General agreement on the trade of the services

The General agreement on the trade of the services ( AGCS , or GATS in English for General Agreement one Trade in Services ) constitutes the appendix 1B Accord of Marrakech instituting the World Trade organization (OMC) in 1994. It is a question of a multilateral agreement of liberalization of the exchanges of services, supposed of bringing a more effective use of the means of production by supporting employment where each Member State has a comparative Avantage.

Origins

In 1994, OMC replaces the General Agreement on Tariffs and Trade (or GATT for the English acronym of General Agreement one Trade and Tariffs ) of 1947, which is integrated to him (appendix 1A). At the time of the cycle of negotiation of Uruguay ( Uruguay round ) between 1986 and 1994, prelude to the recasting of GATT, the countries contracting decide to integrate into the negotiations a more specific agreement on the services, the AGCS, as another dedicated to the Aspects of the intellectual property laws which touch with the trade (ADPIC). Since its coming into effect on January 1st 1995, the founding document of OMC thus relates to from now on 3 sectors: the Goods S (begun again GATT, appendix 1A), the services (appendix 1B), and the Intellectual property (appendix 1C). In 2005, OMC counted 148 members, who are thus contracting parties with each agreement stated above and whose original text is deposited with the head office of OMC, with Geneva.

During very a long time, the integration of the services in the trade agreements was not regarded as essential, for the good reason that those were seen like mainly domestic activities, of which it is difficult to make a transborder trade (for example a Coiffeur). Certain sectors, the such rail or the Telecommunications, were, by the cost and the importance of their infrastructures, recently still seen like natural monopolies of the State. Lastly, a third service type like education, health and the social coverage basic, in the same way are regarded by the majority of the companies as exclusive field of the State, for obvious reasons of regional and social cohesion, and justify a strict regulation vis-a-vis the roughness of the markets.

Other service types, in particular international finance and the maritime transport, are however opened with competition since sometimes of the centuries and form a natural complement with the trade of the goods. Certain sectors in addition underwent deep economic and/or lawful transformations in the last decades, opening with the private participations and calling into question the relevance of some Monopole S (télécoms constituting in this field an academic case). The arrival of Internet (which gives access to a large range of online services) and in a more general way the advent of a company Post-industrialist it in the Pays developed S.A. also contributed to change gives it. Today, it is estimated that a quarter of the International business relates to services (figure which does not take into account the services exchanged in the domestic markets - e.g. the hairdresser).

After the conclusion of the agreement of Marrakech, it was decided to wait 5 years before taking again the negotiations on the deepening of the adopted agreements. The Cycle of Doha officially began in November 2001, after the 4th interdepartmental conference which was taken place in the capital of the Qatar. This cycle aims at discussing the progressive opening of the national markets, in particular as regards services.

Initially envisaged to finish on January 1st, 2005, the negotiations were prolonged on several occasions fault of agreement between the parts for finally finishing on an acknowledgment of failure after a last meeting in Geneva the July 24th 2006.

Operation

The agreement and the negotiations which carry out to it are based on an approach based on demands and supplies: each part produces a list of engagements sectors which it is committed liberalizing, as well as a list of requests communicated to each other country and where it indicates the sectors that it would like to see those liberalizing in their turn. So practically all the service types are negotiable, a country can as consider as certain sectors must remain a protected national field and can thus not include them in its list of engagements.

Structure of the Agreement

The preamble contains general considerations on the motivations of this Agreement: it is a question of supporting the economic growth by developing the trade of services with the international level, while integrating the countries in the process of development into the process, but in a their grateful certain margin of protection “in order to meet aims of national policy”.

The Agreement itself includes/understands 28 articles, plus a 29e containing appendices equal length to the remainder of the text. The articles are gathered in 6 parts:

Range and definition of the Agreement (article 1)

The article first intends to define which types of supply of services are aimed by the Agreement. It describes 4 vast categories (also called modes), which indicate the various types of negotiation and national legislations which will be affected (Article 1.2):

  1. transborder services, where only the service crosses the border (e.g. a translation service on line);
  2. consumption abroad (e.g.: tourism, or the repair of a vehicle abroad);
  3. the commercial presence abroad (e.g.: establishment of a branch);
  4. the commercial presence representatives of the country of origin (that concerns especially the expatriates - migrant worker is not covered by the Agreement, since they are not attached to a company in their country of origin).

The services being the subject of these negotiations can cover one or more with these modes.

Lastly, the article specifies that the services “provided in the exercise of the governmental capacity are not included”, i.e. the services with noncommercial goal and who are not in competition with other service providers. In a strict sense term, that relates to the fields Régalien S of the State (armed, police force, justice, etc). See low: services concerned.

General obligations

This part (Article 2 to 15), by far longest, relates to the rules of bases which apply to all the members and, except exceptions, with all the services. A certain number of articles indicate that other negotiations will have to be open or carried out to regulate the possible problems of distortion (government contracts (Article 13), subsidies (Article 15)) : these relatively vague indications betray the fact that the Agreement was signed whereas the cycle of Uruguay touched at its end - certain provisions thus treat only orientation desired, without returning in the details.

The provision-keys of GATT are taken again here, in particular the Clause of the most favoured nation (Article 2, to see also low). This provision indicates that a country signatory cannot grant less privileges to a country than it already granted some to another (equal treatment).

Another important point: obligation of transparency (Article 3) which requires of the contracting States to diffuse most quickly and most largely possible all modifications of the law which would affect the operation of a trade (e.g. reinforcement of the rules of hygiene or a new requirement as regards diplomas), so that all the companies can get informed about the conditions of exercise and the procedures of recording in a given country (this condition being constraining for the developed countries but not for the countries in the process of development). In the same way, the States are invited to set up commissions aiming at facilitating the mutual recognition of the titles and diplomas (Article 7), preferably by the means of international standards (as for the chartered accountants, for example).

Article 8 evokes the situation of a monopoly sheltered by a Member - two important situations are indirectly evoked:

  • a government enterprise of monopoly cannot rest on this one to enter in competition with other companies on other markets. For example, EDF cannot make dumping on the market prices of electricity Italy N by compensating for its losses by its situation of monopoly in France.
  • the Nationalization of a sector or, more often, the simple sudden restriction of access for the foreign companies (by the means of import taxes, for example): although always possible for a country, it must however be the subject the communication of preliminary to the partners, and a corresponding compensation will be negotiated between the parts (by the imposition of equivalent taxes at the other part for example). This provision aims at avoiding the distortions of competition, where a country would reconsider its engagements while benefitting unduly from the overseas markets remained open.

A situation of exception is evoked all the same in article 12, where States whose Balance of the payments is abnormally unbalanced can temporarily restrict the access to the trade of the services, without going “beyond the necessary one” and until what the situation is restored. This provision is addressed primarily to the countries in the process of development, which need a minimal level of reserves to ensure their development plan or transition. These restrictions will be periodically examined by a committee of OMC.

Outstanding innovation compared to GATT: the Members recognize with the article 9 qu ' a service provider could have “certain business practices” being able to limit competition. Within the framework of this situation “to the Microsoft”, the Members agree to consult each other and cooperate so as to correct this distortion.

Technical parts

The other parts ( specific Engagements (Article 16 to 18), progressive Liberalization (Article 19 to 21), institutional Dispositions (Article 22 to 26) and final (Article 27 to 29) are primarily technical and pose two principles of operation:
  • the possible conflicts must be regulated in front of the Organe of settlement of the disputes (Article 22-23), which functions already for the conflicts within the framework of GATT.
  • article 27 makes it possible a member of OMC to refuse to grant the advantages negotiated to a country non-member.

Services concerned

As indicated in the article first of the Agreement, one understands by service “all the services of all the sectors except for the abundant services in the exercise of the governmental capacity”. The choice is vast, since on a world scale there exist many examples of services depending from the state monopoly in a country which are entrusted at private companies in other countries (the supply of Eau is primarily private in France, while with the Denmark they are the management of the fire protection organizations and Suisse the Health insurance which is entrusted to independent companies). A precise list of the 12 sectors and 155 under-sectors potentially concerned can be found here. It should however be noted that liberalization supplements each sector is not obligatory : each country decides service type which will be included - or not on its list of engagements (see low the section Négociations ).

Public services: concerned or not?

The key question lies in the interpretation of the article 1 al. 3 litt. are b: of the sectors like education and health services “provided in the exercise of the governmental capacity” (such as the army or justice, as higher indicated) or fall within the framework from the AGCS? Criticisms of the Agreement make the point that the letter (c) of the same paragraph specifies as by “abundant service in the exercise of the governmental capacity understands any service which is provided neither on a commercial basis, nor in competition with one or more service providers” . And, indeed, rare are the entirely integrated sectors and where no form of coexistence already exists between governmental services and private (between health insurance and mutual insurance companies, for example).

The problem, complex, tackles several fundamental questions, to start with the exact definition of a public service: is it about a service which must be brought to all, and must it be provided obligatorily by the State (the télécoms are an example of public service ensured by the private one)? Does a “commercial base” correspond to the simple sale of a service (but then quid of the payment of an all-in price for a hospitalization, bench in order to responsabiliser users?), or with its sale for a profit (that to make if a public service releases “accidentally” a profit, as a supplier of energy when the winter is particularly rigorous?).

It is not in the matter of this article to answer these questions. One can however evoke a report/ratio of July 2005 published by OMC: this one concludes that, so almost all the service types can in one way or another be in the final analysis included in the framework of the ACGS, wisest for the contracting countries concerned not to politically take risks on questions and socially dubious will be quite simply… not to register the services concerned on their lists of engagement, in which case they will not be covered by the Agreement.

The principle of the most favoured nation

Principle

The application of the treatment of the most favoured nation (or NPF - Article 2) is not, as its name could indicate it, an indication of privileged mode: on the contrary, it imposes a concept of equity of treatment between the parts. This clause aims primarily the tariff barriers and the freedom of investment.

In substance, it is about an agreement between two (or several) nations according to which the parts begin to grant to their partner the same commercial advantages granted to a third party. No partner can thus be treated more badly than another (it can however be better treated compared to thirds not signatories of such an agreement). This treatment of favor is thus not a treatment of reciprocity , since the extension of a particular privilege is not done only with another country which turns over the same advantage, but with all the signatories of an agreement of treatment of the most favoured nation.

As example, if a country has imposes 100% of customs duties and a country B requires only 10%, and that these two countries sign an agreement NPF, the two parts can in theory keep the same rates one towards the other (it is nevertheless more probable than their respective rates are much closer). But if has decides to grant to C a preferential rate of 90% of taxes on the products or services coming from this one, it will have automatically to then grant the same rate to B (without this one not changing anything in its own conditions).

Historically

The first days of the international business, the majority of these agreements were shown in a bilateral way between two nations. Towards the end of XIXe and the beginning of the 20th century, that became much less true: the Western nations imposed of force and a unilateral way this clause of the most favoured nation on the Asian countries (in particular the China after the Second war of opium). If the Asian countries were to grant the same commercial advantages to all Western nations, those were not held to do it in return.

After the Second world war, the exchanges international and the multilateral negotiations began again, and were quickly negotiated since 1947 within the framework of GATT. This one comprises a reference to the clause of the most favoured nation as of its article first: it is this same principle which is taken again by the AGCS.

At the beginning of the Years 1960, UNCTAD tried to propose the extension of this clause again in a unilateral way, but this time by supporting the access of the markets of North to the country of the South. This attempt failed, primarily because the “South” was a disparate whole of country to the interests and priorities divergent, and thus non-cohesive.

Exceptions

The contracting parties recognize however that this rule can be softened for certain countries in the process of development. Exemptions at limited time can thus be negotiated, so that the countries more in difficulty can be relatively selective in the choice of the granted advantages.

Another exemption (Article 2.3) relates to the installation of structure of regional integration, such as the European Union, which already abolished or very strongly decreased their interior barriers, while maintaining restrictions on the importation with respect to the countries non-member of these regional unions. The clause of the most favoured nation thus does not apply to this type of agreements, and internal measurements at the EU (in her case) thus apply only to its Member States.

Criticisms

Two criticisms essential with this clause however:
  • Such an approach is supposed to promote free trade, but free trade profits especially with the nations economically strong. Therefore provisions and exemptions for the economies under development or of transition are envisaged in the Agreement.
  • the application of the treatment of the most favoured nation, and thus the progressive lowering of the tariff barriers, can easily be compensated by a deliberately restrictive requirement as regards nontariff barriers (technical requirements, of hygiene, formation, etc). Therefore OMC tries in parallel to support agreements of mutual recognition and the approval of international standards.

Another point, relating to the terminology even of the term, appeared in the United States where the fact was criticized that totalitarian modes could nevertheless benefit from the statute of “most favoured nation”. The American terminology speaks since the beginning about the century about “normal commercial relations” - also because, in fact, there exists nothing any more but one extreme minority of countries (Cuba, the North Korea, etc) which do not profit from this treatment on behalf of the US government.

Negotiations

The opening of the national markets is negotiated with the length of negotiation cycles which as for GATT are designed to last several years and are based on the principle of the “Lump of a woman”. Each contracting party prepares a list of engagements indicating those of the 12 sectors, 155 under-sectors, and 4 modes of services for which it considers a liberalization, and until which degree: the developed countries present on average nearly 100 sectors for liberalization, that is to say 2,5 times more than the countries in the process of development, and 4 times more than the least advanced countries.

The States also prepare a list of requests for each other part, where the sectors of interests for negotiation are evoked (always on the principle “I would like that my companies can freely sell Assurance S by the means of branches on your territory ( mode 3 , like considering higher), in compensation I leave hold them to reach at my market of broking or of Fret and to send directly to it representatives (modes 1 and 4)”). Once a closed negotiation cycle, article 19 of the Agreement envisages clearly that a new cycle must be prepared, making it possible to continue the process of liberalization until, in the long term, there is no more restrictions on the trade of the services between the contracting parties. Article 19 is not in is not constraining as for the starting date of each new cycle after that of Doha (the AGCS is a agreement and not a treated): the contracting parties could just as easily decide that they liberalized their markets for the moment enough and decide to defer the opening of new discussions.

The negotiations are held with door-close and their contents are strictly confidential, just as the majority of the lists of requests: the majority of the countries make public of the summaries of general order, but do nothing but fly over the sets of themes evoked in some layers, whereas the exact lists transmitted to the countries represent long technical documents several hundreds of pages (the total of the lists for the negotiations of GATT represents approximately 30.000 pages).

If the majority of the countries for example are laid out to negotiate the opening of their respective markets of data-processing services, much less propose to make in the same way with their educational services or of health. Moreover, the disparities between industrial North and the more agricultural South make than the vast majority of the African countries and the totality of the the least advanced Pays did not deposit any list of engagements: it is not of any interest for those to liberalize services where they are not competitive as long as the advanced countries will refuse to reform their clean Subvention S agricultural, as well as the access to their markets in this field. Whereas the first offers of engagement would have being deposited at the latest in March 2003, more of the third of the 148 members had not always subjected anything to semi-2005, reinforcing the probability of a failure of the cycle.

AGCS and EU

Negotiators
As a Customs union and commercial power of foreground whose economy from now on is largely based on the services, the European Union is strongly implied in the negotiations in progress. But although each Member State of the Union is also member of OMC, none takes part directly in the negotiations - it for two reasons closely dependant:

  • From the particular nature of Community construction, it is the European commission which negotiates in the name of the European Communities, economic pillar of a Union which, for lack of constitution, does not have legal personality (and cannot thus adhere to OMC).

  • This capacity of negotiation was allotted to the Commission by the means of the Arrêt AETR (1971): this one states indeed that in the fields where competences were transferred at the European level, the Member States are not any more in right, for reasons of coherence, to contract with Nonmember states of the obligations affecting of the common rules (in fact here trade).

Lastly, it should be noted that all the agreements signed by the Member States before their adhesion their remain clean - they do not have to change their engagements to adopt those of the Communities.

In practice, the European States initially negotiate between them sectoral engagements which they are ready to see the Commission taking on their behalf, with their possible limitations (which can be specific to each country). The European negotiators then make the their list resulting from these “preliminary negotiations” and use it as bases to lead their own discussions to OMC.

The Commission representative at OMC has the rank of ambassador. Since September 1st 2000, it acts of the Dutch Carlo Trojan.

Negotiation
Generally, the position of the Union is very open on the majority of the services (it belongs to the contractors having made the most proposals of engagements), while asserting a protection (and thus non-negociability) of the audio-visual sectors, culture, health and education.

AGCS and Directive Bolkestein on the level of the EU

The Directive Services relative to the freedom of establishment of the service providers and freedom of movement of the services in the interior market or Directive Bolkestein is a kind of AGCS on the level of the European Union. The purpose of it is liberalization of a certain number of services within the European Union and should make it possible to make those more competing on the worldwide market of the services, than the AGCS aims at liberalizing.

Criticisms

Criticisms addressed to this Agreement are in substance the same ones as those concerning GATT and, since 1994, OMC: presence of supposed elements of supranationality without democratic counterpart, absolute lack of transparency for the negotiations, and finally asymmetry of the liberalized topics, where the industrial great powers reach new markets of goods and services while continuing with surprotéger their respective agricultural sectors. This last criticism is taken again besides by the group of the G22, gathering the countries of the agricultural South opposed to the subsidies, which ruined the negotiations of Cancún in 2003 for lack of agreement binding services and agriculture.

The groups altermondialists also reproach the AGCS for belonging to a diary néolibéral which, in the particular case of the services, would take the step on the real wellbeing of the populations concerned, while concentrating only on the Marchandisation and the commercial valorization of the concept of essential public services (such education or the health system). The simple fact that sectors it regarded still little there as reserved domain of official structures can be the subject of negotiations of opening would in the long term predict according to them disappearance of some to be able of regulation of the States.

Municipalities and territorial collectivities, in several countries, decided to coordinate each other to protest against the installation of this agreement. Symbolically, they declare “Zone except AGCS”.

See too

On Wikipédia

External bonds

  • Text of the Agreement
  • sectoral Classification of the services of OMC: HTML, Doc.
  • Site of anti-ACGS countryside of ATTAC France
  • AGCS - Reality and fiction, on the site of OMC
  • Gatswatch.org, ONG which supervises the negotiations in progress.

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