Coherence and Divergence in Services Trade Law

A quarter of a century after the conclusion of the General Agreement on Trade and Services (GATS), the international law on trade in services remains in a state of flux: On the one side, countries increasingly conclude regional trade agreements with chapters on trade in services which aim at a further liberalisation of services trade. On the other side, the GATS structure still remains the dominant model and serves as a basis of many preferential trade agreements (PTAs). Yet, new aspects such as electronic commerce, data protection and taxation emerge while issues, which already existed in the mid-1990s such as financial services regulation, labour mobility, and telecommunications continue to be of current concern.

This chapter reviews instances of coherence and divergence in trade in services agreements through recourse to a series of events that led to the creation of the General Agreement on Trade in Services (GATS) and its evolution via developments at the preferential level. It traces developments in this area in three stages. It begins with an analysis of the background that explains the rise of services integration as a stand-alone topic in the agenda of multilateral trade negotiations. The focus then shifts to the genesis of the GATS; the analysis of the dynamics that evolved in the wake of the Uruguay Round; the identification of the birth defects of the GATS; and the instances of embedded divergence. Finally, the chapter discusses how preferential trade agreements (PTAs) undermine coherence but, on an optimistic note, also points to potential situations that can act as remedies for such fragmentation.

The chapter addresses an issue that has so far been left to little attention in literature dealing with international trade in services. It asks how services liberalization is conducted by countries that have a federal structure and where services are not regulated only on the level of the central government but also by various sub-national entities. Some of the most powerful nations, such as the United States (US) and Canada, have divided competencies over services regulation. So does the European Union (EU) which can be compared to federal states in its external trade relations due to its common trade policy. The chapter analyses the different ways in which federations and other federal-type structures engage in international services liberalization by using the EU, the US and Canada as examples. In order to shed more light on their treaty practice and to see to what extent sub-central levels of government appear in their services schedules, the chapter reviews the GATS commitments as well as the services commitments that the EU, the US and Canada have made in some of their recent PTAs. The chapter shows that there are crucial differences in the way that these federal entities engage in international services liberalization. The chapter also draws more far-reaching conclusions on the approach to take towards liberalization commitments by sub-central levels of government and assesses the effect that they have, or rather the effect that the lack of such commitments has, on the liberalization levels reached in modern trade agreements.

The paper examines recent developments on disciplines on domestic regulations affecting trade in services at regional, plurilateral and multilateral level. It identifies a significant degree of convergence between the disciplines adopted at regional level with those currently negotiated at plurilateral level, and suggests that, discrepancies over the extent and eligibility for special and differential treatment for developing countries are the main obstacle to reach a multilateral agreement on this matter. The paper also argues that it is unlikely that regional or plurilateral disciplines may generate trade diversion. First, in most cases the disciplines are phrased in soft terms, giving countries plenty of flexibility to decide how and when to comply with them. Second, those sponsoring the plurilateral negotiations account for fifty seven per cent of world exports of commercial services (seventy six cent including the U.S.) and have pledged to incorporate the results of the negotiations into their GATS schedules as additional commitments under Article XVIII of the Agreement (and thus extending the benefits of the disciplines on a Most Favoured Nation basis to WTO Members that have not participated in the negotiations). Finally, even those few disciplines included in Preferential Trade Agreements that go beyond the plurilateral reference paper are, for practical reasons, applied de facto, on an MFN basis.

The chapter addresses privacy and data protection in FTAs. It takes stock of the evolution of provisions on privacy and data protection in the post-WTO FTAs and FTAs currently under negotiation relying on EU- and US-led FTAs as an empirical basis. The chapter evaluates the trends and patterns of the development of these provisions and provides an outlook for the upcoming negotiations on electronic commerce at the WTO. It highlights the evolution of provisions on privacy and personal data protection in general exceptions, financial and telecommunications chapters, chapters on electronic commerce and digital trade. After identifying trends in the design and wording of these provisions in the EU- and US-led FTAs the chapter concludes that both trading partners tend to prefer their own template for regional FTAs.

The chapter maps how digital services trade is addressed under the General Agreement on Trade in Services (GATS) and e-commerce chapters in preferential trade agreements. It sets out the applicability of the GATS to digital services trade and identifies three elements of the current framework that adversely affect the liberalisation of digital services trade and that can be addressed at the PTA level. Moreover, the chapter studies whether existing gaps are being filled in the e-commerce chapters of PTAs. The e-commerce-related content of these PTAs is identified through a term-frequency analysis, which allows for a mapping of the presence of different barriers to digital services trade in PTAs.

A cross-comparative mapping of the provisions on the temporary movement of natural persons (Mode 4, M4) Mode 4 (M4) with the non-services mobility provisions in select Asian (ChAFTA, India-Singapore PTA, EUSFTA, India-ASEAN) and EU PTAs towards non-Asian partners (CARIFORUM EPA, C&P FTA, Georgia DFTA) reveals that PTAs have advanced in GATS-plus and GATS-extra, but just how proximate the links between ‘migration’ and GATS Mode 4 mobility are, differs. In this chapter, we draw on the analytical fame of the migration-mobility nexus (MMN), being developed by nccr-on-the-move research network to better categorize the proximity and permeability between migration and mobility and the directionality of the links between both concepts between migration and mobility. We first observe that the EU and Asian countries make different use of M4 commitments in their PTAs. Common to both world regions is the trend to add the category of graduate trainees (GT) as a horizontal commitment in a M4 opening in a trade agreement, as well as opening that category of cross-border mobility in a bilateral setting. In this first section, we seek to understand why the migration and mobility narratives overlap, compete or conflict in a linear dimension of the MMN, within a PTA and across the PTA and bilateral migration agreements. In a second step, the MMN is conceived ‘as continuum’ on the vertical scale to explain how M4 chapters of PTAs are implemented differently in national immigration and regional integration labor migration norms, e.g. EU labor market directives: The EU makes liberalization advances preferably via horizontal, rather than sectoral commitments, countries or regions that are less multilevel opt for sectoral advances in M4. M4 develops GATS-plus sectorally in Asian PTAs, where e.g. a traditional Chinese medicine (TCM) professional sees her immigrant status directly regulated in a side letter attached to the PTA. In sum, the chapter offers some new evidence from the field of international trade, to contribute to further designing the interdisciplinary concept of the MMN. While the focus study builds on the corpus of legal and IR research on GATS M4, this chapter suggests to deepening the theoretical deliverables of the GATS M4 literature by anchoring the evidence from PTAs into the analytical frame of the MMN.

The chapter seeks to trace developments in preferential trade agreements (PTAs) with regard to the telecommunications and the media services sectors by looking at a few recent and advanced trade deals of the United States and the European Union respectively. It examines in particular the Comprehensive and Progressive Agreement for Transpacific Partnership (CPTPP) and the United States-Mexico-Canada Agreement (USMCA), as well as the Comprehensive Economic and Trade Agreement (CETA) and the EU-Japan free trade agreement. The chapter maps the differences in the commitments and potentially in the treaty language in these PTAs and the corresponding chapters for telecom and media services vis-à-vis the commitments and the language under the World Trade Organization. Thereby the chapter tests the hypothesis that the PTA developments have been too path-dependent and have not adequately reflected the technological and policy developments that have occurred after the end of the Uruguay Round.

Are we experiencing convergence in preferential international trade rules on financial services? This paper tries to answer this question by comparing key obligations in the financial services chapters of five free trade agreements (FTAs): CPTPP; USMCA; KORUS; CETA; and JEFTA. The paper compares select aspects of the legal discipline introduced in the FTAs, with a view to testing whether (and to what degree) the financial services chapters in the chosen FTAs depart from the GATS template. Despite the possibility for parties to re-write substantially the rules of the game, this paper shows that the GATS template still represents the basis for bilateral and regional negotiations. In a few areas, however, the five FTAs examined in the article innovate substantially as compared to the text of the GATS. Specifically, innovative solutions concerning the discipline on prudential regulation are particularly relevant.

Shipping is the most international of all industries, as well as being one of the oldest—and it is also one of the most complicated. This chapter examines, through historical, legal and economic lenses, whether and how RTAs (and PTAs) may facilitate international trade and enhance liberalisation of maritime transport service along with the GATS under the WTO framework. The relationship between the WTO and maritime transport regime can be traced back to the GATS and related maritime transport service negotiations. Even though shipping has been on the negotiating agenda since the 1980s, the GATS related negotiations on this sector turned out extremely frustrating. After exploring the status quo of the maritime transport services and their liberalisation under the GATS and RTAs, this chapter argues that the future liberalisation of maritime transport sector relies on efforts from both the WTO and RTAs. From an economic point of view, today’s trade relies on shipping to carry the goods around the world, because the trade is globalised, shipping needs such a global, multilateral framework which the WTO empowers. At the same time, shipping also needs regional, bilateral and local forums—RTAs (including PTAs)—through which Members share a high degree of commonality.

This article explores the intersections between the global tax reform launched by the Organization for Economic Co-operation and Development (OECD) and the Group of 20 (G20) to tackle base erosion and profit shifting (BEPS) on the one hand, and international rules on trade in services, mostly—the General Agreement on Trade in Services (GATS) under the World Trade Organization (WTO) on the other hand. The GATS entered into force in 1995 to expand trade in services. It covers all measures affecting trade in services, including direct taxation. While the GATS leaves policy space for WTO Members to adopt measures to ensure the effective imposition of direct taxes and to conclude agreements among themselves to avoid double taxation, its negotiators could hardly have envisaged the depth and breadth of the current BEPS reform package, as shown by a recent WTO dispute. This paper provides a systematic analysis of concurrent application of the GATS and the BEPS Package and recommends that WTO Members take actions to avoid potential conflict in applying both sets of rules.