International Trade Business Law 2019 2020 Lecture Week 7

1.4 Schedule of Specific Commitments 1.5 Vietnam’s Commitments on Trade in Services 3... Annexes : Sector, mode, or policy-related issues i Annex on Article II Exemptions, ii Annex on

Faculty of International Trade and Business Law

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1.4 Schedule of Specific Commitments

1.5 Vietnam’s Commitments on Trade in Services

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services, resulting from the Uruguay Round of trade negotiation  All WTO Members are signatories to GATS

• Objectives of the GATS (in the Preamble):

• To establish a multilateral framework of principles and rules for trade

in services

• To expand trade under conditions of transparency and progressive liberalization

• To promote the economic growth of all trading partners and DCs

• The GATS Council is in charge of overseeing the implementation of the Agreement

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1 The text of the Agreement : the “Framework” Agreement

2 Annexes : Sector, mode, or policy-related issues

(i) Annex on Article II Exemptions, (ii) Annex on Movement of Natural Persons, (iii) Annex on Air Transport Services, (iv) Annex on Financial Services, (v) Annex on Telecommunications, (vi) Annex on Negotiations on Maritime Transport Services

3 Schedule of Specific Commitments for each WTO Member (Members’ specific commitments on national treatment and market access, and any additional commitments) and MFN Exemptions (“once-off” upon accession)

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• Distinguish b/w goods and services

• Goods are storable and the production and consumption of goods normally take place at different times # Services are not normally storable and the production and consumption of services often take place simultaneously

• Market access for goods is generally restricted by tariffs # Market access for services are mainly regulated by non-tariff barriers such as domestic regulations

• Goods are tangible # Services are intangible  Many domestic regulations focus on the service providers rather than on the services themselves (e.g in the form of licensing and qualification requirements)

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• No definition of “services” in GATS:

• WTO Members use the Services Sectoral Classification List (based on the UN Central Product Classification System - CPC ) for structuring their commitments

• In principle, GATS applies to all service sectors (“universal coverage”)

• “Trade in services”: the supply of a service through 4 possible

7 Financial services (including insurance and banking);

8 Health-related and social services;

9 Tourism and travel-related services;

10 Recreational, cultural and sporting services;

11 Transport services; and,

12 Other services not included elsewhere

 Excluded:

– (i) Services supplied in the exercise of governmental authority (supplied neither on

a commercial basis nor in competition with other suppliers, e.g social security, public service of healthcare and education)

– (ii) Measures affecting air traffic rights and directly-related services 8

any of the four modes of supply, namely:

1 Cross-Border Supply : covers service flows from the territory of one Member into the territory of another Member (e.g banking or architectural services transmitted via telecommunications or mail);

2 Consumption Abroad : refers to situations where a service consumer (e.g tourist or patient) moves into another Member's territory to obtain a service

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4 Presence of Natural Persons : consists of persons of one Member entering the territory of another Member to supply a service (e.g accountants, doctors or teachers)

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Source: WTO 11

Stt.010.Mssv.BKD002ac.email.ninhd.vT.Bg.Jy.LjvT.Bg.Jy.LjvT.Bg.Jy.LjvT.Bg.Jy.LjvT.Bg.Jy.LjvT.Bg.Jy.LjvT.Bg.Jy.LjvT.Bg.Jy.LjvT.Bg.Jy.Lj.dtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn.Stt.010.Mssv.BKD002ac.email.ninhddtt@edu.gmail.com.vn.bkc19134.hmu.edu.vn(GATS)

Source: WTO 12

• 1 Unconditional obligations : Obligations that apply to all

Members and to all services, e.g MFN principle (Article II), some

basic transparency obligations (Article III)

• 2 Conditional obligations : Obligations that only apply in those

sectors where an individual Member has undertaken specific commitments in its Schedule, e.g Market access (Art XVI),

national treatment (Art XVII), domestic regulations (Art VI)

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• 2 A Member may maintain a measure inconsistent with paragraph 1 provided that such a measure is listed in, and meets the conditions of, the Annex on Article II Exemptions

• MFN obligation applies to any measure that affects trade in services

in any sector falling under the Agreement, irrespective of whether specific commitments have been taken or not

• E.g A Member can exclude private education sector from its scope of commitments (i.e keeping the market closed to foreign service suppliers), but it cannot subsequently decide to open the market to providers from some Members but not the others

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• Exceptions to MFN:

• Annex on Art II Exemptions

• The list of exemptions must be submitted at the date of entry into force of GATS or accession of new Members

• Exemptions shall not exceed 10 years, must be reviewed every 5 years and subject to negotiations in subsequent trade rounds

• General exceptions (Art XIV) and security exceptions (Art XIV bis)

• Economic integration agreements (Art V)

• Recognition agreements (Art VII)

• Prudential Measures (Annex on Financial Services)

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1.3.2 Transparency (Art III)

• Barriers to trade in services consists in regulations at any level of legislation  WTO Members need to be informed about any change in legislation to prevent a domestic measure from undermining GATS concessions

• WTO Members must:

• Publish promptly all relevant measures of general application which pertain to or affect the operation of GATS

• Respond promptly to all requests for information from other Members

on any measure

• Establish enquiry points within 2 years from the date of entry of the WTO Agreement

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• Applications for supplying a service must be considered within a reasonable period of time (Para 3)

• Qualification requirements and procedures, licensing requirements and technical standards shall be based on objective and transparent criteria , not constitute unnecessary barriers to trade in services and, in the case of licensing criteria, not in themselves restrict trade in services (Para 4) 18

• GATS allows Members to recognize the standards, educational degrees and other qualifications obtained in another Member by an agreement or autonomously  An exemption from MFN obligation

• Such recognition is subject to the following conditions:

• Must not be exclusive , i.e other Members have opportunity to join such agreements or negotiate comparable ones

• Must not be applied as a means of discrimination b/w trading partners

or as a disguised trade restriction

• Should base on multilaterally agreed criteria

• Must be notified to Council for Trade in Services (CTS)

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• Schedule of Specific Commitments : Recording Members’ specific sectoral and modal commitments on national treatment and market access, as well as any additional commitments

• a WTO Member guarantees other Members minimum conditions of access

• GATS does NOT prescribe the sector scope or level of liberalization

 Up to each Member to decide which sector it wishes to commit, and any corresponding limitations on market access or national treatment

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 a the number of service suppliers;

 b the value of service transactions or assets;

 c the number of operations or quantity of output;

 d the number of natural persons supplying a service;

 e the type of legal entity;

 f the participation of foreign capital

• Only measures under 6 categories above are subject to scheduling E.g a high tax on a particular service may act as a barrier to entry, but is not a restriction under any category of Art XVI:2  can be applied but subject to Art VI on Domestic Regulations

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1.4.2 National Treatment (Art XVII)

• WTO Members shall accord to services and service suppliers of any other Member treatment no less favorable than that it accords to its own like services and service suppliers

• “Treatment no less favorable”: treatment which ensures that conditions of competition are not modified in favor of domestic services and service suppliers

• Like services and service suppliers: No case-law guidance

• NT applies to the sectors committed in a Member’s schedule

• No exhaustive list of discriminatory measures that are inconsistent with

NT is provided (# Market access)

• E.g NT-inconsistent measures: restrictions on foreign land ownership, tax benefits for nationals only, training requirements for foreign suppliers only

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• Members may undertake additional commitments regarding measures not falling under the MA (Art XVI) and NT (Art XVII) , e.g commitments concerning technical standards, qualifications or licensing requirements

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Sector or

sub-sector

Limitation on market access

Limitation on national treatment

Additional commitments

(1) … (2) … (3) … (4) …

Inscription of any

NT limitations for each mode of supply

(1) … (2) … (3) … (4) …

Inscription of any additional

commitments

 Bottom-up / Positive-list scheduling approach in selecting sectors/sub-sectors

 If no limitations on MA or NT (full MA and NT are granted)  Inscribe “None”

 If a Member chooses to remain free to introduce or maintain whatever limitations  Inscribe “Unbound”

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and 110 sub-sectors out of 155 (Only 8 sectors and 65 sub-sectors

in the VN-US Bilateral Trade Agreement in 2001)

• Horizontal commitments for all service sectors

• Market access (for Mode 3)

• Forms of commercial presence : (i) business co-operation contract, (ii) joint venture enterprise, (iii) 100% foreign-invested enterprise, (iv) representative office not engaging directly in profit making activities  Branches are unbound (except for some service sectors)

• Capital contribution : foreign service suppliers are allowed to buy shares in Vietnam’s enterprises (not exceed 30% of chartered capital, abolishing this ceiling 1 year after accession, unless otherwise stated in specific commitments)

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• Horizontal commitments for all service sectors

• Market access (for Mode 4)

• Intra-corporate transferees: Entry and stay in the initial period of 3 years and can be extended; At least 20% of managers are Vietnam nationals

• National treatment (for Mode 3)

• Unbound: Subsidies to improve welfare and create jobs for ethnic minorities; R & D Subsidies; Health, education, audiovisual aid Subsidies

• Once-off allowance for SOE equitization does not constitute a breach

• List of Article II (MFN) Exemptions: E.g Audiovisual services, maritime transport, sea-transport services

• Specific Commitments  See the Vietnam’s Schedule at

https://www.wto.org/english/thewto_e/acc_e/a1_vietnam_e.htm 26

2.3 Process of Dispute Settlement

2.4 Vietnam’s Participation in the WTO DSM

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2.1.1 The Dispute Settlement System from GATT to WTO 2.1.2 The Dispute Settlement Understanding

2.1.3 Jurisdiction of the WTO’s DSM

2.1.4 Access to the WTO’s DSM

2.1.5 Dispute Settlement Organs

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2.1.1 The Dispute Settlement System from GATT to WTO

• Major reforms in the WTO DSM as compared with GATT 1947

• Introduction of negative consensus;

• Speeding up of process with explicit timeframe;

• Addition of appellate review;

• Addition of compulsory surveillance for implementation of ruling

 A significantly strengthened DSM, shifting from a power-based

to a rule-based system

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• DSU provides a single mechanism applicable for all “covered agreements” , i.e all WTO agreements in Appendix 1 of the DSU (Art 1.1)

APPENDIX 1

AGREEMENTS COVERED BY THE UNDERSTANDING

(A) Agreement Establishing the World Trade Organization

(B) Multilateral Trade Agreements

Annex 1A: Multilateral Agreements on Trade in Goods Annex 1B: General Agreement on Trade in Services Annex 1C: Agreement on Trade-Related Aspects of Intellectual Property Rights Annex 2: Understanding on Rules and Procedures Governing the Settlement of Disputes

(C) Plurilateral Trade Agreements

Annex 4: Agreement on Trade in Civil Aircraft & Agreement on Government Procurement

 Note: Annex 3: Trade Policy Review Mechanism is excluded

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2.1.2 The Dispute Settlement Understanding

• Objectives and Functions:

• Providing security and predictability to the MTS (Art 3.2);

• Preserving rights and obligations of WTO Members (Art 3.2 and 19.2 DSU);

• Clarifying provisions of the WTO Agreements through interpretation (Art 3.2 DSU);

• Favoring mutually agreed solutions (Art 3.7 and 11 DSU);

• Providing detailed procedures and prompt settlement of disputes (Art 3.3, 6.1, and 20 DSU);

• Securing withdrawal of inconsistent measures (Art 3 DSU)

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• Contentious: WTO DSM is called upon to clarify WTO law in the context of a specific dispute, no authority to issue advisory opinions

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2.1.4 Access to the WTO DSM

• This is a State-to-State dispute settlement mechanism

• Access is limited to WTO member governments to participate in the system:

• As a disputing party (complainant/respondent)  A dispute may involves more than one complainant (Art 9 DSU)

• As a third party (neither complainant nor respondent, but have substantial interest in the matter)  Enjoying some rights, e.g to be heard by panels, to make written submission

• Access is not allowed directly for non-state actors: private parties,

NGOs, civil society groups  “Behind-the-scene” role & indirect

access, through, e.g submission of amicus curiae briefs

(friend-of-the-court briefs) to panels/AB

 Panels/AB have discretion to accept and consider these briefs (may or may not do so)

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2.1.5 Dispute Settlement Organs

a Dispute Settlement Body (DSB)

• Who is the DSB? The General Council of the WTO, discharging its responsibility under the DSU as the DSB, composed of all WTO members (Art IV.3 of Marrakesh Agreement)

• What are the functions of DSB?

• To establish panels

• To adopt panel and AB reports

• To supervise the implementation of rulings

• To authorize suspension of concessions and other obligations in case of non-compliance by a Member with the ruling

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a Dispute Settlement Body (DSB)

• How to make a decision in the DSB? For some key stages of dispute

settlement, by negative consensus (or reverse consensus)

• What is meant by “negative consensus”? The decision will be taken

unless there is a consensus not to adopt it

 Cf (Positive) “consensus”: The body concerned shall be deemed

to have decided by consensus on a matter submitted for its

consideration, if no Member, present at the meeting when the

decision is taken, formally objects to the proposed decision

(Footnote 1, Art IX.1, Marrakesh Agreement)

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