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WTO: The Most Important Negotiation You’ve Never Heard Of

WTO members – 59 of them including the European Union and China – met this week for a round on negotiations to make applying for licenses and occupational certifications abroad simpler and more transparent, in a process you may never have heard of.

Domestic Regulation in Services, one of the most significant potential outcomes from the upcoming 12th Ministerial Conference in Kazakhstan – corona virus permitting – has taken shape largely under the global radar. In May 2019, ministers from 59 governments jointly issued a statement setting the Kazakh conference as a target date for a concrete, plurilateral deliverable.

With the date fast approaching and things looking like they might actually pull it off, what do you need to know?

What are the ‘domestic regulation in services’ negotiations trying to do?

Delivering virtually any kind of service to customers abroad, from legal advice through to hairdressing, often requires obtaining licenses, certifications and approvals from the local government.

These negotiations are an effort to strengthen international trade rules to improve the transparency and usability, so the process of obtaining permission doesn’t itself serve as a barrier to trade.

So they’re trying to open up new markets?

Only in places where it’s bureaucracy, and not policy, that’s keeping foreign firms out.

These negotiations are not market access talks. If a government has decided to keep a market closed by regulating a certain service can only be performed by locals or local firms, these negotiations won’t touch that.

Instead, these negotiations focus on improving access in places where the government has decided foreign firms or providers can compete, but where bureaucratic or administrative hurdles are making it harder, costlier or more arbitrary for them to secure the approvals required.

Ok, so what kind of things are we talking about here?

Examples of what looks like it might make it into the final text in Kazakhstan include:

  • A ‘Single Window’ commitment – so acquiring approvals only requires dealing directly with one government ministry, not several;
  • An ‘electronic governance’ commitment – so relevant government agencies must accept electronic versions of documents rather than insisting on originals or paper copies;
  • A ‘right to appeal or re-application’ commitment – to ensure those initially denied can try again at a later date;
  • A range of ‘transparency’ commitments around the process for approvals including ensuring applicants know:
    • Expected processing duration;
    • Their application status;
    • When an application has been accepted or rejected;
    • The explanation for a rejection, with clearly stated reasons.
  • Some commitments on ‘fees’ including:
    • Transparency about fee structures;
    • Fees to be set at a reasonable level so the costs of approval don’t themselves become an unjust barrier to trade.

Those sound great, will they apply to all services?

No. The way WTO services schedules work allowed countries to list the types of services the provisions they’ve agreed to cover. If a country has exempted a service type like medical from its commitments, it will also be exempt from anything it does under Dom Reg.

If only 59 WTO Members are signed up, it can’t pass right?

There’s virtually no chance of a multilateral outcome on this issue in the foreseeable future, but the Joint Statement Initiative Members have found another path forward.

Those working on this outcome are aiming to finalise a text they can all agree on among themselves. Having done so, they will insert that text into their own WTO ‘services schedules’, thus committing to abide by its rules.

They are working toward this as an ‘open plurilateral.’  This means any WTO Member can attend their meetings and any WTO Member can join them in also incorporating the text into their own schedules when it is completed.

My country isn’t on the list, will the ‘Dom Reg’ members extend the benefits of this agreement to my firm?

Yes, the rules being agreed will be applied on a “Most Favored Nation” basis which means to everyone. Once a WTO Member incorporates this text into its schedule, it obliged to apply its provisions to all WTO Members and not just fellow Dom Reg enthusiasts.

Fortunately, most of the rules being agreed don’t really lend themselves to discrimination anyway. A measure is either transparent or it isn’t. It’s very hard to publish the details of a process online in such a way that only the citizens of 58 other countries benefit.

This all sounds reasonable, why are some countries not on board?

There are a variety of reasons for some WTO Members staying away from these negotiations.

  • Some have pushed back on services negotiations generally as a tactical move, believing movement on services will distract attention away from their own areas of focus (primarily agriculture);
  • Some are fearful of signing up to regulatory commitments which will impede their policy space or open them up to disputes;
  • Some are simply free-riding, reaping the benefits of what others are offering without making commitments themselves. They do so knowing that if non-membership ever becomes a real problem, they can always sign up later;
  • Some, most notably the Unite States, are opposed to new rulemaking when they believe existing rules are being ignored, arbitrated unfairly or both.

So, what makes you think this might actually get across the line?

There’s actually a good amount of reason for hope. For one thing, the text is a lot more advanced, with fewer remaining areas of disagreement, than either the e-commerce or the investment facilitation drafts.

For another, a group of countries have been working on this for half a decade, slowly building up consensus. I’m proud to say Australia played a huge role in that process.

Finally, the work is being structured in a ‘coalition of the willing’ format. If there are objections from only a handful of Members at the last moment they can simply drop out and allow the others to complete the work without them.

 

In this exclusive Borderlex blog series ExplainTrade.com founder Dmitry Grozoubinski (@DmitryOpines) takes a relentlessly pragmatic look at the World Trade Organization with one question in mind: “You’re busy, what do you need to know?”

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