TWN Info Service on WTO and Trade Issues (Dec09/17)
29 December 2009
Third World Network

GATS domestic regulation talks unripe for a new text
Published in SUNS #6840 dated 22 December 2009

Geneva, 21 Dec (Riaz K Tayob) -- The Chairman of the GATS Working Party on  Domestic Regulation (WPDR), Ms Misako Takahashi of Japan, has said that it  was not yet time for her to issue a new text for negotiations, and that  she would hold bilateral consultations with WTO members.

This emerged at informal consultations held last week on 14-15 December.  The decision by the Chair came despite demands from several Members  including Australia and Chile for a new text. The Chair said that she did  not deny the possibility of a new text, but added that it was not the time  for one at this stage.

The next session of the Working Party, scheduled for 10 February 2010,  could discuss whether the talks have matured enough to move to a new draft  text. The Chair also said that it was not a good idea to present a new artificial schedule for the work of the Working Party.

The Chair had proposed in an annotated agenda (Room Document dated 8  December) that the informal consultations to be held on 14 December (which  was extended to 15 December) discuss General Provisions (Chapter III),  Transparency (Chapter IV) and Institutional Provisions (Chapter XI) of the  20 March 2009 text prepared by the previous Chair of the WPDR, Peter  Govindasamy of Singapore (also known as Peter's text).

The agenda also included follow-up comments on previous discussions  contained in Definitions (Chapter II), Technical Standards (Chapter IX),  Development (Chapter X), and future work of the Working Party. The 14-15  December consultations also considered the new proposal (Room Document,  dated 10 November 2009) tabled by Switzerland and co-sponsored by  Australia, Chile, Colombia, Hong Kong -China, Republic of Korea and New  Zealand at the previous informal meeting of the WPDR on 11 November. (See  SUNS #6816 dated 17 November 2009).

Speaking to SUNS after the meeting, some developing country trade  diplomats related their understanding of what was discussed at the meeting  on 14 and 15 December. There were discussions on a Job Document titled  "Questions on  Disguised Restrictions on Trade in Services' in Relation to  the GATS Negotiations on Domestic Regulation" (Job(00)/182, a  communication from China, Pakistan and Switzerland dated 10 December 2009), which raised issues over the term "Disguised Restrictions on  Trade", which is used in Peter's text to discipline domestic regulations.

According to trade diplomats, discussions focussed on what it means for  Members to ensure that domestic regulations do not constitute disguised  restrictions on trade (paragraph 2 of Peter's text). Brazil said that  there is an important relationship between trade policy and sectoral  policy and a balance needs to be sought between trade and sectoral  policies in order for countries to meet their national policy objectives.

According to trade diplomats, the US said that there is a problem between  national treatment and domestic regulation and a deeper discussion was  needed. Japan agreed with the US. It said that the necessity test was  already given in the mandate on domestic regulations, but it had a  flexible position on this.

Chile said that the necessity test, or whatever it is called, should be in  the operative part of the text. It said the concept of disguised measures  is not the best concept, and the necessity test should be used. China said  that there was need to know what is talked about when "disguised measures  related to domestic regulation" are mentioned.

India said that disguised restriction on trade is like a necessity test  and should be incorporated into the body of the text. It said there is  need to structure the necessity test in a suitable way for everyone.

Canada said that it does not have issues with disguised measures on trade,  but wanted to see how it was interpreted in other texts of the WTO. It  suggested that the Secretariat prepare a note, intended as a reference and  not to follow those ideas.

Bolivia asked about general exceptions in the GATS and also for clarity on  whether it is presumed that proposed disciplines apply only to measures  that are discriminatory or that impose limits on market access. The  Philippines said that Peter's text had reached a balance or equilibrium  and that it would be difficult to change elements because this could  create imbalances.

Responding to some of the issues raised, Switzerland said that the GATS  articles including Article 14 exceptions are related to most favoured  nation provisions. However, it recognised the concerns raised by Bolivia  as it related to national treatment and market access in the scope of  application of the disciplines. It added that disciplines in the Chair's  document are not in the scope of national treatment and relevant measures.

According to trade diplomats, during the discussions on Peter's text,  Brazil said that the section titled "Introduction" should be shifted to be  a preamble. It said that it preferred to have a provision in paragraph 2  that guaranteed the right to regulate with the goal to reach public policy  objectives. Argentina supported Brazil's proposal on the right to  regulate. Indonesia said that the right to regulate should be stated  clearly in the text.

Australia preferred that the introduction in Peter's text be changed to a  preamble, which could be used like objectives. It added that Chapter 3  also has objectives and this could be added to the mix.

Barbados, for the Small and Vulnerable Economies (SVEs), said that the  right to regulate should be both in the preamble and in the text, as it  helps developing countries.

The US said that the right to regulate emerges from sovereignty. There is  no need to have a positive statement to include the right to regulate. It  said that if many countries want it, it could be flexible and accept it.  Chile and Switzerland presented a similar view to the US. The EC said that  there was no need to put the right to regulate into the agreement, as it  is inherent to the nature of the state. Singapore supported retaining the  reference to the right to regulate.

Brazil asked for clarity on the judicial relevance of the preamble. The  Secretariat said that the preamble informs two things, the purpose and  object of the agreement and the context of the agreement. The preamble  does not have judicial mandatory obligations.

Discussions moved on to Paragraph 4 of the Introduction, which relates to  recognising the difficulties that Members would have in complying with the  disciplines in other countries. The second sentence of paragraph 4 makes  reference to all Members but also specifically mentions service suppliers  from developing countries.

According to trade diplomats, the EC said that the second sentence should  be removed, or there should be a broader concept, as the problems exist  not only for developing countries but also for developed countries.

In response, Argentina and India said that the current language implies  both developed and developing countries. Barbados, for the SVEs, supported  retaining the paragraph "as is".

The US referred to the issues it had on the scope of the disciplines. It  had some problems related to the objectives of the disciplines on national  policy and sub-national policy. It has two types of jurisdictions and in  many instances, laws and regulations coming from sub-national levels have  the same validity and should be recognised as federal law.

After these discussions, the Chair provided her summary, stating that the  Job Document from China, Pakistan and Switzerland on disguised  restrictions on trade had some ambiguities. She added that it could be  useful for other Members to understand the real meaning of disguised  measures.

Also, there is still a lack of clarity or a need for a common  understanding of the national and sub-national issues, which needed more  discussion. It was also agreed that paragraph 4 covers both developed and  developing countries, she said.

Australia said that there is need to keep working on all issues and enough  work had been done to move to new texts. The new text could have brackets  with some proposals that have less consensus. This was supported by  Switzerland, which said that the various proposals should be attributed  (to proponents) in the text.

Chile said that the discussions were mature enough for a new draft text.  It said that it regarded Peter's text as un-balanced, and that it should  be changed to gather all Members' positions.

The EC felt that the discussions were not mature enough for a new draft.  It proposed a small grouping to negotiate with the Chair on some specific  points of the text. Japan supported the proposal by the EC to have an  annotated text, but not a new draft.

Cuba opposed having small-group negotiations. India supported a new text  with brackets. Barbados, for the SVEs, said that the Working Party can  still have more discussions and that developing another text would be  alright. The US said that there is no need for an annotated text as  proposed by the EC . It still wanted to work on Peter's text. It did not  agree that a small group negotiates with the Chair, as it could not be  productive at this time.

The Chair summarised some of the discussions. She said that it was not a  good idea to present a new artificial schedule. She supported the idea of  having an annotated agenda to check (and report on) the progress made. For  the next session, on 10 February 2010, the Working Party could discuss  whether there is enough maturity to move to a new draft. The Chair had no  intention to develop a new text at this stage and would wait for a little  more work to be done.

Supporting a new text, Australia expressed its disappointment. The Chair  said that she did not deny the possibility of having a new text in a new  form, but that it was not the time for it at this stage. She had to find  more signals from countries, which reflect more clearly  the consensus and  divergences.

Discussions were also held on General Provisions (Chapter III),  Transparency (Chapter IV) and Institutional Provisions (Chapter XI) of  Peter's text. Under General Provisions, paragraph 10 reads, 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. They do not apply to measures to the extent  that they constitute limitations subject to scheduling under Article XVI  or XVII.

China asked that "to the extent" be replaced by "which". According to  trade diplomats, Argentina said that in paragraph 10, there is a part  which covers domestic regulation and another that covers the (specific)  commitments undertaken by countries, and there is lack of clarity  regarding the right to regulate. The US had similar concerns as Argentina.  Chile said that the necessity test, whichever shape it takes, should be in  this part of the text, i.e. Chapter 3.

Discussions were also held on the Swiss proposal of 10 November. According  to trade diplomats, the US expressed some concerns and made some inputs  regarding the 10 November version of the proposal (including paragraphs 1,  4, 5, 8 and 9). It said that in some areas, there is confusion and that  the proponents don't have a clear idea. Many concepts are changed and that  there are new issues emerging from this mix. There was need for more  discussion.

In concluding, Chair said that she did not know if she would prepare another annotated agenda. In the next Working Party session, the  Development chapter (X) would be discussed. Australia asked the Chair what  work will be done to move forward, and whether its proposal would be considered.

The Chair said that she did not know how to proceed. Members would have to  wait until the next session to discuss if a new draft is needed. She added  that some issues have lacked time for discussion like the Development  chapter.

Chile inquired whether more intensive work will be done preceding the next  session, and suggested work in small groupings. The Chair said that she  will discuss issues with all countries, but that maybe she could have some  discussions with some countries to clarify some points. +