)
18 November 2009
Third World Network

New domestic regulation proposal to raise ambition level in services?

Published in SUNS #6816 dated 17 November 2009

Geneva, 16 Nov (Riaz K. Tayob) -- A new proposal on disciplines on domestic regulation was tabled last week by Switzerland and co-sponsored by several other WTO Members in the GATS Working Party on Domestic Regulation (WPDR), which the proponents said raised the level of ambition in services as well as incorporating the views of other Members and simplifying the text that is currently under discussion.

The Working Party, meeting mainly in informal mode on 11 November, considered the 20 March 2009 text prepared by the previous Chair of the WPDR, Peter Govindasamy of Singapore, and entertained initial reactions to the new proposal that was tabled by Switzerland and co-sponsored by Australia, Chile, Colombia, Hong Kong -China, Republic of Korea and New Zealand.

The meeting considered licensing and qualification requirements (Chapter V to VIII), the other two elements of its mandate, as well as a shorter discussion on Technical Standards (Chapter IX) future work and development. At its last meeting on 9 October, it considered the Technical Standards chapter of the 20 March text, also referred to as "Peter's text". [See SUNS #6793 dated 15 October 2009.]

By the end of the meeting, there remained different perceptions among some delegates as to how the new proposal would be treated by Working Party Chair, Ms. Misako Takahashi of Japan.

According to a developing country trade diplomat, different versions of the Swiss proposal were circulating. The room document introduced by Switzerland contained 13 paragraphs on licensing and qualifications. Instead of four chapters on requirements and procedures for both licensing and qualifications, there are only two chapters. One is on licensing and qualification requirements, and another on licensing and qualification procedures.

During the meeting, the Swiss proposal was welcomed as an initial reaction, but most said that they would have to study the document first, according to developing country trade diplomats who spoke to SUNS after the meeting.

According to a trade diplomat, the Swiss explained that their proposal improved the level of ambition, it reduced the repetition in the chapters, and to gain clarity, it "saved words" through a large reduction in the number of paragraphs. The sponsors welcomed inputs into the shape and contents of the proposal.

Chile said that the proposal was a common sense grouping of the common elements to avoid duplication. Australia said that Members' concerns have been taken into account in the text. The EC delegate inquired about the level of ambition, saying that he thought that the Swiss proposal was not an improvement in the level of ambition. The EC said that the proposal also contained a mistake in paragraph 21 on licensing fees. Fees relate to procedures and not requirements.

Switzerland responded by saying that it would fix the text for the next meeting.

On licensing fees, a developing country trade diplomat said that there is a setback for developing countries. Peter's text said that licensing fees must be reasonable, while the Swiss proposal asks for it to be "commensurate".

[On the issue of licensing fees, Peter's text states that each Member shall ensure that licensing fees are reasonable in terms of the costs incurred by the competent authority, including those for activities related to regulation and supervision of the relevant service, and do not in themselves restrict the supply of the service (paragraph 26). A footnote explains: Licensing fees do not include fees for the use of natural resources, payments for auction, tendering or other non-discriminatory means of awarding concessions, or mandated contributions to universal service provision.]

El Salvador was concerned about the wording on licensing fees and expressed a preference for the paragraphs in Peter's text.

The US said that they will check the coherence of the texts because when there is a reduction, something may be lost. They would check with their capital and come back on this, according to a developing country trade diplomat. The US also called attention to the issue of soft commitments in the texts. The issue related to whether there were different levels of soft commitments for Members, with some commitments being stronger than others.

Brazil said that the Swiss proposal is a way to move forward in the negotiations but it must not be burdensome, according to a trade diplomat. Modifications should not be more burdensome on regulators or operators. It also expressed concerns about the necessity test incorporated in many hidden ways into the new draft, citing as an example the last part of paragraph 21 (referring to licensing procedures, "not in themselves restrict the supply of the service"). It was very concerned about the inclusion of the necessity test, as members already have had lots of discussion and had asked for its removal.

Brazil also asked that terms like "where possible" and "in principle" be maintained in the text, as it sought to retain, where needed, the flexibility of these terms. Brazil also reiterated the need to include the right to regulate for development.  A developing country trade diplomat explained to SUNS after the meeting that there were concerns about some terms in the new text which replaced the terminology of Peter's text. Peter's text uses words like "where possible" and "in principle", whereas the Swiss proposal uses terms like "where practicable" or even makes obligations much stronger.

India in its initial reaction welcomed the text and inquired whether the contents of paragraphs 19 and 34 of Peter's text were taken into account, according to a trade diplomat.

[Paragraph 19, under licensing procedures, states that an applicant shall, in principle, not be required to approach more than one competent authority in connection with an application for license. Paragraph 34 states, under qualification requirements, that where examinations are required, a Member shall ensure they are scheduled at reasonable intervals and applicants shall be allowed a reasonable period to submit applications.]

Another developing country trade diplomat who has followed these issues closely for years told SUNS after the meeting that there are certain areas where the level of ambition is higher, but there are also areas where it is lower. This is just a first reading, he said.

Various developing country trade diplomats explained to SUNS after the meeting some of the reactions to issues raised in the meeting.  About the level of the ambition in the text, Chile said that the new text is more ambitious, as it has eliminated the ambiguity in words like "in principle" and "where possible" in the previous text.  On the necessity test, Switzerland said that it is in the mandate for the disciplines.  Discussions then moved onto Peter's text, as explained to SUNS by a few developing country delegates after the meeting.  The US asked why new disciplines or special requirements for residence requirements were being made. Korea said that qualification requirements in paragraph 29 should be removed.  [Paragraph 29 states that residency requirements, not subject to national treatment scheduling, shall not be a pre-requisite for assessing and verifying the competence of a service supplier of another Member.]  The US said that for paragraph 19, it was not possible for just one authority to be approached to meet licensing requirements, as for it, some services cut across many sectors and there may be a need to approach many authorities.  According to trade diplomats, Barbados, for the Small and Vulnerable Economies (SVEs), said that mandatory standards should be reduced in paragraphs 19 and 32, and that "should" must replace "shall".

Paragraph 24 states that the processing of an application for a license, including reaching a final decision, is completed within a reasonable time-frame from the submission of an application.  The US said time-frames are an internal issue and that this paragraph could be removed.  Regarding paragraph 26 on licensing fees (also discussed under Swiss proposal paragraph 21 above), the US said that it was not responsible for fees charged by private entities.  The US said that in Peter's text, the words "in principle" and "where possible" should be removed, as these are not legal terms.

Brazil said that a balance had been reached in Peter's text and that balance should not be modified by new amendments. It said that the words "in principle" and "where possible" especially in paragraphs 19 and 23 were indispensable for them.  Australia questioned the point raised about flexibilities for developing countries. It said that the words "in principle" and "where possible" were not legal terms and there could be other wording to meet the concerns of developing countries. It further said that words like "practicable" could be used. It asked for more consultations with developing countries.

According to trade diplomats, Bolivia said that it supported views for more flexibilities for developing countries to reach their policy objectives. Other countries that supported greater flexibilities for developing countries included Guatemala, Mexico and Barbados.

Paragraph 27 of Peter's text, under Qualification Requirements, refers to qualification requirements for the supply of a service, and procedures for their assessment.  On qualification requirements in paragraphs 27 and 28 (of Peter's text), the US sought to reiterate its previous concerns and said these are qualification procedures, not requirements.  According to trade diplomats, Brazil asked that in paragraph 27, the concept of "relevant professional experience" be clarified, as it is ambiguous. It said that more guidance needed to be given to regulators.  India said that this paragraph applies to the movement of natural persons, adding that the rules should be clearer. It said the 2006 version of this paragraph had clearer provisions on this matter. India said we have to reduce the exaggerated power in the hands of authorities.

Canada said that paragraph 34 should be modified, and that Members should be "encouraged".  Paragraph 34 of Peter's text states that Members shall ensure that required examinations are scheduled at reasonably frequent intervals, and that applicants shall have a reasonable period to submit applications.

A short discussion was then conducted on Technical Standards. Switzerland said that there is need for the necessity test in paragraphs 16, 26 and 31 (of Peter's text), as it was in the mandate. It said that the test was needed to avoid government regulation from being against free trade, and that limits the provision of the service.  According to trade diplomats, the US said it had made inputs on this at the October meeting.  Brazil said that we are fully convinced that we do not accept "necessity" in the text. We have discussed this a lot and we reiterate our position, it added.  Canada said it was not comfortable with necessity in the text.

Discussion moved on to the Development (Chapter X) part of Peter's text. The US said it had not received inputs on this part and was not prepared to discuss this part.

On future work, another meeting will be conducted on 14 December. Work will cover Chapters 1, 3, 4 and 11 (Introduction, General Provisions, Transparency, Institutional Provisions, respectively).

There seemed to be some different understandings about how the Swiss proposal was to be treated. Some developing country delegates said they did not want to see it as an alternative text, as a lot of work has been done on Peter's text.  But they said that they were not clear on how it will be handled even after hearing the Chair trying to clarify it.  Another trade diplomat said that in its understanding, the Working Party would consider Peter's text and then consider the proposal from Switzerland. +