Services Trade Liberalisation and Regulation: New Developments and Old Problems

Krajewski, Markus

doi:10.1007/978-3-540-78883-6_7

Markus Krajewski³

Part of the book series: European Yearbook of International Economic Law ((EUROYEAR,volume 1))

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Abstract

In his foreword to a recent publication on trade in services, the Director General of the World Trade Organisation (WTO), Pascal Lamy, claims: “Gone are the days when services used to be considered non-tradables”.¹ Indeed, creating a consensus among trade policy officials, business leaders and academic commentators that services can be traded across borders was a major step for the development of the multilateral trading system. However, the ensuing problems that followed from this consensus are at least as challenging. Considering services as tradables gives rise to a number of fundamental questions about the proper framework and legal rules for the liberalisation and regulation of such trade. It is therefore not surprising that trade in services moved to the centre of attention of political and academic discourses about the international trading system in recent years. As a result of the increased interest in trade in services, the challenges and difficulties associated with this concept became apparent. While early assessments of the inclusion of services in the multilateral trading system were often shaped by generally optimistic assumptions about the over-all positive effects of services trade liberalisation on the one side and unsubstantiated claims that the GATS would force governments to privatisation and deregulation on the other side, the debate is more balanced now. Most commentators – political and academic ones alike – recognise the complexity of the issues involved. In fact: Gone are the days when the liberalisation of trade in services used to be subject to simplistic assumptions and claims.

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Notes

1.
Lamy, Foreword, in: Marchetti/Roy (eds.), Opening Markets for Trade in Services – Countries and Sectors in Bilateral and WTO Negotiations, 2009, p. xix.
2.
Lowenfeld, International Economic Law, (2nd ed.), 2008, p. 23 et seq.
3.
Marchetti/Roy, Summary and Overview, in: Marchetti/Roy (eds.), Opening Markets for Trade in Services – Countries and Sectors in Bilateral and WTO Negotiations, 2009, p. 1.
4.
ECJ, Case C-348/96, Calfa [1997] ECR I-11, para. 16.
5.
Hatzopoulos, Recent Developments of the Case Law of the ECJ in the Field of Services, CMLRev 37 (2000) p. 43 (43).
6.
Eeckhout, Constitutional Concepts for Free Trade in Services, in: de Búrca/Scott (eds.), The EU and the WTO, 2001, p. 211 (212).
7.
In other contexts, comparisons between the international and the European regime reveal interesting results, for example the emergence of a common concept of “services” in WTO and EC law due to the combination of the EC rules on freedom to provide and receive services with the freedom of establishment of service providers, see Krajewski, Of modes and sectors – External relations, internal debates and the special case of (trade in) services, in: Cremona (ed.), New Developments in EU External Relations Law, 2008, p. 172 (pp. 187–188).
8.
Australia Treaty Series 1988, No. 20, available at http://www.dfat.gov.au/geo/new_zealand/anz_cer/215.pdf.
9.
Feketekuty, International Trade in Services: An Overview and Blueprint for Negotiations, 1988, p. 176.
10.
Text available at http://www.worldtradelaw.net/nafta/CUSFTA.pdf.
11.
Roy/Marchetti/Lim, Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs): How Much Further than the GATS? WTO Staff Working Paper ERSD-2006-07, 2006, p. 7, available at http://www.wto.org/english/res_e/reser_e/ersd200607_e.pdf.
12.
Trebilcock/Howse, The Regulation of International Trade, (3rd ed.), 2005, pp. 353–354.
13.
Trebilcock/Howse, The Regulation of International Trade, (3rd ed.), 2005, p. 39.
14.
For a comprehensive overview see Fiorentino/Verdeja/Toqueboeuf, The Changing Landscape of Regional Trade Agreements: 2006 update, WTO Discussion Paper No. 12 (Geneva: WTO, 2007), available at http://www.wto.org/english/res_e/reser_e/discussion_papers_e.htm (last visited 18 February 2009).
15.
The figure includes the EC enlargement agreements of 2004 and 2007 and the notifications of agreements predating the entry into force of the GATS. Data taken from the WTO’s database available at http://rtais.wto.org/UI/PublicSearchByCrResult.aspx (last visited 18 February 2009).
16.
Bilateral agreements are understood as agreements between two single entities (states or separate customs territories), but not between one state and a regional integration organisation such as the EC or EFTA.
17.
The Economist, “Services”, Economics A–Z, available at http://www.economist.com/research/economics/alphabetic.cfm?letter=S (19 February 2009).
18.
Lester/Mercurio, World Trade Law, Texts, Materials and Commentary, 2008, p. 598.
19.
Copeland/Mattoo, The Basic Economics of Services Trade, in: Mattoo/Stern/Zanini (eds.), A Handbook of International Trade in Services, 2008, p. 84 (85).
20.
Hoekman/Mattoo, International trade: trade in services, in: Guzman/Sykes (eds.), Research Handbook in International Economic Law, 2007, p. 113 (115); Hoekman/Kostecki, The Political Economy of the World Trading System, (2nd ed.), 2001, p. 241.
21.
Copeland/Mattoo, The Basic Economics of Services Trade, in: Mattoo/Stern/Zanini (eds.), A Handbook of International Trade in Services, 2008, p. 84 (85).
22.
GATT, Services Sectoral Classification List, Note by the Secretariat, MTN.GNS/W/120, 10 July 1991. The list is reproduced in the 2001 Scheduling Guidelines as Attachment 8, see Council for Trade in Services, Guidelines for the Scheduling of Specific Commitments under the General Agreement on Trade in Services, S/L/92, 28 March 2001.
23.
Adlung, Public Services and the GATS, JIEL 9 (2006) 455 (462 et seq.); Leroux, What is a “Service Supplied in the Exercise of Governmental Authority” Under Article I:3(b) and (c) of the General Agreement on Trade in Services? JWT 40 (2006), p. 345 (348 et seq.).
24.
Krajewski, Protecting a Shared Value of the Union in a Globalized World: Services of General Economic Interest and External Trade, in: Van de Gronden (ed.), The EU and WTO Law on Services, 2009, p. 173 (202).
25.
Zdouc, WTO Dispute Settlement Practice in relation to GATS, JIEL 2 (1999), p. 295 (321, n. 85).
26.
Matoo/Sauvé, Regionalism in Services Trade, in: Mattoo/Stern/Zanini (eds.), A Handbook of International Trade in Services, 2008, p. 221 (247 et seq.).
27.
Lang, GATS, in: Bethlehem et al. (eds.), The Oxford Handbook on International Trade Law, 2009 p. 157 (161).
28.
Drake/Nicolaidis, Ideas, interests, and institutionalization: “trade in services” and the Uruguay Round, International Organisation 46 (1992), p. 37 (45).
29.
Feketekuty, International Trade in Services: An Overview and Blueprint for Negotiations, 1988, p. 28 et seq.
30.
Drake/Nicolaidis, Ideas, interests, and institutionalization: “trade in services” and the Uruguay Round, International Organisation 46 (1992), p. 37 (71).
31.
Lang, GATS, in: Bethlehem et al. (eds.), The Oxford Handbook on International Trade Law, 2009 p. 157 (159).
32.
Feketekuty, International Trade in Services: An Overview and Blueprint for Negotiations, 1988, p. 131 et seq.
33.
Lang, GATS, in: Bethlehem et al. (eds.), The Oxford Handbook on International Trade Law, 2009, p. 157 (159).
34.
For an account of the important role of Geza Feketekuty in creating the GATS see Drake/Nicolaidis, Ideas, interests, and institutionalization: “trade in services” and the Uruguay Round, International Organisation 46 (1992), p. 37 (50) with further references.
35.
Feketekuty, International Trade in Services: An Overview and Blueprint for Negotiations, 1988, p. 209.
36.
Deardorff/Stern, Empirical Analysis of International Services Transactions and the Consequences of Liberalization, p. 167 (178).
37.
Winham, The Evolution of the World Trading System, in: Mattoo/Stern/Zanini (eds.), A Handbook of International Trade in Services, 2008, p. 5 (10).
38.
Dolzer/Schreuer, Principles of International Investment Law, 2008, p. 17.
39.
Matoo, National Treatment in the GATS, Corner-Stone or Pandora’s Box? JWT 31 (1997) 1, pp. 107–135.
40.
Cossy, Determining “Likeness” Under GATS: Squaring the Circle? WTO Staff Working Paper ERSD-2006-08, http://www.wto.org/english/res_e/reser_e/ersd200608_e.pdf, pp. 10–11; Nicolaïdis/Trachtman, From Policed Regulation to Managed Recognition in GATS, in: Sauvé/Stern (eds.), GATS 2000, New Directions in Services Trade Liberalization, 2000, p. 241 (253–254). See also Krajewski/Engelke, Art. XVII GATS, paras 35 et seq., in: Wolfrum/Stoll/Feinäugle (eds.), WTO – Trade in Services, 2008.
41.
The same views can be applied to Art. II GATS (MFN).
42.
Example taken from Nicolaïdis/Trachtman, From Policed Regulation to Managed Recognition in GATS, in: Sauvé/Stern (eds.), GATS 2000, New Directions in Services Trade Liberalization, 2000, p. 241 (253–254).
43.
Roy/Marchetti/Lim, Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs): How Much Further than the GATS? WTO Staff Working Paper ERSD-2006-07, 2006, p. 8, available at http://www.wto.org/english/res_e/reser_e/ersd200607_e.pdf (last visited 18 February 2009).
44.
Stephenson, Regional versus multilateral liberalisation of services, WTR 1 (2002), p. 187 (193–194).
45.
Adlung/Roy, Turning Hills into Mountains? Current Commitments Under the General Agreement on Trade in Services and Prospects for Change, JWT 39 (2005) 6, p. 1161 (1187).
46.
Jara/Domínguez, Liberalization of Trade in Services and Trade Negotiations, JWT 40 (2006) 1, p. 113.
47.
Adlung, Negotiations on Safeguards and Subsidies in Services: A Never-Ending Story? JIEL 10 (2007), p. 235 (236).
48.
For an overview of these negotiations see Leal-Arcas, Services as Key for the Conclusion of the Doha Round, LIEI 35 (2008), p. 301 (305 et seq.).
49.
Sixth Ministerial Conference, Doha Work Programme, Ministerial Declaration Adopted on 18 December 2005, Annex C, WT/MIN(05)/DEC.
50.
The total number of initial offers is 71 and of revised offers is 31, see “State of the Play”, available at http://www.wto.org/english/tratop_e/serv_e/state_of_play_e.htm (last visited 16 March 2009).
51.
Adlung, Services Liberalization from a WTO/GATS perspective: In Search of Volunteers, WTO Staff Working Paper ERSD-2009-05, 2009, pp. 11–13, available at http://www.wto.org/english/res_e/reser_e/ersd200905_e.pdf (last visited on 12 March 2009).
52.
Mattoo, Services in a Development Round: Three Goals and Three Proposals, JWT 39 (2005) 6, p. 1223 (1223).
53.
Adlung, Services Negotiations in the Doha Round: Lost in Flexibility? JIEL 9 (2006), p. 865 (877 et seq.).
54.
US – Measures Affecting the Cross-Border Supply of Gambling and Betting Services, Report of the Appellate Body, WT/DS258/AB/R. For a discussion of the impact of this decision on the GATS negotiations see Krajewski, Playing by the Rules of the Game? – Specific Commitments after US – Gambling and Betting and the Current GATS Negotiations, Legal Issues of Economic Integration 32 (2005), p. 417 (437).
55.
Jara/Domínguez, Liberalization of Trade in Services and Trade Negotiations, JWT 40 (2006) 1, p. 113 (117).
56.
Adlung, Negotiations on Safeguards and Subsidies in Services: A Never-Ending Story? JIEL 10 (2007), p. 235 (236).
57.
GATT, Services Sectoral Classification List, Note by the Secretariat, MTN.GNS/W/120, 10 July 1991. The list is reproduced in the 2001 Scheduling Guidelines as Attachment 8, see Council for Trade in Services, Guidelines for the Scheduling of Specific Commitments under the General Agreement on Trade in Services, S/L/92, 28 March 2001.
58.
See, e.g. Peng, Trade in Telecommunications Services: Doha and Beyond, JWT 41 (2007) 2, p. 293 (297 et seq.), who points out that “value-added facsimile services” or “Telex and telegraph services” are not much used today anymore, whereas “mobile services” have been developed into a large array of different activities not foreseen in the early 1990s.
59.
On audiovisual services see Communication from the United States, Audiovisual and Related Services, S/CSS/W/21, 18 December 2000. On telecommunication classifications see Communication from the European Communities, Classification in the Telecom Sector under the WTO-GATS Framework, S/CSC/W/44, 10 February 2005 and Communication from the United States, Classification in the Telecommunications Sector under the WTO-GATS Framework, S/CSC/W/45, 22 February 2005.
60.
Hufbauer/Stephenson, Services Trade: Past liberalization and future challenges, JIEL 10 (2007), p. 605 (619).
61.
Cottier/Molinuevo, Art. V GATS, paras 23 et seq., in: Wolfrum/Stoll/Feinäugle (eds.), WTO – Trade in Services, 2008.
62.
Adlung, Services Liberalization from a WTO/GATS perspective: In Search of Volunteers, WTO Staff Working Paper ERSD-2009-05, 2009, p. 4, available at http://www.wto.org/english/res_e/reser_e/ersd200905_e.pdf (last visited on 12 March 2009).
63.
Sauvé/Stern, New Directions in Services Trade Liberalisation: An Overview, in: Sauvé/Stern (eds.), GATS 2000 – New directions in services trade liberalisation, 2000, p. 9.
64.
For a comprehensive treatment of this mandate and the negotiations see Wouters/Coppens, GATS and Domestic Regulation: Balancing the Right to Regulate and Trade Liberalization, in: Alexander/Andenas (eds.), The World Trade Organisation and Trade in Services, 2008, p. 207 (216 et seq.).
65.
Council for Trade in Services, Disciplines on Domestic Regulation in the Accountancy Sector, S/L/64, 14 December 1998.
66.
Working Party on Domestic Regulation, Revised Draft Disciplines on Domestic Regulation Pursuant to GATS Article VI:4, Informal Note by the Chairman, 23 January 2008. The draft is not publicly available from the WTO, because it is a Room Document. However, the text can be obtained from other sources, e.g. the website of the Permanent Mission of Pakistan to the WTO at http://www.wto-pakistan.org/documents/services/chair_jan_2008.doc (last visited on 16 March 2009).
67.
For an analysis of the key aspects of an earlier – very similar version – of the draft see Krajewski, Art. VI GATS, paras 42 et seq., in: Wolfrum/Stoll/Feinäugle (eds.), WTO – Trade in Services, 2008.
68.
For an earlier account of these negotiations see Sauvé, Completing the GATS Framework: Addressing Uruguay Round Leftovers, Aussenwirtschaft (Swiss Review of International Economic Relations) 57 (2002), pp. 301–341 and more recently Adlung, Negotiations on Safeguards and Subsidies in Services: A Never-Ending Story? JIEL 10 (2007), p. 235 (238 et seq.).
69.
For the most recent summary of the negotiations see Working Party on GATS Rules, Annual Report of the Working Party on GATS Rules to the Council for Trade in Service (2008), S/WPGR/18, 5 December 2008.
70.
Hufbauer/Stephenson, Services Trade: Past liberalization and future challenges, JIEL 10 (2007), p. 605 (614 et seq.)
71.
The following cases contained GATS issues: Canada – Certain Measures Concerning Periodicals (Canada – Periodicals), WT/DS31/AB/R, Report of the Appellate Body adopted on 30 July 1997; European Communities – Regime of the Importation, Sale and Distribution of Bananas (EC – Bananas), WT/DS27/AB/R, Report of the Appellate Body adopted on 25 September 1997; Canada – Certain Measures Affecting the Automotive Industry (Canada – Automotive Industry), WT/DS139 and WT/DS142, Report by the Appellate Body adopted on 19 June 2000; Mexico – Measures Affecting Telecommunications Services (Mexico – Telecommunications [Telmex]), WT/DS204/R, Report of the Panel adopted on 1 June 2004; and United States – Measures Affecting the Cross-Border Supply of Gambling and Betting Services (US – Gambling and Betting), WT/DS258/AB/R, Report of the Appellate Body adopted on 20 April 2005.
72.
In the Matter of Cross-Border Trucking Services (Mexico v. United States), USA-MEX-98-2008-01, Final Report of the Panel, 6 February 2001.
73.
EC – Bananas, Report of the Appellate Body, para. 220.
74.
Canada – Periodicals, Report of the Appellate Body, Section IV and EC – Bananas, Report of the Appellate Body, paras 220–222.
75.
US – Gambling and Betting, Report of the Appellate Body, para. 159.
76.
US – Gambling and Betting, Report of the Appellate Body, para. 196.
77.
Mexico – Telecommunications (Telmex), Report of the Panel, paras 7.354 et seq.
78.
This was one of the limitations in Mexico’s scheduling regarding market access, see Mexico – Telecommunications (Telmex), Report of the Panel, paras 7.353.
79.
US – Gambling and Betting, Panel Report, paras 6.448 et seq.
80.
US – Gambling and Betting, Panel Report, para. 6.318.
81.
US – Gambling and Betting, Report of the Appellate Body, para. 215.
82.
US – Gambling and Betting, Report of the Appellate Body, para. 232.
83.
US – Gambling and Betting, Panel Report, para. 6.332.
84.
US – Gambling and Betting, Report of the Appellate Body, paras 239 and 252.
85.
Pauwelyn, Rien ne Va Plus? Distinguishing Domestic Regulation from Market Access in GATT and GATS, WTRev 4 (2005), p. 131 (161 et seq.); Krajewski, Playing by the Rules of the Game? – Specific Commitments after US – Gambling and Betting and the Current GATS Negotiations, Legal Issues of Economic Integration 32 (2005), p. 417 (437); Ortino, Treaty Interpretation and the WTO Appellate Body Report in US – Gambling: A Critique, JIEL 9 (2006), p. 117 (132 et seq.).
86.
Delimatsis, Don’t Gamble with GATS – The Interaction between Articles VI, XVI, XVII and XVIII GATS in the Light of the US – Gambling Case, JWT 40 (2006) 6, p. 1059 (1069 et seq.).
87.
EC – Bananas, Report of the Panel, para. 7.322.
88.
Zdouc, WTO Dispute Settlement Practice Relation to the GATS, JIEL 2 (1999), p. 332.
89.
Canada – Automotive Industry, Panel report, para. 10.307. For a support of this argument see Matoo, National Treatment in the GATS, Corner-Stone or Pandora’s Box? JWT 31 (1997) 1, p. 107 (121).
90.
Krajewski, National regulation and trade liberalization in services, 2003, pp. 102–103.
91.
US – Gambling and Betting Services, Recourse to Arbitration by the United States under Article 22.6 of the DSU, Decision by the Arbitrator, WT/DS285/ARB.
92.
Council for Trade in Services, Notification from the United States Pursuant to Article XXI of the General Agreement on Trade in Services (GATS) – Addendum, S/SECRET/10/Add.1, 21 December 2007.
93.
Grosse Ruse-Khan, A Pirate of the Caribbean? The Attractions of Suspending TRIPS Obligations, JIEL 11 (2008), p. 313 (320).
94.
Grosse Ruse-Khan, A Pirate of the Caribbean? The Attractions of Suspending TRIPS Obligations, JIEL 11 (2008), p. 313 (323).
95.
China – Measures Affecting Trading Rights and Distribution Services for Certain Publications and Audiovisual Entertainment Products (China – Trading Rights and Distribution Services), Request for Consultations by the United States, WT/DS363/1.
96.
China – Trading Rights and Distribution Services, Communication from the Chairman of the Panel, WT/DS363/8.
97.
China – Measures Affecting Financial Information Services and Foreign Financial Information Suppliers, (China – Financial Information Services), Request for Consultations, WT/DS372/1, WT/DS373/1 and WT/DS378/1.
98.
See, e.g. China – Financial Information Services, Joint Communication from China and the European Communities, WT/DS372/4.
99.
Adlung, Services Liberalization from a WTO/GATS perspective: In Search of Volunteers, WTO Staff Working Paper ERSD-2009-05, 2009, pp. 6–7, available at http://www.wto.org/english/res_e/reser_e/ersd200905_e.pdf (last visited on 12 March 2009).
100.
On these provisions see Schloemann/Pitschas, Cutting the Regulatory Edge? Services Regulation Disciplines in the Cariforum EPA, Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH, 2008, available at http://www.gtz.de/de/dokumente/en-epa-cutting-the-regulatory-edge-2008.pdf (18 March 2009).
101.
For the use of international standards set by the ITU and the Basle Committee into WTO dispute settlement see Howse, “Importing” Regulatory Standards And Principles Into WTO Dispute Settlement: The Challenge of Interpreting GATS Arrangements On Financial Services and Telecommunications, Paper presented at the International Conference on “Services Liberalisation in the EU and the WTO”, Vienna, 5 and 6 March 2009.

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SFB 597, University of Bremen, 28334, Bremen, Germany
Markus Krajewski

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Chair for Constitutional and Administrative Law European Law, European and International Economic Law, Passau University, D-94030, Passau, Germany
Christoph Herrmann LL.M
Department of European Law, Hamburg University, Schlüterstraβe 28, 20146, Hamburg, Germany
Jörg Philipp Terhechte (Assistant Professor of Law, Faculty of Law) (Assistant Professor of Law, Faculty of Law)

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Krajewski, M. (2010). Services Trade Liberalisation and Regulation: New Developments and Old Problems. In: Herrmann, C., Terhechte, J.P. (eds) European Yearbook of International Economic Law 2010. European Yearbook of International Economic Law, vol 1. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-78883-6_7

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