Trade in Services Division World Trade Organization

Plan of the presentation Article V of the GATS General trends of services PTAs Implications for multilateralism

Article V: Conditions Substantial sectoral coverage (volume of trade, number of sectors, and modes) No a priori exclusion of modes, etc. Absence or elimination of substantially all discrimination in the sense of Article XVII (national treatment) Should facilitate trade among parties and not raise overall barriers vis-à-vis other Members If GATS specific commitments are affected, renegotiation according to Article XXI is required 3

Article V: Flexibility Elimination of discrimination can be achieved over a reasonable timeframe Conditions are relaxed if developing countries are parties to the agreement Consideration may be given to the relationship with a wider process of economic integration However: No discrimination against established suppliers (juridical persons) of third countries, except for agreements among developing countries

Services PTAs are proliferating 11 WTO Members involved in services PTAs before 2000. More than 100 now. 5 services PTAs notified before 2000, more than 20 times that since 2000. By the end of 2013, 131 services PTAs notified (including 21 EU enlargement agreements). Still a small fraction of all PTAs notified, but common feature of PTAs involving developed countries Regional imbalance in participation to services PTAs

Notification of services PTAs 20 18 16 14 12 10 8 6 4 2 0 1995 1996 1997 1998-2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

General Trends Most important trading Members are involved in this web, although no agreements link them Most top exporters/importers of services are involved. Main demandeurs in WTO negotiations all involved. Also, services PTAs cover most WTO Members targeted by plurilateral requests

Services PTAs as part of all PTAs Goods only Services

Level of Development of Parties to Services PTAs 38% 13% 49% North-North North-South South-South 49%

Proliferation of services PTAs since mid-1990s Services PTAs in force in total (Art. V GATS): 2000 = 4 2005 = 31 2010 = 79 2012 = 103 (Excluding EC Treaty and subsequent enlargements)

RTA: a complex alternative: the spaghetti bowl EFTA Canada EU United States Mexico DR-CAFTA CACM CARICOM MERCOSUR Morocco Cameroon Turkey Israel Jordan India China Brunei Singapore Korea Chinese Taipei Japan ASEAN Peru ESA Chile SACU South Africa Australia New Zealand Transpacific SEP NAFTA EUROPEAN UNION EFTA PAFTA ECOWAS EAC SAFTA CACM CARICOM CEFTA GCC CEMAC SADC ASEAN CAN MERCOSUR CIS WAEMU COMESA SACU PICTA

Western Hemisphere Intra and Cross-Regional RTA network (notified and in force ~ March 2013) Jordan Bahrain Oman Morocco Australia Israel Singapore CAFTA-DR Central America CARIFORUM Japan Turkey China Chinese Taipei Rep. of Korea Malaysia India NAFTA CACM CARICOM CAN MERCOSUR Singapore New Zealand Brunei

Asia Pacific Intra and Cross-Regional RTA network (notified and in force ~ March 2013) Mexico Switzerland Macao, China United States MERCOSUR Nicaragua ASEAN El Salvador PICTA Honduras Singapore PATCRA MSG Panama SPARTECA Jordan Chile Peru South Asian Free Trade Area ASEAN Free Trade Area Pacific Islands Countries Trade Agreement (PICTA) Brunei, Chile, New Zealand & Singapore CER Costa Rica Guatemala Asia-Pacific Trade Agreement

Features of Services PTAs Part of comprehensive PTAs; Standard feature of PTAs involving developed economies Broad commonality among different PTAs, and vis-à-vis the GATS: scope, general provisions, exceptions... No major developments in rules, with some exceptions, re: DR and Transparency Main difference relates to architecture and modalities: Separate chapters on Financial, Telecoms, Business Persons, GP Initially: GATS Model (positive list) vs. NAFTA model (negative list)

Motivations for Services PTAs Regional Integration Part of trade-offs for preferential access in goods Attract foreign investment Expand export bases Security of access for services exporters Encourage and consolidate domestic reforms Political considerations

Assessing Commitments in Services PTAs Purpose of the research: Assess liberalization commitments in recent PTAs and compare them with achievements under GATS and the DDA. Provide a basis for analysing trends and implications, and open avenues for future research on causes and effects of services PTA commitments. (A study by Roy and Marchetti of the WTO in 2007 and updated in 2011)

Data and Methodology Analysis of market access and national treatment commitments of 53 Members (EU as one) in 67 PTAs Focus on Modes 1 and 3 Comparison between a Member s GATS commitments, DDA offer, and various PTA commitments, per mode of supply and per subsector. (A study by Roy and Marchetti of the WTO in 2007 and updated in 2011)

Data and Methodology Two basic approaches used: 1)Proportion of sub-sectors newly committed or improved. 2)An Hoekman-type index of GATS+ commitments in PTAs. Starting Point: Score of 1 for full commitments Score of 0.5 for partial commitments Score of 0 for no commitment (A study by Roy and Marchetti of the WTO in 2008 and updated in 2011)

Key Trends: Sectoral Coverage Source: Roy (2011), updated from Roy, Marchetti and Lim (2007)

Mode 1: New and Improved Sub-sectors

Mode 3: New and Improved Subsectors

Index: Variations across Agreements Source: Roy (2011), updated from Marchetti and Roy (2008) on the basis of expanded dataset.

Index: Overall Trends Source: Roy (2011), updated from Marchetti and Roy (2008) on the basis of expanded dataset.

Index: Regional Trends 100 90 80 70 60 50 40 30 20 10 0 Total Mode 1 Mode 3 Total Mode 1 Mode 3 Total Mode 1 Mode 3 All Members Asia - Pacific Members Latin American Members GATS PTA Source: Roy (2011), updated from Marchetti and Roy (2008) on the basis of expanded dataset.

Index: Sectoral Trends Source: Roy (2011), updated from Marchetti and Roy (2008) on the basis of expanded dataset.

PTAs: How Much Further than the GATS? Overall PTA commitments tend to go significantly beyond GATS offers For either M1 or M3, average score achieved by PTAs is more than twice that of existing GATS commitments Value-added of GATS offers pales in comparison with PTA advances Unequal results across Members

How Much Further than the GATS? Those that have made the most important GATS+ commitments in RTAs had also modest DDA offers? Value-added of PTA commitments is fairly widespread across sector groupings PTA advances tend to be relatively more modest in sectors that are more difficult at the multilateral level.

Real liberalization in selected sectors Some examples Country Sector Liberalization commitment Australia Insurance Branching in life insurance Bahrain Construction Local presence requirement to be lifted China Professional Will allow wholly owned operations in architectural, engineering, integrated engineering, and urban planning and landscape architectural services Colombia Audiovisual Will reduce quotas for broadcasting of locallyproduced TV programs from 50% to 30% Costa Rica Telecom Full liberalization by 2007 Oman Distribution Full foreign ownership of retail enterprises worth more than $1 million Singapore Legal Existing Singaporean laws to be modified so as to relax conditions under which US law firms are permitted to provide legal services. Thailand Tourism, education & maritime transport Will allow 60% Australian ownership in major restaurants or hotels, some tertiary education services,

Determinants of PTA Advances What are the most important factors that decide the levels of PTA commitments? Reciprocity? Economic importance of trading partners? Liberalization modalities? (political considerations)?

What are the implications of PTA negotiations for parties? Enhanced negotiating capacity and built up expertise? Generated useful policy lessons? Offered opportunities to pursue, deepen or lock in some of the policy reforms?

What are the implications for multilateralism? Negative Political Economy Implications? PTA negotiations diverting resources from Doha negotiations? Creation of vested interests opposing multilateral liberalization? PTA providing an incentive to hold back in multilateral negotiations? Success of big trading partners in PTAs reducing their ambition in multilateral negotiations? Losing leverage to deal with key issues in Doha?

How to navigate the spaghetti bowl:

http://i-tip.wto.org/services/

Services PTAs by Asian Economies Some findings of a study of 25 services PTAs involving Asian economies by the World Bank: The approach towards scheduling commitments matters less than commonly thought; Dual coverage of investment in services can streamline disciplines but also undermine their transparency and credibility; Rules of origin are mostly liberal, with some notable deviations; Limited progress in areas of rule-making that remain unresolved multilaterally; Liberalization outcome is mixed. (Fink & Molinuevo: East Asia FTAs in Services, World Bank, 2007)

Notified services PTAs involving Asian economies until end of 2013 Singapore: 16 Japan: 12 China: 9 Malaysia: 8 Thailand: 6 Brunei: 5 Chinese Taipei: 5 India: 4 Philippines: 4 Vietnam: 4 Cambodia: 3 Myanmar: 3 Pakistan: 2 Hong Kong: 2 Macao: 1