The Challenges Ahead

6.3 Negotiations on GATS Rules

Government Procurement

The share of government purchases of services — from postal and communication services, to transport and financial services — is significant in many markets, and so are the trade effects that may result from access restrictions. The GATS imposes no effective disciplines, however, on governments’ use of such restrictions, whether in the form of exclusions of foreign participation, or of preferential margins favouring domestic suppliers.

Article XIII provides that the MFN obligation (Article II) and any existing commitments on market access and national treatment (Articles XVI and XVII) do not apply to the procurement of services for governmental purposes. It is for the individual Members to balance the fiscal cost and structural inefficiencies that may be associated with purchasing restrictions and/or preferences with their expected contribution to employment, development and other policy objectives. However, Article XIII provides for negotiations to be conducted under the GATS. Although these negotiations started relatively soon after the Uruguay Round, together with those in the other rule-making areas, progress has been limited to date. It remains to be seen whether the new round will give a boost.

The only current procurement disciplines under WTO provisions are those contained in the Plurilateral Agreement on Government Procurement, whose scope is confined to a limited number of mostly economically advanced Members. The Agreement applies to purchases of goods and services and provides for transparency and, in specifically listed sectors, non-discrimination in the award process among signatories. Further, the Doha Declaration foresees negotiations after the Fifth Ministerial Conference on transparency in government procurement.

Subsidies

Like other measures affecting trade in services, subsidies are already subject to the GATS. The unconditional general obligations, including MFN treatment, thus apply. In scheduled sectors, these are complemented by the national treatment obligation, subject to any limitations that may have been inscribed, and a variety of conditional obligations.

Article XV nevertheless provides for negotiations on disciplines that may be necessary to avoid trade-distortive effects. The appropriateness of countervailing measures shall also be addressed. While the Agreement provides no further guidance, it may be assumed that the negotiating mandate covers trade distortions associated with subsidies in areas beyond the modal definition of GATS (e.g. cross-border exports) or in sectors/modes not covered by specific commitments in the relevant Member’s schedule.

The WTO Agreement on Subsidies and Countervailing Measures Agreement was developed for goods trade, and it may not necessarily prove an appropriate model for services. Governments may want to retain broader scope for subsidization in the pursuit of social, cultural, and general development objectives. While Article XV:1 of the GATS also provides for an information exchange on subsidies among Members, very little information has been provided to date. This may reflect a certain lack of negotiating interest, but might also be attributed to definitional and data problems.