GATS and Domestic Regulation Disciplines and Sustainable Development: Principles and Operational Concepts: The Challenges

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The World Trade Organisation (WTO) was established on 1 January 1995 following the Ministerial Meeting at Marrakech in April 1994. The General Agreement on Trade in Services (GATS) is one of the thirty multilateral agreements which form part of the WTO. The Council for Trade in Services (CTS) was established1 “to facilitate the operation” of the GATS and to create and organise subsidiary bodies as appropriate, one of which was the Working Party on Professional Services (WPPS).

The task of the WPPS was to develop disciplines for the accounting sector in accordance with the mandate of paragraph 4 of GATS Article VI on Domestic Regulation. In May 1997 the CTS approved the “Guidelines for Mutual Recognition Agreements or Arrangements in the Accountancy Sector” prepared by the WPPS and in December 1998, adopted the “Disciplines on Domestic Regulation in the Accountancy Sector”. The accountancy disciplines are due to become binding at the conclusion of the Doha Development Agenda for countries which have undertaken specific commitments in the accounting sector.

Subsequently, in April 1999, the CTS formed the Working Party on Domestic Regulation (WPDR) with the broad remit of developing disciplines as mandated under GATS Article VI:4. The WPPS was wound up, and the WPDR was entrusted with the work of the WPPS on the development of disciplines for professional services. Under its mandate, the WPDR is to develop generally applicable disciplines, and as appropriate, disciplines for individual sectors or groups of sectors. The WPDR, in particular is asked to “develop necessary disciplines” to ensure that “measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services.”

As part of the exercise, Members were invited by the WPDR to indicate whether the accountancy disciplines could be developed so as to apply to other regulated professions. In a way, the construct of these disciplines has influenced their thinking on the wider remit of developing disciplines on government measures covering all services sectors. The VI:4 mandate leaves it open as to whether the resulting disciplines apply generally to all measures affecting trade in services, as does much of the GATS itself, or just to measures related to sectors which Members have inscribed in their schedules of specific commitments. Pending the adoption of the VI:4 disciplines, there is the provision in VI:5 that where a Member has undertaken specific commitments it “shall not apply licensing and qualification requirements and technical standards that nullify or impair such specific commitments” in a manner which does not comply with criteria set out in VI:4 and “could not reasonably have been expected” when the specific commitments were made.

The WPDR has considered an extensive range of material submitted by Members and requested from the WTO Secretariat, including on relevant legal aspects of other WTO agreements. In an effort to focus this long debate, in May 2003, Japan submitted a draft of a GATS Annex on Domestic Regulation forming a complete set of disciplines under the VI:4 mandate, and to apply to specific commitments only. It is largely based on the accountancy disciplines, supplemented by elements from other relevant agreements. Since then other Members have tabled drafts, both of complete annexes, and certain aspects such as licensing procedures and technical standards. This study includes a survey of the main material tabled at the WPDR and attempts an analysis of the various possible elements that the disciplines may include, based on the illustrative list attached to the report of the Chairman of the WPDR to the Special Session of the Council for Trade in Services on 15 November 2005, contained in document JOB(05)/280.

The first Chapter describes the principal GATS articles, noting their relationship to VI:4 and the likely issues arising. Chapter 2 summarises the key principles embodied in the GATS legal framework and the concepts applied when assessing how the principles are put into effect by conditioning legal measures controlling commercial activities. Chapter 3 describes the key concerns of developing countries that they propose should be taken into account when drafting the legal language so that their sustainable development is not compromised. Chapter 4 addresses the issues arising for the Mode 4 form of supply through the temporary movement of natural persons, which developing countries have set as a priority. Chapter 5 describes the elements for the development of VI:4 disciplines and the logic for their formulation, while Chapter 6 considers what the sequence and timing of the negotiations on VI:4 could be. Finally full language for the VI:4 disciplines is proposed in Chapter 7, taking account of the need for clear legal definitions that respect the sovereign rights of Members to regulate their domestic affairs.
The Annexes include the full wording of the GATS Articles on Domestic Regulation and Recognition, the mandate of the WPDR and the Accountancy Disciplines. There is also an overview of the proposals for the disciplines tabled by WTO Members, together with significant observations on the key principles and issues provided by the WTO Secretariat.

This paper is not a legal treatise and aims to avoid legalese so as to provide a commentary that is understandable by practitioners, NGOs and the general public as well as attempting to be technically accurate so that the negotiators, regulators and academics can find it a useful reference.