Main Building Blocks: Agreement, Annexes, and Schedules

2.4 Other General Provisions

Economic Integration Agreements

Like GATT (Article XXIV) in merchandise trade, the GATS also has special provisions to exempt countries participating in integration agreements from the MFN requirement. Article V permits any WTO Member to enter into agreements to further liberalize trade in services on a bilateral or plurilateral basis, provided the agreement has “substantial sectoral coverage” and removes substantially all discrimination between participants. Recognizing that such agreements may form part of a wider process of economic integration well beyond services trade, the Article allows the above conditions to be considered in this perspective. It also provides for their flexible application in the event of developing countries being parties to such agreements.

While Economic Integration Agreements must be designed to facilitate trade among participants, Article V also requires that the overall level of barriers is not raised vis-à-vis non-participants in the sectors covered. Otherwise, should an agreement lead to the withdrawal of commitments, appropriate compensation must be negotiated with the Members affected. Such situations may arise, for example, if the new common regime in a sector is modeled on the previous regime of a more restrictive participating country.

Article Vbis relates to, and provides similar legal cover for, agreements on labour markets integration. The main condition is that citizens of the countries involved are exempt from residency and work permit requirements.

Recognition

Notwithstanding the MFN requirement, Article VII of the GATS provides scope for Members, when applying standards or granting licenses, certificates, etc., to recognize education and other qualifications a supplier has obtained abroad. This may be done on an autonomous basis or through agreement with the country concerned. However, recognition must not be exclusive, i.e. other Members are to be afforded an opportunity to negotiate their accession to agreements or, in the event of autonomous recognition, to demonstrate that their requirements should be recognized as well. Article VII:3 requires that recognition not be applied as a means of discrimination between trading partners or as a disguised trade restriction.

Exceptions

Part II of the GATS (General Obligations and Disciplines) further contains exception clauses for particular circumstances. Regardless of relevant GATS obligations, Members are allowed in specified circumstances to restrict trade in the event of serious balance-of-payments difficulties (Article XII) or of health and other public policy concerns (Article XIV), or to pursue essential security interests (Article XIVbis).