New WTO disciplines on domestic regulation in services

On 2 December 2021, the World Trade Organization’s joint initiative to develop new disciplines on domestic regulation in services declared their conclusion at the 12th WTO Ministerial Conference. The initiative is on voluntary basis, but the current 67 participants account for more than 73 per cent of world services trade. The initiative had the objective to develop disciplines mitigating trade restrictive effects of measures relating to licensing and qualification requirements and procedures, as well as technical standards. WTO members also examined how the disciplines under negotiation relate to those under recent regional trade agreements, such as the Regional Comprehensive Economic Partnership, and other free trade agreements, including those between Singapore and the EU, China and the Association of Southeast Asian Nations (ASEAN) or Indonesia and Australia. The participants, which include three ASEAN members, i.e. the Philippines, Singapore and Thailand, noted the conclusion of negotiations on the Reference Paper concerning Services Domestic Regulation on 26 November 2021. They intend to incorporate the disciplines in the Reference Paper as additional commitments into their respective Schedules of the General Agreement on Trade in Services (GATS). 

WTO Members generally have the right to regulate the supply of services within their territories in order to meet domestic policy objectives. This can lead to asymmetries concerning the degree of development of services regulations in different member states. A significant part of service trade barriers is attributable to regulatory divergence, as well as opaque regulations and cumbersome procedures. Many globally operating companies thus complain that obtaining, filling and submitting a large number of official documents required for their trading operations costs them a considerable amount of time and resources. In this light, a central background for this initiative is the recognition of respective compliance difficulties faced by service suppliers. 

Article VI:4 of the GATS provides that the members of the Trade in Services Council develop necessary disciplines through subsidiary bodies, with the goal of ensuring that domestic measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services. The focus of the disciplines, which are treated as additional commitments under Article XVIII GATS, lies on measures that are closely linked to the process of authorization to supply a service. They seek to ensure that existing market access and national treatment commitments are not nullified by burdensome authorization procedures. Hence, the objective is to create good regulatory practices that help mitigate any unintended trade-restrictive effects of procedures for authorizing the supply of services. The disciplines are designed to be compatible with WTO members' diverse regulatory systems and approaches. 

The reference paper on services domestic regulation states that each Member shall, to the extent practicable, avoid requiring an applicant to approach more than one competent authority for each application for authorization. The term "authorization" means the permission to supply a service, resulting from a procedure to which an applicant must adhere in order to demonstrate compliance with local requirements and standards. Authorities shall endeavor to accept applications in electronic format and accept copies of documents, that are authenticated in accordance with the Member’s domestic laws and regulations, in place of original documents. Original documents should merely be required to protect the integrity of the authorization process. 

For the improvement of procedural transparency the competent authorities shall, if possible, provide (i) an indicative timeframe for processing of an application and (ii) without undue delay information concerning the status of the application upon respective request. They also need to timely ascertain the completeness of an application for processing under the Member’s domestic laws and regulations, which is often an open issue for investors in administrative practice. 

From transparency perspective it is also required that all information necessary for obtaining, maintaining, amending and renewing such authorization are either published or otherwise made publicly available in writing. If an application is rejected, the applicant should be informed of the reasons for rejection and, if applicable, the procedures for resubmission of an application. In this context, an applicant should not be prevented from submitting another application solely on the basis of a previous rejection. 

Each Member shall ensure that the authorization fees charged by its competent authorities are reasonable, transparent, based on authority set out in a measure, and do not in themselves restrict the supply of the relevant service. 

Technical standards adopted by the Members’ authorities have to be developed through open and transparent processes. In this regard the Members shall ensure that such measures are based on objective and transparent criteria and respective procedures are impartial and adequate for applicants to demonstrate whether they meet the requirements. Furthermore such measures may not discriminate between men and women. 

Further disciplines apply to measures by Members relating to licensing requirements and procedures, and qualification requirements and procedures affecting trade in financial services, as defined in the GATS Annex on Financial Services.

The WTO members participating in the negotiations have circulated schedules of commitments setting out how they intend to incorporate the new disciplines on services domestic regulation into their existing WTO commitments. Other WTO Members may anytime join the Declaration by incorporating the disciplines outlined in the Reference Paper as additional commitments into their GATS Schedules. Subject to the completion of domestic procedures, the participants aim to submit their Schedules of Specific Commitments for certification within twelve months of the Declaration’s date. While developed countries such as the EU member states or Singapore appear to vastly fulfill the commitment already, the domestic implementation in some emerging economies will be more complex. We will monitor the progress and report on new developments with particular regard to the participating ASEAN members.