GATS Update: New draft text on domestic regulation

published 18 June 2007 updated 18 June 2007

Negotiations aimed at liberalizing trade in services under the GATS appear to be on the verge of endorsing new restrictions on domestic regulations. These new rules would cover measures related to qualification requirements and procedures, licensing requirements and procedures, and technical standards.

Educational International has been a prominent critic of these new restrictions, noting they could constrain important regulations governing a range of vital sectors, including education.

The chair of the working group on domestic regulation released his third and what may be penultimate draft of proposed rules in late April in an attempt to broker a compromise between those countries that want to constrain the regulatory authority of governments and those who want to safeguard it.

In a briefing memo [ http://www.tradeobservatory.org/library.cfm?refID=98867] to state and local governments in the US, Robert Stumberg of the Harrison Institute for Public Law at Georgetown University says the latest draft, while softening some of the more restrictive language in previous proposals, still significantly constrains regulatory authority.

"The most explicit threat to regulatory authority - the necessity test - is gone," Stumberg notes. "This would have required governments to use the approach that is least burdensome to service suppliers."

In place of the necessity test, however, the third draft would require governments to ensure that regulations do not constitute "disguised barriers to trade".

"The foremost concern is whether avoiding 'disguised restrictions' could be a kind of operational necessity test," says Stumberg.

In addition, the third draft requires that regulations must be "objective" and "relevant".

"In the context of qualification requirements," Stumberg explains, "a relevance test might exclude education requirements that are not necessary to perform a service. For example some [U.S.] states require education that exceeds the technical skill set for licensed professionals (e.g. a course diversity requirement or a local history requirement)."

Of the GATS talks as a whole, the negotiations on domestic regulation appear to be the most advanced with no firm deadline yet set for members to submit their revised offers on what service sectors they are prepared to liberalize.

WTO members were originally scheduled to submit revised offers at the end of July 2006, but that deadline was suspended along with the entire Doha Round of talks after members failed to overcome their differences on agricultural and industrial goods. Many developing countries insist they are not prepared to offer more in services until there is a breakthrough in these other negotiations.

Developed countries, on the other hand, have complained about what they see as the poor quality of offers made so far and have been pressing for a significant liberalization package on services.