It's Your Turn
Trade in Services
Consultations on the Development of WTO GATS Disciplines on Domestic
Regulation
Disciplines on Domestic Regulation Pursuant to GATS Article VI:4:
The WPDR Chair's Consolidated Working Paper - Canada's Guide to
Domestic Consultations (Overview Section)
Introduction
For many years, since the establishment of the GATS Working Party
on Domestic Regulation (WPDR) in 1999, Members have engaged in extensive
discussions on the development of disciplines on domestic regulation,
pursuant to Article VI:4 of the General Agreement on Trade in Services
(GATS). Discussions started on various concepts relating to the
disciplines. These were eventually followed by the tabling and discussion
of specific proposals on disciplines by various Members. The WPDR
focused its efforts on developing disciplines pursuant to GATS Article
VI:4 before the end of the Doha Round of negotiations, as mandated
in Annex C of the Hong Kong Ministerial Declaration.
Based on the outcome of extensive discussions to date, the Chair
of the WPDR issued in July 2006 a consolidated working paper that
reflected his views on areas of convergence, areas where alternative
approaches exist, and areas where differences remain to be resolved.
He intended his document to facilitate further discussion in the
WPDR and domestic consultations by individual WTO Members.
As past discussions have shown, there are many elements of proposed
domestic regulation disciplines that raise concerns and questions
for many Members, including Canada. In this regard, further analysis
and consultation of regulators and service suppliers are required
before Canada’s position can be determined in some areas.
While the Chair's working paper does not constitute draft negotiating
text, Canada views this working paper as providing a good starting
point for our domestic consultations. To facilitate these consultations,
the Department of Foreign Affairs and International Trade has developed
a Guide, which builds upon the Chair's document. This Guide provides
a brief overview of the work of the WPDR, the rationale behind the
development of disciplines on domestic regulation, and the key elements
of concern and discussion among the Members. It describes Canada's
objectives and interests in the development of disciplines. It conveys
Canada's position and the basis of that position to date on some
of the proposed provisions. Finally, the Guide asks pointed questions
within the text to elicit views on what can or cannot be supported
and the reasons why.
Background: Why develop Article VI:4 disciplines
on domestic regulation?
Trade in goods generally faces barriers at the border, largely
in the form of tariffs. On the other hand, trade in services is
principally affected by barriers inside the border, such as domestic
regulation. While such regulations may be non-discriminatory in
intent, their application may have the effect of restricting trade.
To facilitate international trade and investment in services, the
WTO General Agreement on Trade in Services includes several provisions
that deal specifically with regulatory measures that may have restrictive
effect on trade in services. Of particular interest to the WPDR
and these current consultations is GATS Article VI:4, which mandates
the development of any necessary disciplines to ensure that measures
relating to qualification requirements, qualification procedures,
licensing requirements, licensing procedures, and technical standards
do not become unnecessary barriers to trade. Article VI:4 requires
that disciplines aim to ensure that such requirements are, inter
alia:
-
based on objective and transparent criteria, such as competence
and the ability to supply the service;
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no more burdensome than necessary to ensure the quality of
the service; and
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in the case of licensing procedures, not in themselves a restriction
on the supply of the service.
Until such time these disciplines are developed, however, Article
VI:5 remains operational. It requires that in sectors in which a
Member has undertaken specific commitments, pending the entry into
force of Article VI:4 disciplines, the Member shall not apply licensing
and qualification requirements and technical standards that nullify
or impair specific commitments in a manner that does not comply
with the criteria outlined in VI:4 (a), (b), or (c), and could not
reasonably have been expected at the time specific commitments in
those sectors were made.
The work program on the development of disciplines on domestic
regulation was initially implemented in March 1995 with a decision
by the Services Council to have Members begin work in professional
services. Priority was accorded to the accountancy sector and work
was undertaken by the Working Party on Professional Services (WPPS).
The WPPS completed its work in April 1999 following the elaboration
of two documents: Guidelines for Mutual Recognition Agreements
for the Accountancy Sector (May 1997) and Disciplines on
Domestic Regulation in the Accountancy Sector (December 1998).
The Guidelines have no legal status but may be used to
assist in the negotiation of mutual recognition agreements. The
Accountancy Disciplines currently have no legal status but are to
be integrated into the GATS no later than the conclusion of the
Doha Round GATS negotiations.
With the completion of the WPPS work, the WPDR was established
in April 1999 to continue the work of the WPPS to develop generally
applicable disciplines. The WPDR also retained the option of developing
disciplines for individual service sectors as required. Members
have widely recognized that the Accountancy Disciplines
serve as a good starting point or baseline for the development of
horizontal Article VI:4 disciplines. As such they have incorporated
some of the provisions of these disciplines in their own proposals.
State of Play1
In the early work of the WPDR, Members discussed concepts relating
to the development of horizontal disciplines and the development
of disciplines for professional services. The latter covered the
sharing of national experiences, including regulatory regimes governing
the sector, as well as the reporting of the outcome of consultations
of professional service sectors on the relevance and applicability
of the Accountancy Disciplines developed in 1998.
Members also engaged in a discussion of a WTO Secretariat compilation
of a list of examples of the kinds of measures that would be addressed
by disciplines under GATS Article VI:4, based largely on contributions
by Members. Among the examples cited by Members included the following:
There are too many steps for business registration and such registration
must be renewed relatively frequently at considerable time and expense.
Regulators require in-country experience before sitting examinations.
It is difficult to operate a business in the face of too many license
requirements. Some licensing requirements are not relevant to the
license being obtained. The regulatory environment lacks transparency,
with laws and regulations being unclear in respect of criteria and
conditions.
By 2003, Members started to propose specific disciplines on domestic
regulation. Between 2005 up to June 2006 more proposals were tabled
and extensively discussed. They addressed the key elements of scope
and application, definitions, transparency, licensing and qualification
requirements and procedures, technical standards, and special and
differential treatment.
Submissions came from both developed and developing countries. Proposals
from the latter reflected a strong development focus. One proposal
sought to ensure that the situation faced by small, vulnerable economies
be taken into account in the drafting of disciplines. Another pushed
for pro-development principles to promote appropriate domestic regulatory
reform and institution building efforts that will help their exporters
address regulatory barriers in the markets they operate in. One
other proposal outlined a list of specific areas where technical
assistance and capacity building are sought.
Negotiating Dynamics
In the course of proposal-by-proposal deliberations and thematic
discussions, the concerns and differences among the Members coalesced
around several issues, the most prominent being the necessity test,
and special and differential treatment.
A. Necessity Test
One of the key issues that engendered debate in the membership
was the Necessity Test. This is a test used in some WTO agreements
to ensure that measures, which are implemented to achieve a Member’s
policy objective, do not constitute unnecessary barriers to trade.
A necessity test is built into GATS Article VI:4 (b) in stipulating
that the disciplines to be developed ensure a measure may not be
“more burdensome than necessary to ensure the quality of a
service.” Article VI:5 references the language of Article
VI:4 for existing commitments, thus effectively incorporating that
article’s necessity test.
Nevertheless, there remains a great sensitivity to the use of a
necessity test based on the possible implications on the rights
of governments to regulate in the public interest. Many oppose the
inclusion of the test in the disciplines even with the recognition
in the GATS of the rights of Members to regulate in order to meet
national policy objectives. On the other hand, there are those who
actively support a necessity test as a means of ensuring that countries
do not use their licensing and qualification procedures and requirements,
and technical standards in services as disguised trade barriers
to negate commitments they have undertaken in the GATS.
Our assessment is that any negotiating text developed will have
to reflect an approach that bridges the gap between the two extremes.
As such Canada will seek to ensure that any discipline that incorporates
a test must give unquestionable recognition of a Member’s
right to regulate in order to meet all its national policy objectives
and ensure that, should a dispute ever arise, a panel will only
have the jurisdiction to assess the burdensome nature of a measure
to meet a specific objective, but will not have jurisdiction to
question the legitimacy of a policy objective.
B. Special and Differential Treatment and LDCs
Developing countries support the development of domestic regulation
disciplines and, given that the Doha Round is a development round,
they seek development-friendly provisions. Given the asymmetries
existing in respect of the development of services regulation in
different countries, there is broad recognition that flexibility
is necessary to accommodate the differences among Members. One issue
that has been the subject of discussion is whether or not least
developed countries (LDCs) should be exempted from the scope of
the disciplines. Those who argue against such an exemption propose
instead the provision of longer transition periods and technical
assistance to facilitate implementation.
Members also differed on the issue of how special and differential
treatment is to be granted to developing countries and LDCs in particular.
There are views on whether technical assistance should be given
on demand or provided on mutually agreed terms and conditions. Some
developing countries seek technical assistance directed at strengthening
their services export capacity and their participation in standards
development in international bodies. The question of just what kind
of assistance falls within the ambit of Article VI:4 needs further
review.
C. Scope of Application of Disciplines
Overall, Members seek disciplines that are horizontal in nature.
Proposed disciplines are intended to apply to all levels of government
and non-governmental bodies in the exercise of delegated authority.
These disciplines would only apply to measures that relate to licensing
and qualification requirements and procedures, as well as technical
standards. Finally, the disciplines would only apply to sectors,
sub-sectors and modes of supply where Members have taken specific
commitments. For example, in Canada’s case, these would not
apply to services such as health, public education, and social services.
Prospective Article VI:4 disciplines shall cover both the Uruguay
Round and new Doha Round commitments that Members will undertake.
Article VI:4 disciplines are intended to help ensure that any market
access commitments made by other WTO Members are not negated by
the application of their services regulations.
Chair’s Consolidated Working Paper
On the basis of the various proposals tabled and the outcome of
discussions at the WPDR, the Chair prepared his consolidated working
paper. Many Members expressed varying degrees of support for the
document, with many welcoming it as a good basis for further consultations.
However, others criticized the paper for incorporating elements,
such as the necessity test, which they did not accept. Therefore,
they were not willing to consult on the basis of the paper and sought
a negotiating text to be developed by the Chair.
As the Chair explains in his introductory note, the paper is not
a draft negotiating text. This is a working document that will be
subject to modification when Members resume their discussions. We
hope that a draft negotiating text will be developed shortly after
negotiations resume and are, therefore, using the Chair's working
paper to facilitate domestic consultations.
The current working paper covers the following elements: Objectives;
Scope of Application ; General Provisions; Definitions; Transparency;
Licensing Requirements; Licensing Procedures; Qualification Requirements;
Qualification Procedures; Technical Standards; Development; and
Institutional Provisions.
Canada’s Objectives and Interests in Article VI:4 Disciplines
GATS Article VI on Domestic regulation fully reflects Canadian
laws, policies and practices. No changes were required to implement
it at the end of the Uruguay Round. As we elaborate on these provisions,
as in the case of Article VI:4 disciplines, we will need to ensure
that they reflect Canadian laws, regulations, procedures, and practices
already in place. At the same time, we must recognize that these
disciplines may also incorporate non-binding best practice guidelines
from which we all can benefit from as we seek to improve good regulatory
practices across the membership.
In terms of the proposed disciplines, many elements are consistent
with Canada's own regulatory approach. These include proposed disciplines
on transparency, including the provision of the opportunity to comment.
Under the Government Directive on Regulating2
(will replace the 1999 Government of Canada Regulatory Policy),
the federal government is committed to create accessible, understandable,
responsive regulation through greater inclusiveness, transparency,
accountability, and public scrutiny. It requires federal departments
and agencies to identify interested and affected parties and provide
opportunities to engage in open, transparent, and balanced consultations
on the development, implementation, evaluation, and review of regulation.
This would mean providing timely feedback, as well as advising on
the outcome of consultations and priorities considered in decision-making.
Proposed disciplines on regulatory transparency are expected to
deliver many benefits to investors and exporters of services. The
disciplines are envisioned to secure greater transparency of, and
predictability in, the environment in which they operate. Regulatory
transparency constitutes a key priority for Canadian service sectors
as had been conveyed in past consultations. As a result, Canada
has consistently argued for it and will continue to push for disciplines
in this area.
Another Canadian objective is to ensure that the language of the
existing necessity test in Article VI:5 is clarified such that the
scope is clear (i.e., any test will relate only to the five types
of measures covered by Article VI:4); that any discipline which
incorporates a test gives unquestionable recognition of a Member’s
right to regulate in order to meet all its domestic policy objectives;
and that panel jurisdictions are clear.
The necessity test is not a new concept to Canada. It has been
used in other WTO agreements, such as the Agreement on Technical
Barriers to Trade (TBTA), the Agreement on Sanitary and PhytoSanitary
Measures (SPS), and the Annex on Telecommunications.
Moreover, this concept is recognized in Canada’s regulatory
policy. In the 1999 Government of Canada Regulatory Policy,
regulatory authorities are required “to ensure that information
and administrative requirements are limited to what is absolutely
necessary and that they impose the least possible cost”. This
is also reflected in the draft Government Directive on Regulating.
It would further require that in selecting the appropriate mix of
government instruments for action that departments and agencies
demonstrate that the regulatory response is designed to address
policy objectives and advance public interest, and that the regulatory
response is proportional to the degree and type of risk to Canadians
and Canada’s natural environment.
To date, Canada’s approach on the necessity test in the WPDR
has been two pronged. As a first step, a key objective has been
to ensure that the language of the existing necessity test is clarified.
Moreover, in terms of policy objectives, we support the general
reference to national policy objectives without solely focusing
on quality of service. This recognizes the fact that objectives
of relevance to other service sectors go beyond quality of service
to encompass also security, consumer safety, or environmental protection.
Should a dispute ever arise, we want to ensure a panel will only
have the jurisdiction to assess the burdensome nature of a measure
to meet a specific objective and will not have jurisdiction to question
the legitimacy of a policy objective for which the measure has been
developed. There appears to be no opposition to Canada’s position
in this regard.
As a second step, Canada is assessing through these consultations
whether each specific proposed discipline that includes a necessity
test element can be accepted in their entirety or in parts, and
on what basis.
In conclusion, it is in Canada's interest to participate in the
negotiation of these disciplines to ensure that the interests and
priorities of both Canadian regulators and service suppliers are
advanced.
For a full copy of the Guide, please contact the Department.
1. Documents related to the work of the Working
Party on Domestic Regulation are available on the WTO
website.
2. See link.
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