No outcome likely at MC11 on domestic regulation in services

A proposed Buenos Aires outcome to discipline domestic regulation of services trade has met with widespread opposition from countries concerned, among others, that it would undermine their right to regulate.

by D. Ravi Kanth

GENEVA: A large majority of developing and least developed countries rejected on 7 November a revised draft negotiating proposal for an outcome on disciplines on domestic regulation of trade in services at the upcoming WTO ministerial meeting in Buenos Aires.

In rejecting the proposal, the countries said the draft is replete with divergences among the sponsors and misinterprets Article VI.4 of the WTO’s General Agreement on Trade in Services (GATS), participants told the South-North Development Monitor (SUNS).

The proposal was opposed by members of the African Group, the African, Caribbean and Pacific (ACP) Group, the least developed countries (LDCs), India, Bolivia, Cuba and Venezuela, among other countries. The United States also rejected the proposal.

Revised proposal

The proposal covers several areas concerning administration of measures, transparency, technical standards, development of measures, gender equality and necessity test. Its sponsors include Argentina, Australia, Canada, Chile, Colombia, Costa Rica, the European Union, Hong Kong (China), Iceland, Israel, Japan, Kazakhstan, Korea, Liechtenstein, Mexico, Moldova, New Zealand, Norway, Switzerland, Chinese Taipei, Turkey, Ukraine and Uruguay.

At a meeting of the WTO Working Party on Domestic Regulation on 7 November, the sponsors said their revised proposal took on board the concerns raised by several members on specific improvements on domestic regulation. They said they were encouraged by “the level of engagement on the proposed Disciplines on Domestic Regulation”.

The sponsors said they “have taken note of the comments [WTO] Director-General [Roberto] Azevedo delivered in Marrakesh [at a meeting of selected trade ministers in October] on the need to intensify work on domestic regulation as a prospective deliverable for MC11, and in particular the need for proponents to address questions and concerns.”

The sponsors maintained that, following the last meeting of the Working Party on Domestic Regulation on 2-4 October, they made intense efforts to reach out to a broad range of members. Their latest revised draft text “responds to concerns and accommodates text proposals from other members.” The proposed improvements in the revised text, they said, aim at simplifying the disciplines on domestic regulation in services.

The changes in the draft include the creation of one nodal authority in each country for applications relating to licensing requirements and procedures, qualification requirements and procedures, and technical standards affecting trade in services where specific commitments are undertaken by members.

The revised draft text, according to the sponsors, reveals how they have accommodated changes to their original proposal by improving the language on the general provisions, administrative measures, transparency, technical standards and development of measures.

The draft text also includes a proposal from Albania, Argentina, Australia, Canada, Chile, Colombia, the European Union, Iceland, Kazakhstan, Liechtenstein, Moldova, Montenegro, Norway, Panama and Uruguay for an outcome on gender equality.

In addition, several countries – Chile, Hong Kong (China), Moldova, Peru, New Zealand and Switzerland – proposed language for an outcome on the “necessity test”, under which each member is required to ensure that measures relating to authorization for the supply of services are not burdensome.

“Systemic” concerns

Commenting on the revised proposal, Rwanda, on behalf of the African Group, said it was encouraged to “hear so many new voices join this conversation and express similar views and concerns as the African Group has been doing for the last eight months.”

In one of the sharpest critiques of the proposal, the African Group said its “views and concerns are systemic”, underscoring the need for “a deeper, more fulsome, conceptual discussion on GATS Article VI.4.”

Article VI.4 of the GATS requires the WTO’s Council for Trade in Services, or appropriate bodies the Council might establish, to develop any necessary disciplines so as to ensure that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services.

The African Group maintained that it cannot be expected to resolve numerous divergences in the draft text in one month “when the entire genesis of the proposals and consolidated texts are problematic, and there is no common understanding and agreement on the GATS Article VI.4 mandate.”

It maintained that “the GATS Article VI.4 mandate has been misinterpreted and imprecisely operationalized in the consolidated texts and proposals we have on the table today.”

One of the most fundamental concerns, according to the African Group, is “how the proposals create a framework to facilitate ability of foreign governments, and their service providers, to intervene more directly in the future in our domestic policy-making processes. It is the concept of, and implications for our governments, on the sovereign ‘right to regulate’”.

Further, “too much emphasis is being placed on the institutional and procedural approach to domestic regulation”, the African Group said.

More disturbingly, the draft text is based on “an underlying assumption that there is a one-size-fits-all approach or model to regulation”, the African Group said.

“In the short time that is left to MC11, it is not possible to bridge historically sensitive matters because no amount of best endeavour language or transition periods being characterized as Special and Differential Treatment could make up for taking away sovereign right of African governments to regulate,” the African Group maintained.

Lastly, the African Group said, members must move “away from texts that have cherry-picked some issues over others, and start assessing how proponents intend to address the African Group’s concerns and what the starting point for discussions will be when we come back from Buenos Aires.”

India said it had already sought several clarifications on the draft text, suggesting that it remains concerned that the text is not in accordance with the texts issued by the chairs in 2009 and 2011.

The US said the draft text on which members are interacting cannot be taken to Buenos Aires because of sharp divergences. The US said an outcome for improving the disciplines on domestic regulation cannot be presented to trade ministers given the differences on almost all issues in the text, according to a negotiator present at the 7 November meeting.

In short, the writing on the wall is clear that there cannot be any outcome on disciplines on domestic regulation at Buenos Aires, given the overwhelming opposition from members across all sides, a participant said after the meeting. (SUNS8571)                                     

Third World Economics, Issue No. 650, 1-15 October 2017, pp7-8