IN SOME RECENT TRADE AGREEMENTS
Sanya Reid Smith
Legal Advisor and Senior Researcher, Third World Network (TWN)
Disciplines on domestic regulation (DRD) in services are currently being negotiated in a number of trade agreements including at the WTO, in the TiSA, the Regional Comprehensive Economic Partnership (RCEP) and some European Union FTAs. These DRD restrict the ability of governments to have even non-discriminatory regulations. The proposed DRD would restrict laws and regulations etc. applying to:
a) licensing requirements and procedures (such as what is needed to obtain a licence for a hospital or nuclear power station); b) qualification requirements and procedures (e.g. what a human being needs to do to qualify as a medical doctor); and in some trade agreements c) technical standards (e.g. how clean the water has to be and how many patients are allowed per nurse in a hospital, etc.).
In some trade agreements, these DRD would only apply to the service sectors liberalised (which may be on a positive list basis: i.e. the sectors listed are liberalised as occurs at the WTO; or on a negative list basis: where all service sectors are liberalised V. THE ROLE OF SERVICES-RELATED TRADE POLICIES, TRADE AGREEMENTS AND TRADE NEGOTIATIONS FOR STRUCTURAL ADJUSTMENT 71
except those listed). In other trade agreements, some countries are proposing that the DRD apply to all service sectors, even those which are too sensitive to be liberalised.
While the WTO’s services rules in the GATS are not strictly binding on subnational governments (because national governments only have to take such reasonable measures as may be available to it to ensure their observance by subnational governments), in some trade agreements the proposals are that these DRD would be strictly binding on all levels of government, even local and municipal governments.
Some of the main proposed DRD in current trade negotiations are that licensing requirements and procedures etc. must be:
• Objective: This has been interpreted as: (a) not arbitrary (where arbitrary can mean a rigid unbending requirement such as a maximum price for water); (b) not biased, which could prohibit affirmative action for disadvantaged groups (e.g. lower licensing fees for the disabled, women, veterans, etc.); (c) not subjective, which could make it difficult to have just and reasonable rates for essential services or fit and proper person tests for media ownership; and (d) not tougher than international standards (e.g. the World Health Organization’s Framework Convention on Tobacco Control);
• Transparent: experts note that this can mean that requirements must be fixed, not discretionary. But if they are fixed, they can be arbitrary and so not objective. The proposed footnote to ‘objective and transparent’ in TiSA, noting that this can include potential health or environmental impacts of an authorisation decision, shows the concerns that some TiSA governments have for how these criteria could be interpreted;
• Not more burdensome than necessary and other similar wording. In the WTO DRD negotiations this necessity test has been opposed by many countries, including Brazil, Canada and the United States of America who noted that it would be both a vague and unpredictable standard, ultimately defined by a panel rather than WTO Members, which would open the door to second-guessing experienced regulators about some of the most sensitive policy choices made by Members;
• Pre-established was proposed at the WTO in 2009, but was dropped from the 2011 Chair’s
text, presumably because of the way it could be a standstill on services regulations, even when there has been changes in external circumstances such as the financial crisis, climate change, etc. However, the recently concluded CETA between Canada and the European Union has a similar requirement that licensing requirements and procedures must be established in advance;
• As simple as possible is also a CETA requirement that may prevent regulations requiring environmental impact assessments and consultations of the local community, etc. before, for example, starting a mine.
There are also proposals in current trade negotiations restricting licensing fees, for example to be commensurate with the cost of printing the licence and enforcing it (e.g. making sure the restaurant closes at midnight). This would prevent governments from using licensing fees to raise revenue, to discourage certain services (such as casinos), or to cross-subsidise (for example a public hospital from a private hospital’s licensing fees). Governments at various levels in both developed and developing countries are currently using licensing fees to pay for street lighting, rubbish collection, public health clinics, police and fire departments, etc. It is not clear if ministries at all levels of government are willing to give up this revenue source and that the national governments will compensate them for the lost licensing revenue for the duration of the trade agreements. There are usually exceptions to these restrictions on licensing fees for auctions (e.g. of the 4G phone spectrum), natural resources (e.g. mining and forestry licences) and mandatory contributions to universal service (e.g.
for postal services).
The proposed DRD often include a proposal that a licence once granted must take effect without undue delay (in accordance with its terms and conditions).
This prevents governments from changing their mind (e.g. when a new government comes to power, or there has been a change in external circumstances - e.g. a nuclear power plant accident -, or of public opinion, etc.).
While the general exceptions in GATS for health and the environment etc. often apply to these proposed DRD, one 2015 study found these WTO exceptions (for goods and services) have only worked once out of 44 attempts to use them.
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