Importance of services for national economies.

• Services - a diverse market activity for national economy distinct from manufacturing, mining and agriculture… (diversification);

• Services account for a substantial portion of national GDP and increase with the economic development;

• Substantial employment in services;

• Services make an essential input into a production of other goods and services; many producers depend on services to deliver their output to the market;

• Fragmentation or splintering of production chains dependent on efficient services inputs;

• Trade and investment in services grows;

Services such as energy, telecommunications and transportation are important to all sectors of the economy; financial services facilitate transactions and investment; health and education services that contribute to a fit, well-trained workforce; and legal and accountancy services allow an institutional framework required to run a successful market economy.

19. General Agreement on Trade in Services: key features.

GATS: Objectives

• Progressive liberalization of trade in services

• Promoting economic growth and development

• Increasing participation of developing countries

Purpose of the GATS

• Assists governments that want to reduce their trade barriers and/or consolidate reforms

• Contributes to coordination of economic policy-making

• Better access to foreign markets

• Transparency and predictability of trading conditions

• Efficient and impartial settlement of disputes

GATS: Main Characteristics

• Liberalization not deregulation

• New definition of trade

• Relationship to domestic regulation

Definition of services:

• non-physical products or "services"

• The delivery of services may involve the international movement of people, particularly highly skilled individuals who provide services that are intellectual output, such as advice to clients

• “Trade in services”

Definition of "trade in services"

1. Cross-border supply

2. Consumption abroad

3. Supply through commercial presence

4. Supply through the presence of natural persons

Sectoral coverage: all services

Coverage of the GATS (Article I)

• The GATS covers all internationally traded services except services supplied in the exercise of government authority, supplied on a non-commercial basis

• 12 service sectors and 49 broad categories with many sub-categories or activities

• The list of about 160 services used in the negotiations was based on a list developed by the United Nations called the Central Products Classification.

The main service sectors included are: (SERVICES SECTORAL CLASSIFICATION LIST, 24 May 1991)

• Business Services

• Communication Services

• Construction and Related Engineering Services

• Distribution Services

• Educational Services

• Environmental Services

• Financial Services

• Health Related and Social Services

• Tourism and Travel Related Services

• Recreational, Cultural and Sporting Services

• Transport Services

• Other Services - Services Not Included Elsewhere

Coverage of the GATS (Article I)

• GATS rules apply to all levels of government

• national,

• sub-national

• municipal) as well as

• non-governmental bodies that operate through powers delegated by these three levels of government – e.g., independent agencies and commissions and self-regulatory bodies

Modes of Supply

Mode 1. Cross-border Supply

Services are supplied by firms in one country to firms or consumers in another country and neither the services supplier nor the firm or person consuming the service travels to the other's country (e.g., consultancy services supplied through international telephone calls, cargo transportation).

Mode 2. Consumption Abroad

Consumers or firms in one country travel to another country to purchase or make use of services (e.g., tourism, education).

Mode 3. Commercial Presence

• Services are supplied through the presence of a commercial entity of one WTO member in the territory of any other member (e.g., banking, restaurants).

• In other words, a firm from one country sets up a business establishment in another country in order to supply services.

• Establishment can take various forms, including incorporation, branch, and joint-venture.

Mode 4. Presence of Natural Persons

• Services are supplied through temporary cross-border movement of persons (e.g., consultants, musicians or performers) from one country to another.

• This is also referred to as temporary entry. Temporary entry may be important for managers and specialized personnel to work at a commercial presence in a foreign jurisdiction.

A member’s GATS schedule is a document that lists:

• the services sectors, subsectors or activities subject to specific commitments, notably national treatment and market access ("listed sectors"),

• the extent of market access allowed for listed sectors (e.g., whether there are restrictions on foreign ownership), and

• any limitations on national treatment (whether some privileges granted to local companies will not be given to foreign companies) relating to listed sectors.

GATS: Specific commitments

1. Horizontal Commitments

2. Commitments relating to Sectors and/or Sub-Sectors

3. Market Access

4. National Treatment

5. Additional Commitments

The following six policy measures inhibit services trade. They must be stated in their schedules in order to be permitted (Article XVI) :

• limits on the number of service providers;

• limits on the total value of service transactions;

• limits on the total number of service operations or the amount of services supplied;

• limits on the number of persons employed in a particular service sector;

• restrictions on the type of legal entity through which a foreign service company may deliver its service (e.g., branches, joint-ventures, subsidiaries)

• restrictions on foreign investment.

GATS: Key Obligations

1. Most-Favoured Nation (Article II)

   1. Applies to all sectors

2. Obligations implying openness to international competition (Market Access and National Treatment) only apply in accordance with each Member’s schedule of commitments

• Only in selected sectors

• Subject to conditions and limitations inscribed

GATS: Most-Favoured-Nation Treatment (Article II)

With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country.

National Treatment (Article XVII)

If a sector or service activity is included in a country’s schedule, and there is no exception stated for it, the government is obliged to treat foreign services and service companies no less favourably than similar service suppliers.

Market Access (Article XVI): only applies to services that a country lists in its schedule, subject to the terms, limitations and conditions that it specifies in that schedule.

Monopolies and Exclusive Service Providers (Article VIII, IX)

• Governments are obligated to ensure that monopoly service suppliers (such as telecommunications and other utilities in many countries) do not act in a manner that works against the most-favoured nation principle.

• The obligation is intended to prevent monopolists or exclusive service suppliers from abusing their power in the market where they are dominant when (and if) they compete in a market for another service (i.e. not the market in which they are dominant where there is no scope for participation by foreign service suppliers).

Transparency (Article III)

WTO members are obligated:

• publish all relevant laws and regulation affecting trade in services, including those made by regional or local authorities,

• notify changes in their laws which significantly affect trade in services in a listed sector to the WTO (Council on Trade in Services)

• establish and maintain enquiry points

Transparency (Article III): Governments are exempted from providing confidential information that could undermine or jeopardise law enforcement or legitimate commercial interests.

GATS: Participation of developing countries

• Significance of developing countries

• Liberalization supports development

• Contact points

• Least developed countries

GATS: Domestic regulation

• Appeals procedure

• Reasonable, objective and impartial administration of regulations

• Licensing, qualifications and technical standards

• Taking account of international standards

• Procedures to verify competence of professionals

• Development of new disciplines on domestic regulation

GATS: Safeguards, Government Procurement and Subsidies

1. Emergency Safeguard Measures

2. Government Procurement

3. Subsidies

Emergency safeguards in services may be expected to allow for the temporary suspension of market access, national treatment and/or any additional commitments that Members may have assumed in individual sectors. Any such mechanism, should it be agreed to by Members, would need to be based on the principle of non-discrimination.

Government Procurement

1. 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.

2. 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.

Subsidies

• Like other measures affecting trade in services, subsidies are already subject to the GATS.

• 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.

• Article XV:1 of the GATS: an information exchange on subsidies among Members, but very little information has been provided to date

• Certain lack of negotiating interest

GATS: Exceptions

Members are allowed in specified circumstances to restrict trade:

• in the event of serious balance-of-payments difficulties (Article XII)

• of health and other public policy concerns (Article XIV)

• to pursue essential security interests (ArticleXIVbis)

• the prevention of deceptive and fraudulent practices

• the protection of individual privacy in the handling of personal data, and equitable and effective taxation.

GATS: Annexes

Permanent validity

• Air Transport

• Movement of Natural Persons

• Article II Exemptions

• Telecommunications

• Financial Services

Progressive Liberalization (Article XIX)

• The GATS is an important first step in liberalizing world services trade but few members agreed to improve access to their markets. Most members simply committed not to make their existing regimes more restrictive.

• The GATS calls for further negotiations in five years (2000) that are expected to lead to increased market access

• to improve the level of commitments undertaken by each WTO member

• to increase and deepen the coverage of the service sectors and activities in each national schedule.

• Uruguay Round services package is only a beginning.

• The GATS rules are incomplete and are untested and they will develop over time.

• If we compare the achievement of the GATS to the rules on goods, it is only a starting point as in 1947 when the original GATT agreement was signed, not the current GATT commitments by WTO members.

How Services Negotiations Work From the outset:

• Essentially a bilateral process

• Some key principles:

  • No sector or mode excluded a priori

  • Flexibility for developing countries

  • Starting point: existing commitments

  • No change in basic structure of the GATS

STATE OF PLAY: INITIAL OFFERS: 71 Schedules (covering 95 Members*)

REVISED OFFERS: 31 Schedules (covering 55 Members*)

*Counting EC Members individually

Sobering Assessment:

• Long delays (initial target date: March 2003)

• Modest achievements (number of sectors and substance)

• Uneven participation of developing countries

• Little change in MFN Exemptions

• Little progress in rules negotiations

• How Negotiations Work

• Since Hong Kong Ministerial:

  • Plurilateral request/offer process

  • LDCs not expected to undertake new commitments

  • No formula, but set of multilateral objectives per mode

20. The nature of intellectual property rights. Types of intellectual property.

The nature of intellectual property rights

• Intellectual property may be described as rights to intellectual creations that allow the owner of those rights to prevent others from gaining economic and other benefits from the creation.

• These rights can be thought of as a form of limited monopoly.

Intellectual property is not like other goods.

A piece of knowledge, whether the blueprint for a new machine or a new variety of wheat – unlike a physical object - can be used by one person without limiting its use by others. The widest possible dissemination of new knowledge or technology leads to the greatest efficiency.

Intellectual property rights:

• Industrial property

• Copyrights and related rights

• IPRs that stimulate inventive and creative activities

• IPRs that resolve information asymmetries

Intellectual property rights (IPRs) consist of two main branches

• Industrial property — This consists mainly of inventions, trademarks, industrial designs, and geographical indications;

• Copyright and related rights — This consists mainly of literary, musical, artistic, photographic, and audiovisual works.

Types of intellectual property

Two categories of IPRs

• IPRs that stimulate inventive and creative activities

  • Patents, copyright, industrial designs, plant breeders’ rights, layout designs for integrated circuits, utility models, trade secrets

• IPRs that resolve information asymmetries

  • Trademarks, geographic indications

Patents

Protect inventions that are new, non-obvious, and commercially useful

• Protection for 20 years, after which the invention moves into public domain

• Main users:

  • All manufacturing industries

  • Since the early 1980s: agricultural biotechnology, computer software, business methods

Copyright and neighboring rights

Protects the expression of an intellectual creation

• Protection lasts for the life of author plus 50-70 years

• Main users:

  • Authors in literary, artistic, and scientific fields

  • Performers and broadcasting organizations

  • Producers of computer software

Trademarks

Words, signs, or symbols that identify a certain product of company

• Protection can endure virtually indefinitely provided they remain in use

• Main users

  • All goods and service industries

  • Of high importance for certain consumer goods

  • Recent economic significance: Internet domain names

Plant breeders’ rights

Protect new plant varieties that are distinct from existing varieties, uniform, and stable. Exclusive sale and distribution rights for 15 years. But

• Research exemption

• Farmers’ privilege to reuse harvested seeds

• Main users:

  • Plant breeders

Components of an IPRs system

Intellectual property laws

1. National registries for patents, trademarks, and plant breeders’ rights

2. Judicial system responsible for enforcing IPRs

3. Treaties to promote international cooperation and facilitate registration of IPRs in more than one jurisdiction

4. Control of anti-competitive practices