Panel II B: General agreement on trade in services (GATS): Presentation summary and comments

Peter Collins: Collins began by noting that the services sector is typically undervalued in terms of its contribution to the U.S. economy. The United States is, by far, the largest exporter of services with $246 million in annual private sector exports. The services sector supports four million jobs across both services and manufacturing industries. This, Collins noted, explains the strong interest in creating GATS on the part of the United States.

Collins believes that the good news with respect to GATS is that there is an upward trend in regard to what has been done with the agreement itself The first five years of its existence have primarily involved unfinished business in sectoral negotiations, the framework agreement, and the addition of new members to GATS.

Sectorally, Collins pointed to negotiations in financial services and telecommunications, maritime issues, and the movement of natural persons as examples of negotiating accomplishments during the first five years. Each of the negotiations made progress and set encouraging precedents for subsequent negotiations.

Collins noted that the GATS drafters did not address three issues in the framework agreement: safeguards, subsidies, and procurement. For the past five years, there has been substantial thinking about GATS provisions addressed to these issues. Collins opined that since there has been little progress on development of such provisions, perhaps there is not a strong need for them.

Collins stated that solid progress has been made on GATS Article VI, which addresses domestic regulation. He noted that Article VI plays an important role in promoting the rule of law and due process. The focus in discussions concerning Article VI have been on issues of transparency, necessity (whether benchmarks can be established to demonstrate that regulations are more burdensome than necessary), and competitive safeguards or pro-competitive regulatory principles. Collins stated that the U.S. position is that the competitive safeguards approach is appropriate for network-based sectors but not all sectors generally.

Although transparency issues are addressed in GATS Article III, they are also discussed under Article VI as part of member countries' attempts to make the agreement function in a practical context. In other words, countries seek to ensure that the GATS structure does not stand in the way of rules that benefit consumers and producers. Collins also noted that transparency is not just an important issue for developed countries. For example, ASEAN nations and Pakistan have also cited transparency as a concern during discussions.

Collins noted that there is much room for improvement and that the United States would like to raise the services provisions at least to the level of the provisions on goods contained in the GATT He echoed Ambassador Lang's comments regarding the committee approach, noting that it has been adopted in the context of GATS negotiations. Collins stated that the disciplines in the GATS evolved through a committee approach; for example, in the clarification of definitions under the agreement and in attempts to clean up the wording and phrasing of the schedules. The key is to build on successes where countries have taken on commitments without the traditional quid pro quo, and to promote this trend in new sectors that increasing numbers of countries care about such as tourism, transportation, and audiovisual.

In conclusion, Collins noted that the record represents (1) a successful normalization of the role of trade in services as an international trade issue, (2) some movement away from GATS being merely a developed country issue, and (3) a positive performance in terms of ratcheting up the level of concessions offered by member countries.

QUESTION AND ANSWER SUMMARY: The panel was asked to discuss some specific things that need to happen in order for the Council on Trade in Services to take charge of the GATS agreement. Lang responded that the Council is already legally capable of addressing the GATS agreement. The steps that need to be taken involve developing a consensus on where the United States wants to go and what it wants to achieve, and then deploying U.S. government resources to achieve those goals. Increasingly, the most effective use of those resources is to build a consensus with other countries through the Council system. Lang believed this to be consistent with an organization that has legal personality because it can decide to act whenever it wants.

Collins agreed, stating that the committee system is designed to address the core issues, including one sectoral body. Collins stated that at some point, the United States will want additional sectoral bodies. Coming out of Seattle, other countries have identified sectors that are of interest to them, and the United States should pick up from that and help countries that do not have the requisite resources to develop those issues.

The panel was then asked to comment on pro-competitive regulatory issues. Lang believed that the best example was in telecommunications. He stated that in most countries at the time the GATS Agreement was negotiated, the telecommunications network was a monopoly. In order to ensure that competition with the installed monopoly actually occurred, it was necessary to include a kind of affirmative action for new entrants. Lang found it interesting that Collins mentioned the possibility of extending this idea to other sectors, for example extending Article VIII, and believed it to be an issue in small-package delivery. Lang also stated that there are legitimate domestic policy issues that need to be taken care of; for example, making sure people get necessary health care when addressing the insurance industry.

Lang stated that another important point is that there is another player in the system: the EU wants to extend the agreement to competition law. Lang stated that, for whatever the reasons, there is no real connection to issues arising in competition law and pro-competitive regulatory principles. Pro-competitive regulatory principles are about making principles operate in a way that promotes competition rather than command and control of an economy. Competition law is a much broader area. An agreement on competition law is much farther away in the future and little work has been done towards building a consensus on that. Lang believed, however, that if the relevant authorities were to be brought along, then there would be room to move forward and these principles might be extended to new areas.

JEFF LANG,* CHARLES D. LAKE, III,** AND PETER COLLINS

* In lieu of Mr. Lang comments, please see his paper, The First Five Years of the WTO: General Agreement on Trade in Services, published in this issue.

** In lieu of Mr. Lake's comments, please see his paper, Comments Regarding the General Agreement on Trade in Services (GATS), published in this issue.

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