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I. Preamble back to top
A. Text of the Preamble
Members,
Recognizing the
growing importance of trade in services for the growth and development
of the world economy;
Wishing to
establish a multilateral framework of principles and rules for trade in
services with a view to the expansion of such trade under conditions of
transparency and progressive liberalization and as a means of promoting
the economic growth of all trading partners and the development of
developing countries;
Desiring the early
achievement of progressively higher levels of liberalization of trade in
services through successive rounds of multilateral negotiations aimed at
promoting the interests of all participants on a mutually advantageous
basis and at securing an overall balance of rights and obligations,
while giving due respect to national policy objectives;
Recognizing the
right of Members to regulate, and to introduce new regulations, on the
supply of services within their territories in order to meet national
policy objectives and, given asymmetries existing with respect to the
degree of development of services regulations in different countries,
the particular need of developing countries to exercise this right;
Desiring to
facilitate the increasing participation of developing countries in trade
in services and the expansion of their service exports including, inter
alia, through the strengthening of their domestic services capacity and
its efficiency and competitiveness;
Taking particular
account of the serious difficulty of the least-developed countries in
view of their special economic situation and their development, trade
and financial needs;
Hereby agree as
follows:
B. Interpretation and Application of the Preamble
1. “transparency”
1. In US —
Gambling, the Panel found that the scope of the United States’
commitment in its GATS Schedule on “Other recreational services,
except sporting” extends to gambling and betting services. The Panel
considered that its conclusion was consistent with the object and
purpose of “transparency”:
“The object and purpose of the GATS lends
support to the conclusion that the ordinary meaning of the terms used in
the US Schedule, when read in their context, is that the United States
has undertaken specific commitments on gambling and betting services in
sub-sector 10.D of its Schedule. Our conclusion derives from the need to
provide clarity and precision in respect of the US entry under
sub-sector 10.D (Other recreational services, except sporting) and the
fact that, unless otherwise indicated in the schedule, Members were
assumed to have relied on W/120 and the corresponding CPC references.
The need for clarity and precision in Members’
schedules referred to in the 1993 Scheduling Guidelines is consistent
with the preamble to the GATS which stipulates, inter alia, that, in
establishing the GATS, Members sought the expansion of trade in services
“under conditions of transparency”. This requirement of transparency
is undoubtedly an object and purpose of the GATS — and the WTO in
general — and applies equally to GATS schedules of specific
commitments. Indeed, schedules of specific commitments determine, inter
alia, the scope of market access and national treatment obligations that
Members undertake under the GATS. It is, therefore, important that
schedules be readily understandable by all other WTO Members, as well as
by services suppliers and consumers.
The Appellate Body found that “the security and
predictability of ‘the reciprocal and mutually advantageous
arrangements directed to the substantial reduction of tariffs and other
barriers to trade’ is an object and purpose of the WTO Agreement,
generally, as well as of GATT 1994.”(1) This confirms the
importance of the security and predictability of Members’ specific
commitments, which is equally an object and purpose of the GATS.”(2)
2. The Appellate Body
in US — Gambling approved the Panel’s finding of a
need for precision and clarity in scheduling in the following terms:
“The Panel referred to the requirement of “transparency”
found in the preamble to the GATS, as supporting the need for precision
and clarity in scheduling, and underlining the importance of having
Schedules that are “readily understandable by all other WTO Members,
as well as by services suppliers and consumers”.(3) The Panel
also referred to the Appellate Body Report in EC — Computer
Equipment as follows:
The Appellate Body found that “the security and
predictability of ‘the reciprocal and mutually advantageous
arrangements directed to the substantial reduction of tariffs and other
barriers to trade’ is an object and purpose of the WTO Agreement,
generally, as well as of GATT 1994.” This confirms the importance of
the security and predictability of Members’ specific commitments,
which is equally an object and purpose of the GATS. (original footnote
omitted)
We agree with the Panel’s characterization of
these objectives, along with its suggestion that they reinforce the
importance of Members’ making clear commitments.”(4)
2. “progressive liberalization”
3. In China —
Publications and Audiovisual Products, the Panel found that the
scope of China’s commitment in its GATS Schedule on “Sound recording
distribution services” extends to sound recordings distributed in
non-physical form, through technologies such as the Internet. The Panel
considered that its interpretation was consistent with the object and
purpose of the GATS:
“We now verify whether our interpretation of
China’s commitment on “Sound recording distribution services” is
consistent with the object and purpose of the GATS. We note that the
Preamble of the GATS indicates that the Agreement is aimed, inter
alia, at establishing “a multilateral framework of principles and
rules for trade in services with a view to the expansion of such trade
under conditions of transparency and progressive liberalization”. In
light of this general object and purpose, the Preamble also provides
that commitments negotiated under the Agreement should aim at “securing
an overall balance of rights and obligations” between the Members. We
find that our interpretation of China’s commitment on “Sound
recording distribution services” is consistent with this object and
purpose.”(5)
4. In China —
Publications and Audiovisual Products, China argued on appeal that
the Panel’s interpretation of “Sound recording distribution services”
is inconsistent with the object and purpose of the GATS and, in
particular, with the principle of “progressive liberalization”. More
specifically, China argued that the Panel interpreted the entry “Sound
recording distribution services” according to the contemporary meaning
of the words it contains, but that the principle of “progressive
liberalization” does not allow for the expansion of the scope of the
commitments of a WTO Member by interpreting the terms used in the
Schedule based on the meaning of those terms at the time of
interpretation. The Appellate Body saw no error in the Panel’s
consideration of the object and purpose of the GATS in general, and
considered that the principle of “progressive liberalization” does
not lend support to an interpretation that would constrain the scope and
coverage of specific commitments that have already been undertaken by
Members and by which they are bound:
“We observe that the GATS preamble lists various
objectives, including the “establish[ment] of a multilateral framework
of principles and rules for trade in services with a view to the
expansion of such trade under conditions of transparency and progressive
liberalization”, and the “early achievement of progressively higher
levels of liberalization of trade in services through successive rounds
of multilateral negotiations”. The Panel found that its interpretation
of “Sound recording distribution services” is consistent with the
objectives listed in the GATS preamble.
We do not disagree with the Panel that nothing in
the GATS preamble appears to contradict an interpretation of “Sound
recording distribution services” as extending to electronic
distribution of sound recordings. At the same time, we observe that none
of the objectives listed in the GATS preamble provides specific guidance
as to the correct interpretation to be given to China’s GATS Schedule
entry “Sound recording distribution services”.
The principle of progressive liberalization is
reflected in the structure of the GATS, which contemplates that WTO
Members undertake specific commitments through successive rounds of
multilateral negotiations with a view to liberalizing their services
markets incrementally, rather than immediately and completely at the
time of the acceptance of the GATS. The scheduling of specific
commitments by service sectors and modes of supply represents another
manifestation of progressive liberalization. In making specific
commitments, Members are not required to liberalize fully the chosen
sector, but may limit the coverage to particular subsectors and modes of
supply and maintain limitations, conditions, or qualifications on market
access and national treatment, provided that they are inscribed in their
Schedules. We do not consider, however, that the principle of
progressive liberalization lends support to an interpretation that would
constrain the scope and coverage of specific commitments that have
already been undertaken by Members and by which they are bound.”(6)
5. In addition, the
Appellate Body stated that it was not persuaded that the meanings of the
terms “sound recording” and “distribution” had changed between
the time of China’s accession to the WTO (2001) and the time of the
Panel’s interpretation (2009). Moreover, the Appellate Body considered
that the terms of a GATS schedule should be interpreted in accordance
with concept of evolutionary interpretation:
“More generally, we consider that the terms used
in China’s GATS Schedule (“sound recording” and “distribution”)
are sufficiently generic that what they apply to may change over time.
In this respect, we note that GATS Schedules, like the GATS itself and
all WTO agreements, constitute multilateral treaties with continuing
obligations that WTO Members entered into for an indefinite period of
time, regardless of whether they were original Members or acceded after
1995.(7)
We further note that interpreting the terms of
GATS specific commitments based on the notion that the ordinary meaning
to be attributed to those terms can only be the meaning that they had at
the time the Schedule was concluded would mean that very similar or
identically worded commitments could be given different meanings,
content, and coverage depending on the date of their adoption or the
date of a Member’s accession to the treaty. Such interpretation would
undermine the predictability, security, and clarity of GATS specific
commitments, which are undertaken through successive rounds of
negotiations(8), and which must be interpreted in accordance with
customary rules of interpretation of public international law.”(9)
Part I: Scope and Definition
II. Article I back to top
A. Text of Article I
Article I: Scope and Definition
1. This Agreement applies
to measures by Members affecting trade in services.
2. For the purposes of
this Agreement, trade in services is defined as the supply of a service:
(a) from the territory of
one Member into the territory of any other Member;
(b) in the territory of
one Member to the service consumer of any other Member;
(c) by a service supplier
of one Member, through commercial presence in the territory of any other
Member;
(d) by a service supplier
of one Member, through presence of natural persons of a Member in the
territory of any other Member.
3. For the purposes of
this Agreement:
(a) “measures by Members”
means measures taken by:
(i) central, regional or
local governments and authorities; and
(ii) non-governmental
bodies in the exercise of powers delegated by central, regional or local
governments or authorities;
In fulfilling its obligations and commitments
under the Agreement, each Member shall take such reasonable measures as
may be available to it to ensure their observance by regional and local
governments and authorities and non-governmental bodies within its
territory;
(b) “services”
includes any service in any sector except services supplied in the
exercise of governmental authority;
(c) “a service supplied
in the exercise of governmental authority” means any service which is
supplied neither on a commercial basis, nor in competition with one or
more service suppliers.
B. Interpretation and Application of Article I
1. Scope of GATS
(a) Measures relating to judicial and
administrative assistance
6. With respect to
measures relating to judicial and administrative assistance in the
context of Article II of the GATS, as referenced in
paragraph 30 below,
at its meeting of 1 March 1995, the Council for Trade in Services agreed
to adopt the conclusion of the Sub-Committee on Services concerning
measures relating to judicial and administrative assistance.(10)
The adopted conclusion, inter alia, states that none of the
provisions of the GATS would apply to such measures.(11)
(b) Measures relating to the entry and stay of
natural persons
7. With respect to the
basis for drawing the distinction between “temporary” and “permanent”
residency in the context of the GATS, see paragraph 234
below.
(c) Electronic commerce
8. At its meeting of
25 September 1998, the General Council adopted the Work Programme on
Electronic Commerce, which mandated the Council for Trade in Services to
examine and report on the treatment of electronic commerce in the GATS
legal framework.(12)
2. Article I:1
(a) “measures affecting trade in services”
9. The Panel in EC
— Bananas III defined the scope of application of the GATS in the
following terms:
“[N]o measures are excluded a priori from
the scope of the GATS as defined by its provisions. The scope of the
GATS encompasses any measure of a Member to the extent it affects the
supply of a service regardless of whether such measure directly governs
the supply of a service or whether it regulates other matters but
nevertheless affects trade in services.”(13)
10. Based on its
interpretation of the scope of the GATS set out above, the Panel in EC
— Bananas III concluded that there was “no legal basis for an a
priori exclusion of measures within the EC banana import licensing
regime from the scope of the GATS”.(14) The Appellate Body
upheld this finding and held that no provision of the Agreement “suggest[s]
a limited scope of application for the GATS”:
“In addressing this issue, we note that Article
I:1 of the GATS provides that ‘[t]his Agreement applies to measures by
Members affecting trade in services’. In our view, the use of the term
‘affecting’ reflects the intent of the drafters to give a broad
reach to the GATS. The ordinary meaning of the word ‘affecting’
implies a measure that has ‘an effect on’, which indicates a broad
scope of application. This interpretation is further reinforced by the
conclusions of previous panels that the term ‘affecting’ in the
context of Article III of the GATT is wider in scope than such terms as
‘regulating’ or ‘governing’. … We also note that Article
I:3(b) of the GATS provides that ‘ ’services’ includes any service
in any sector except services supplied in the exercise of governmental
authority’ (emphasis added), and that Article
XXVIII(b) of the GATS
provides that the ‘ ’supply of a service’ includes the production,
distribution, marketing, sale and delivery of a service’. There is
nothing at all in these provisions to suggest a limited scope of
application for the GATS. … For these reasons, we uphold the Panel’s
finding that there is no legal basis for an a priori exclusion of
measures within the EC banana import licensing regime from the scope of
the GATS.”(15)
11. The Appellate Body
in Canada — Autos stated that whether a measure is “affecting”
trade in services must be assessed before any further consistency of
this measure with other GATS provision is considered:
“[T]he fundamental structure and logic of
Article I:1, in relation to the rest of the GATS, require that
determination of whether a measure is, in fact, covered by the GATS must
be made before the consistency of that measure with any substantive
obligation of the GATS can be assessed.
Article II:1 of the GATS states expressly that it
applies only to “any measure covered by this Agreement”. This
explicit reference to the scope of the GATS confirms that the measure at
issue must be found to be a measure “affecting trade in services”
within the meaning of Article I:1, and thus covered by the GATS, before
any further examination of consistency with Article II can logically be
made. We find, therefore, that the Panel should have inquired, as a
threshold question, into whether the measure is within the scope of the
GATS by examining whether the import duty exemption is a measure “affecting
trade in services” within the meaning of Article
I. In failing to do
so, the Panel erred in its interpretative approach.
…
[W]e believe that at least two key legal issues
must be examined to determine whether a measure is one “affecting
trade in services”: first, whether there is “trade in services” in
the sense of Article I:2; and, second, whether the measure in issue “affects”
such trade in services within the meaning of Article
I:1.”(16)
12. Rejecting the
notion that a panel could directly determine whether a measure was “affecting”
trade in services under Article I:1 simply by examining whether the
measure violated Article II or Article XVII of
GATS, the Appellate Body
in Canada — Autos stated that a panel needed instead to examine
the effect of the measure on the relevant services as services,
or upon the service suppliers in their capacity as service suppliers.
It criticized the Panel’s approach in the following terms:
“[T]he Panel … never examined whether or how
the import duty exemption affects wholesale trade service suppliers
in their capacity as service suppliers. Rather, the Panel simply
stated:
‘Like the measures at issue in the EC —
Bananas III case, the import duty exemption granted only to manufacturer
beneficiaries bears upon conditions of competition in the supply of
distribution services, regardless of whether it directly governs or
indirectly affects the supply of such services. (emphasis added)’
We do not consider this statement of the Panel to
be a sufficient basis for a legal finding that the import duty exemption
‘affects’ wholesale trade services of motor vehicles as services, or
wholesale trade service suppliers in their capacity as service
suppliers. The Panel failed to analyze the evidence on the record
relating to the provision of wholesale trade services of motor vehicles
in the Canadian market. It also failed to articulate what it understood Article
I:1 to require by the use of the term ‘affecting’. Having
interpreted Article I:1, the Panel should then have examined all the
relevant facts, including who supplies wholesale trade services of motor
vehicles through commercial presence in Canada, and how such
services are supplied. It is not enough to make assumptions. Finally,
the Panel should have applied its interpretation of ‘affecting trade
in services’ to the facts it should have found.
The European Communities and Japan may well be
correct in their assertions that the availability of the import duty
exemption to certain manufacturer beneficiaries of the United States
established in Canada, and the corresponding unavailability of this
exemption to manufacturer beneficiaries of Europe and of Japan
established in Canada, has an effect on the operations in Canada of
wholesale trade service suppliers of motor vehicles and, therefore, ‘affects’
those wholesale trade service suppliers in their capacity as service
suppliers. However, the Panel did not examine this issue. The Panel
merely asserted its conclusion, without explaining how or why it came to
its conclusion. This is not good enough.”(17)
13. In China —
Publications and Audiovisual Products, the Panel found that various
measures at issue were measures “affecting” the supply of services.
The Panel noted that it was not in dispute that the measures at issue
“regulate or govern” certain matters, and stated that “[s]ince the
term “affecting” is wider in scope than “regulating” or “governing”,
we therefore consider that these measures are “affecting” the supply
of [services]”.(18)
3. Article I:2(a)
(a) Means of delivery covered
14. The Panel in US
— Gambling stated that supply of a service through mode 1 includes
all means of delivery:
“To sum up, we conclude that mode 1 includes all
means of delivery. We are of the view that when a Member inscribes the
word “None” in the market access column of its schedule for mode 1,
it commits itself not to maintain measures which prohibit the use of
one, several or all means of delivery under mode 1 in a committed sector
or sub-sector. This is especially so in sectors and sub-sectors where
cross-border supply is effected essentially if not exclusively through
the Internet.”(19)
…
“Therefore, a market access commitment for mode
1 implies the right for other Members’ suppliers to supply a service
through all means of delivery, whether by mail, telephone, Internet
etc., unless otherwise specified in a Member’s Schedule. We note that
this is in line with the principle of “technological neutrality”,
which seems to be largely shared among WTO Members.”(20)
15. In China —
Publications and Audiovisual Products, the Panel considered that the
principle of “technological neutrality” “might have come into play”
had it found that there was doubt about whether it also covered the
distribution of content on non-physical media, but that this was not the
case in that dispute:
“In light of our interpretation of China’s
commitment, we now examine the US argument on “technological
neutrality”. This principle, according to the United States,
establishes that any differences between the supply of the sound
recording distribution services on physical, as compared to
non-physical, media are merely “technological”, and thus should not,
unless specified in China’s Schedule, serve to narrow the scope of
China’s commitment. The United States derives this principle from a
statement in a Progress Report on a “Work Programme on Electronic
Commerce”, dated 19 July 1999, prepared by the Council for Trade in
Services for the General Council.(21) The statement says:
“It was also the general view that the GATS is
technologically neutral in the sense that it does not contain any
provisions that distinguish between the different technological means
through which a service may be supplied.”(22)
We note that this statement has been referred to
by the panel in US — Gambling. That panel, in examining the
range of possible means of delivery included in a full market access
commitment on cross-border supply, concluded that such a commitment
includes “all means of delivery, whether by mail, telephone, Internet
etc., unless otherwise specified in a Member’s Schedule.”(23)
The panel in that case added that this was “in line” with the
principle of technological neutrality that “seems to be largely shared
among WTO Members” as evidenced by the statement in the Progress
Report.(24)
We note, however, that in interpreting China’s
commitment on “sound recording distribution services”, we have no
need to invoke a principle of technological neutrality. We have already
found that the core meaning of China’s commitment on these services
includes the distribution of audio content on non-physical media. The
principle of technological neutrality might have come into play had we
found that China’s commitment covered distribution on physical media
and that there was doubt about whether it also covered the distribution
of content on non-physical media. But this was not the case here.”(25)
(b) Relevance of where the supplier operates,
or is present
16. The Panel in Mexico
— Telecoms found that “the services at issue, in which United
States suppliers link their networks at the border with those of Mexican
suppliers for termination within Mexico, without United States’
suppliers operating, or being present in some way, in Mexico, are
services which are supplied cross-border within the meaning of Article
I:2(a) of the GATS.”(26) In examining
Article I:2(a), the Panel
found that this provision does not require that the service supplier
must itself operate, or be present, in the territory into which the
service is supplied:
“Subparagraph (a) describes what is referred to
as ‘cross-border’, or ‘mode 1’, supply of trade in services. The
ordinary meaning of the words of this provision indicate that the
service is supplied from the territory of one Member into the territory
of another Member. Subparagraph (a) is silent as regards the supplier
of the service. The words of this provision do not address the service
supplier or specify where the service supplier must operate, or be
present in some way, much less imply any degree of presence of the
supplier in the territory into which the service is supplied.
If we look at the wording of the other modes of
supply, we note that the silence in subparagraph (a) as regards the
presence of the supplier of the service is in marked contrast to the
modes of supply described in subparagraphs (c) (‘commercial presence’)
and (d) (‘presence of natural persons’). In both cases, the presence
of the service supplier within the territory where the service is
supplied is specifically mentioned. The context provided by
subparagraphs (c) and (d) therefore suggests that, where the presence of
the service supplier was required to define a particular mode of supply,
the drafters of the GATS expressed this clearly.”(27)
(c) Relevance of ownership and control of the
infrastructure used to supply the service
17.
The Panel in Mexico
— Telecoms, in examining the definition of basic
telecommunications services contained in the GATS, found that the
definition does not imply that the supplier of such services must itself
own or control the entire network infrastructure over which the
cross-border service is supplied:
“According to the definition, basic
telecommunications services are services supplied ‘between two or more
points’. The definition nowhere indicates that a single
supplier must undertake the transmission between the ‘points’. The
words ‘between two or more points’ suggest, in fact, the contrary.
Transmission to the various ‘points’ requested by a customer
requires ownership of or access to an expansive transmission
infrastructure. It would be unreasonable to assume that the definition
of telecommunications services applies only where a telecommunications
supplier itself owns or controls a complete global infrastructure
allowing it to reach every potential ‘point’ requested by its
customers. Had WTO Members intended this to be the case, they surely
would have made it explicit in the definition.”(28)
18. The Panel in Mexico
— Telecoms found further support for this view by examining the
meaning of “public long-distance voice telephone services”,
contained in the UN 1991 Provisional Central Product Classification, and
referenced in the GATS Sectoral List (W/120) used by Mexico and many
other Members in scheduling their telecommunications commitments:
“This definition makes clear that the service of
long-distance telephony consists of giving a customer access to both ‘the
supplier’s and connecting operator’s entire telephone network’
(emphasis added). The definition of voice telephony services thus
anticipates interworking of both operating networks in order for the
service to be performed. No element of the definition implies or
requires ‘end-to-end’ service by one and the same operator.
Moreover, when more than one operator is involved, the service supplied
to customers includes access to the ‘entire networks’ of both
operators. The service supplied is not therefore the simple transmission
of a voice message ‘up to’ a connecting operator’s network;
rather, the service is defined as spanning both operators’ networks.
It therefore follows that supply of the service involves call completion
spanning both operators’ networks.”(29)
19. The Panel in Mexico
— Telecoms specified that the cross-border supply of
telecommunications services could take place even if elements of the
service were subcontracted or carried out with assets owned by another
firm:
“More generally, a supplier of services under
the GATS is no less a supplier solely because elements of the service
are subcontracted to another firm, or are carried out with assets owned
by another firm. What counts is the service that the supplier offers and
has agreed to supply to a customer. In the case of a basic
telecommunications service, whether domestic or international, or
supplied cross-border or through commercial presence, the supplier
offers its customer the service of completing the customer’s
communications. Having done so, the supplier is responsible for making
any necessary subsidiary arrangements to ensure that the communications
are in fact completed. The customer typically pays its supplier the
price of the end-to-end service, regardless of whether the supplier
contracts with, or uses the assets of, another firm to supply the
service.”(30)
(d) Relevance of degree of interaction between
different operators
20. Referring again to
the definition of “public long-distance voice telephone services” in
the UN 1991 Provision Central Product Classification, the Panel in Mexico
— Telecoms stated that the reference in this definition to
services “necessary to establish and maintain communications”
suggested a high degree of interaction between operators in the
cross-border supply of a telecommunications service:
“We observe that basic telecommunications
services supplied between Members do require, during the delivery of the
service, a high degree of interaction between each other’s networks,
since the service typically involves a continuous, rapid and often
two-way flow of intangible customer and operator data. The interaction
results in a seamless service between the originating and terminating
segments, which suggests that the service be considered as a single,
cross-border service.”(31)
(e) Relevance of supply by means of “linking”
to another operator
21. In arriving at the
conclusion discussed in paragraph 16 above, the Panel in Mexico —
Telecoms considered that Mexico’s claim that he supplier itself
must transmit the customer data from one Member to another Member:
“If linking with another operator implied that
the originating operator were no longer ‘supplying’ the service, an
absurd consequence would result. Not only would telecommunications
services delivered in this manner not be ‘supplied’ cross-border in
the sense of Article I:2(a), they would also not be ‘supplied’ under
any of the other modes of supply under the GATS. Nearly all
telecommunications services currently supplied across borders would then
fall outside the scope of the GATS. Present and future liberalization of
this form of international telecommunications trade would not be
possible within the WTO, without a new or amended treaty. Such an
interpretation would be inconsistent with the fact that the GATS ‘applies
to … trade in services’ (Article I:1), and that ‘trade in services’
is defined comprehensively as the supply of services through four modes
of supply. The GATS creates a wide-ranging agreement covering all
services and modes of supply, in order to allow progressive
liberalization of trade in services between Members. This suggests that
the supply of basic telecommunications services — the ‘transmission
of customer supplied information’ — must include supply by means
which involve or require linking to another operator to complete the
service.”(32)
4. Article I:2(c)
(a) Supply by a firm commercially present in
one Member into the territory of another Member
22. The Panel in Mexico
— Telecoms examined whether international services supplied by a
firm in Mexico fell within the definition of services supplied through
commercial presence. It found that there was no territorial requirement
contained in paragraph 2(c) other than a commercial presence in the
territory of any other Member:
“The definition of services supplied through a
commercial presence makes explicit the location of the service supplier.
It provides that a service supplier has a commercial presence — any
type of business or professional establishment — in the territory
of any other Member. The definition is silent with respect to any other
territorial requirement (as in cross-border supply under mode 1) or
nationality of the service consumer (as in consumption abroad under mode
2). Supply of a service through commercial presence would therefore not
exclude a service that originates in the territory in which a commercial
presence is established (such as Mexico), but is delivered into the
territory of any other Member (such as the United States).(33)
5. Article I:3(b)
23. The Appellate Body
in US-Gambling examined the context provided by the structure
of GATS in interpreting the specific commitments made by the US in its
GATS Schedule. The Appellate Body stated that from the definition of ‘services’
and ‘sector’(34) found in GATS, it follows that, firstly, a
Member may schedule commitments in respect of any service and
secondly, that a particular service cannot fall within two different
sectors or sub sectors of a Member’s Schedule:
“To us, the structure of GATS necessarily
implies two things. First, because the GATS covers all services
except those supplied in the exercise of governmental authority, it
follows that a Member may schedule a specific commitment in respect of
any service. Secondly, because a Member’s obligations regarding a
particular service depend on the specific commitments that it has made
with respect to the sector or subsector within which the service falls,
a specific service cannot fall within two different sectors or
subsectors. In other words, the sectors and subsectors in a Member’s
Schedule must be mutually exclusive.“(35)
6. Relationship with the GATT 1994
24. The Panel in Canada
— Periodicals, in a finding subsequently not addressed by the
Appellate Body, rejected the argument by Canada that Article III of the
GATT 1994 does not apply to a measure which is within the purview of the
GATS:
“Canada’s argument is essentially that since
Canada has made no specific commitments for advertising services under
GATS, the United States should not be allowed to ‘obtain benefits
under a covered agreement that have been expressly precluded under
another covered agreement’. … Put another way, Canada seems to argue
that if a Member has not undertaken market-access commitments in a
specific service sector, that non-commitment should preclude all the
obligations or commitments undertaken in the goods sector to the extent
that there is an overlap between the non-commitment in services and the
obligations or commitments in the goods sector. Canada claims that
because of the existence of the two instruments — GATT 1994 and GATS
— both of which may apply to a given measure, ‘it is necessary to
interpret the scope of application of each such as to avoid any overlap’.
We are not fully convinced by Canada’s
characterization of the Excise Tax as a measure intended to regulate
trade in advertising services, in view of the fact that there is no
comparable regulation on advertisements through other media and the fact
that the tax is imposed on a ‘per issue’ basis. However, assuming
that Canada intended to carve out Part V.1 of the Excise Tax Act from
the coverage of its GATS commitments by not inscribing advertising
services in its Schedule…, does that exonerate Canada from the Panel’s
scrutiny regarding the alleged violation of its obligations and
commitments under GATT 1994?
In order to answer this question, we need to
examine the structure of the WTO Agreement including its annexes.
Article II:2 of the WTO Agreement is the relevant provision, which reads
as follows:
‘The agreements and associated legal instruments
included in Annexes 1, 2 and 3 … are integral parts of this Agreement,
binding on all Members’ ….”(36)
25. Recalling the
principle of effective treaty interpretation, the Panel then found that
“obligations under GATT 1994 and GATS can co-exist and that one does
not override the other”:
“According to Article 31(1) of the 1969 Vienna
Convention on the Law of Treaties (‘Vienna Convention’), a treaty
must be interpreted in good faith in accordance with the ordinary
meaning to be given to the terms of the treaty in their context and in
the light of its object and purpose. Furthermore, as the Appellate Body
has repeatedly pointed out, ‘one of the corollaries of the ‘general
rule of interpretation’ in the Vienna Convention is that
interpretation must give meaning and effect to all the terms of the
treaty. An interpreter is not free to adopt a reading that would result
in reducing whole clauses or paragraphs of a treaty to redundancy or
inutility.’…(37) The ordinary meaning of the texts of GATT
1994 and GATS as well as Article II:2 of the WTO
Agreement, taken
together, indicates that obligations under GATT 1994 and GATS can
co-exist and that one does not override the other. If the consequences
suggested by Canada were intended, there would have been provisions
similar to Article XVI:3 of the WTO Agreement or the General
Interpretative Note to Annex 1A in order to establish hierarchical order
between GATT 1994 and GATS. The absence of such provisions between the
two instruments implies that GATT 1994 and GATS are standing on the same
plain in the WTO Agreement, without any hierarchical order between the
two.”(38)
26. The Panel in Canada
— Periodicals finally rejected the notion that overlaps between
the subject-matter of the GATT 1994 and GATS should be avoided. Rather,
it noted that certain types of services have long been associated with
GATT disciplines, as evidenced, inter alia, by certain GATT Panel
Reports:
“In this connection, Canada also argues that
overlaps between GATT 1994 and GATS should be avoided. … We disagree.
Overlaps between the subject matter of disciplines in GATT 1994 and in
GATS are inevitable, and will further increase with the progress of
technology and the globalization of economic activities. We do not
consider that such overlaps will undermine the coherence of the WTO
system. In fact, certain types of services such as transportation and
distribution are recognized as a subject-matter of disciplines under
Article III:4 of GATT 1994. It is also noteworthy in this respect that
advertising services have long been associated with the disciplines
under GATT Article III. As early as 1970, the Working Party on Border
Tax Adjustment made the following observation:
‘The Working Party noted that there was a
divergence of views with regard to the eligibility for adjustment of
certain categories of tax and that these could be subdivided into
(a) ‘Taxes occultes’
which the OECD defined as consumption taxes on capital equipment,
auxiliary materials and services used in the transportation and
production of other taxable goods. Taxes on advertising, energy,
machinery and transport were among the more important taxes which might
be involved. …;
(b) Certain other taxes,
…’…(39)
We also note that there are several adopted panel
reports that examined the issue of services in the context of GATT
Article III. For instance, the panel on Canada — Import,
Distribution and Sale of Certain Alcoholic Drinks by Provincial
Marketing Agencies addressed the issues of access to points of sale
and restrictions on private delivery of beer. … The panel on United
States — Measures Affecting Alcoholic and Malt Beverages also
dealt with the issues of distribution of wine and beer. … More to the
point, the panel on Thailand — Restrictions on Importation of and
Internal Taxes on Cigarettes specifically addressed the question of
advertising …
In any event, since Canada admits that in the
present case there is no conflict between its obligations under GATS and
under GATT 1994 … there is no reason why both GATT and GATS
obligations should not apply to the Excise Tax Act. Thus, we conclude
that Article III of GATT 1994 is applicable to Part V.1 of the Excise
Tax Act.”(40)
27. On appeal, the
Appellate Body in Canada — Periodicals did not find it
necessary “to pronounce on the issue of whether there can be potential
overlaps between the GATT 1994 and the GATS, as both
participants agreed that it is not relevant in this appeal.” The
Appellate Body then held that the Canadian measure at issue, as an
excise tax on certain periodicals, clearly applied to goods. The
Appellate Body subsequently examined the measure under Article III:2 of
the GATT 1994. (41)
28. While in Canada
— Periodicals the Appellate Body did not find it necessary to
pronounce on the question whether there could be overlaps between the
scope of application of the GATT 1994 and GATS, in EC — Bananas III
the Appellate Body confirmed the approach of the Panel in Canada —
Periodicals. The Appellate Body rejected the notion that the GATT
1994 and GATS are “mutually exclusive agreements” and held that
there was a “category of measures that could be found to fall within
the scope of both the GATT 1994 and the GATS”:
“The second issue is whether the GATS and the
GATT 1994 are mutually exclusive agreements. The GATS was not intended
to deal with the same subject matter as the GATT 1994. The GATS was
intended to deal with a subject matter not covered by the GATT 1994,
that is, with trade in services. Thus, the GATS applies to the supply of
services. It provides, inter alia, for both MFN treatment and
national treatment for services and service suppliers. Given the
respective scope of application of the two agreements, they may or may
not overlap, depending on the nature of the measures at issue. Certain
measures could be found to fall exclusively within the scope of the GATT
1994, when they affect trade in goods as goods. Certain measures could
be found to fall exclusively within the scope of the GATS, when they
affect the supply of services as services. There is yet a third category
of measures that could be found to fall within the scope of both the
GATT 1994 and the GATS. These are measures that involve a service
relating to a particular good or a service supplied in conjunction with
a particular good. In all such cases in this third category, the measure
in question could be scrutinized under both the GATT 1994 and the GATS.
However, while the same measure could be scrutinized under both
agreements, the specific aspects of that measure examined under each
agreement could be different. Under the GATT 1994, the focus is on how
the measure affects the goods involved. Under the GATS, the focus is on
how the measure affects the supply of the service or the service
suppliers involved. Whether a certain measure affecting the supply of a
service related to a particular good is scrutinized under the GATT 1994
or the GATS, or both, is a matter that can only be determined on a case
by case basis. This was also our conclusion in the Appellate Body Report
in Canada — Periodicals.”(42)
29. In China —
Publications and Audiovisual Products, the Panel and the Appellate
Body found that China had acted inconsistently with the “trading
rights commitments” found in China’s Protocol of Accession and China’s
Accession Working Party Report. China argued, inter alia, that
because one of the measures at issue regulated trade in services, it
should be excluded from scrutiny under China’s “trading rights
commitments”, which are applicable only to trade in goods. The
Appellate Body saw no error in the Panel’s finding that the measure
was subject to China’s trading rights commitments, in that it
necessarily affects who may engage in importing of hard-copy
cinematographic films and, therefore, goods. While the argument raised
by China did not concern the relationship between the GATS and the GATT
1994, in the course of its analysis, the Appellate Body found guidance
in its prior pronouncements regarding the relationship between the GATS
and the GATT 1994:
“We understand China to argue that, because the Film
Regulation regulates trade in services, it should be excluded from
scrutiny under China’s trading rights commitments, which are
applicable only to trade in goods. We note, in this regard, that the
Appellate Body has found that a measure could be simultaneously subject
to obligations relating to trade in goods under the GATT 1994 and to
obligations relating to trade in services under the GATS. As the
Appellate Body noted in Canada — Periodicals, “[t]he entry
into force of the GATS, as Annex 1B of the WTO Agreement, does
not diminish the scope of application of the GATT 1994.”(43) In
EC — Bananas III, the Appellate Body observed that, although
the subject matter of the GATT 1994 and that of the GATS are different,
particular measures “could be found to fall within the scope of both
the GATT 1994 and the GATS”, and that such measures include those “that
involve a service relating to a particular good or a service supplied in
conjunction with a particular good.”(44) These findings
specifically concern the relationship between the GATS and the GATT
1994, and thus do not directly address the relationship between China’s
trading rights commitments and its commitments on trade in services.
Yet, these findings provide assistance in analyzing the issue of whether
a measure can be simultaneously subject to obligations relating to trade
in goods and those relating to trade in services. Given that China’s
trading rights commitments apply to trade in goods, the Appellate Body
findings in these earlier disputes are also relevant to resolving the
issue of whether measures regulating services may be subject to China’s
trading rights commitments.
The Appellate Body’s approach in the above two
disputes implies that a measure can regulate both goods and services and
that, as a result, the same measure can be subject to obligations
affecting trade in goods and obligations affecting trade in services.
…
…
We do not see the clear distinction drawn by China
between “content” and “goods”. Neither do we consider that
content and goods, and the regulation thereof, are mutually exclusive.
Content can be embodied in a physical carrier, and the content and
carrier together can form a good. For example, in Canada —
Periodicals, the Appellate Body found that “a periodical is a good
comprised of two components: editorial content and advertising content.
Both components can be viewed as having services attributes, but they
combine to form a physical product — the periodical itself.”(45)
Moreover, the United States points out that China’s Schedule of
Concessions on goods, which contains the Harmonized System heading 3706,
defines as a good “cinematographic film, exposed and developed,
whether or not incorporating sound track or consisting only of sound
track”. This confirms that a physical film reel containing content is
treated as a good under China’s own tariff regime. We therefore share
the view that China’s arguments “are premised on an artificial
dichotomy between film as mere content (which China contends is not a
good) and the physical carrier on which content may be embedded (which
China views as a good)”.”(46)
Part II: General Obligations and Disciplines
III. Article II back to top
A. Text of Article II
Article II: Most Favoured-Nation Treatment
1. 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.
2. A Member may maintain a
measure inconsistent with paragraph 1 provided that such a measure is
listed in, and meets the conditions of, the Annex on Article II
Exemptions.
3. The provisions of this
Agreement shall not be so construed as to prevent any Member from
conferring or according advantages to adjacent countries in order to
facilitate exchanges limited to contiguous frontier zones of services
that are both locally produced and consumed.
B. Interpretation and Application of Article II
1. Scope
(a) Measures relating to judicial and
administrative assistance
30. At its meeting of
1 March 1995, the Council for Trade in Services agreed to adopt the
following conclusion of the Sub-Committee on Services concerning
measures relating to judicial and administrative assistance:(47)
“At the end of the Uruguay Round it had been
agreed by participants that Article II of the GATS
(MFN) would not apply
to measures relating to judicial and administrative assistance. This
agreement was reflected in document MTN.GNS/W/177/Rev.1/Add.1 which
states:
‘It is agreed by participants that the
provisions of Article II (Most-Favoured National Treatment) do not apply
to measures relating to judicial and administrative assistance. In the
light of this agreement, the former footnote to Article II has been
deleted.’
The agreement was based on the view that
discrimination between service suppliers of different Members arising
from judicial and administrative assistance measures, apart from what is
already stipulated by the provisions of the GATS, would not have any
significant effect on conditions of competition between service
suppliers. In the subsequent consultations it was agreed that the same
logic could be applied to the whole of the GATS and that therefore none
of the provisions of the GATS would apply to such measures.”(48)
(b) Electronic commerce
31. With respect to
the application of Article II to electronic commerce, see the Progress
Report adopted by the Council for Trade in Services in the context of
the Work Programme on Electronic Commerce on 19 July 1999.(49)
2. Application
32. In Canada —
Autos, the Appellate Body explained how a Panel should proceed when
examining the consistency of a measure with Article II:1 of the
GATS:
after determining whether the measure under examination affects trade in
services, the examiner should make “factual findings as to treatment
of wholesale trade services and service suppliers of motor vehicles of
different Members commercially present” and, as the last step, apply
Article II:1 to these facts:
“The wording of this provision suggests that
analysis of the consistency of a measure with Article II:1 should
proceed in several steps. First, as we have seen, a threshold
determination must be made under Article I:1 that the measure is covered
by the GATS. This determination requires that there be ‘trade in
services’ in one of the four modes of supply, and that there be also a
measure which “affects” this trade in services. We have already held
that the Panel failed to undertake this analysis.
If the threshold determination is that the measure
is covered by the GATS, appraisal of the consistency of the measure with
the requirements of Article II:1 is the next step. The text of
Article
II:1 requires, in essence, that treatment by one Member of ‘services
and services suppliers’ of any other Member be compared with treatment
of ‘like’ services and service suppliers of ‘any other country’.
Based on these core legal elements, the Panel should first have rendered
its interpretation of Article II:1. It should then have made factual
findings as to treatment of wholesale trade services and service
suppliers of motor vehicles of different Members commercially present in
Canada. Finally, the Panel should have applied its interpretation of
Article II:1 to the facts as it found them.”(50)
33. The Appellate Body
in Canada — Autos subsequently disapproved of the Panel’s
application of Article II of the GATS to the facts in the case before
it. Specifically, the Appellate Body objected to what it considered to
be the Panel’s assumption that the application of an import duty
exemption to manufacturers automatically affected “competition among
wholesalers in their capacity as service suppliers”:
“Clearly, here the Panel is confusing the
application of the import duty exemption to manufacturers with its
possible effect on wholesalers. In our view, the Panel has conducted a
‘goods’ analysis of this measure, and has simply extrapolated its
analysis of how the import duty exemption affects manufacturers to
wholesale trade service suppliers of motor vehicles. The Panel surmised,
without analyzing the effect of the measure on wholesalers as service
suppliers, that the import duty exemption, granted to a limited number
of manufacturers, ipso facto affects conditions of competition among
wholesalers in their capacity as service suppliers. As we stated earlier
in respect of whether the measure at issue ‘affects trade in services’,
the Panel failed to demonstrate how the import duty exemption granted to
certain manufacturers, but not to other manufacturers, affects the
supply of wholesale trade services and the suppliers of wholesale trade
services of motor vehicles. In reaching its conclusions under Article
II:1 of the GATS, the Panel has neither assessed the relevant facts —
we see no analysis of any evidence relating to the supply of wholesale
trade services of motor vehicles — nor has it interpreted Article II of the
GATS and applied that interpretation to the facts it found.”(51)
3. Article II:1
(a) “no less favourable treatment”
34. In EC —
Bananas III, the European Communities argued that Article II of the
GATS did not cover de facto discrimination; the European
Communities claimed that if the drafters of the GATS had wished to make
the “modification of competitive conditions” requirement an integral
part of the “no less favourable treatment” test under the most-favoured-nation
clause, they would have done so explicitly. The Panel rejected this
argument, noting that Article XVII “is meant to provide for no less
favourable conditions of competition regardless of whether that is
achieved through the application of formally identical or formally
different measures … The absence of similar language in Article II is
not, in our view, a justification for giving a different ordinary
meaning in terms of Article 31(1) of the Vienna Convention to the words
‘treatment no less favourable’, which are identical in both Articles
II:1 and XVII:1.”(52) The Panel also opined that “if the
standard of ‘no less favourable treatment’ in Article II were to be
interpreted narrowly to require only formally identical treatment, that
could lead in many situations to the frustration of the objective behind
Article II which is to prohibit discrimination between like services and
service suppliers of other Members”.(53) The Appellate Body did
not agree with this reasoning of the Panel, but reached the same
conclusion as regards the applicability of Article II of GATS to de
facto discrimination:
“We find the Panel’s reasoning on this issue
to be less than fully satisfactory. The Panel interpreted Article II of the
GATS in the light of panel reports interpreting the national
treatment obligation of Article III of the
GATT. The Panel also referred
to Article XVII of the GATS, which is also a national treatment
obligation. But Article II of the GATS relates to MFN treatment, not to
national treatment. Therefore, provisions elsewhere in the GATS relating
to national treatment obligations, and previous GATT practice relating
to the interpretation of the national treatment obligation of Article
III of the GATT 1994 are not necessarily relevant to the interpretation
of Article II of the GATS. The Panel would have been on safer ground had
it compared the MFN obligation in Article II of the
GATS with the MFN
and MFN-type obligations in the GATT 1994.
Articles I and
II of the GATT 1994 have been
applied, in past practice, to measures involving de facto
discrimination. …
The GATS negotiators chose to use different
language in Article II and Article XVII of the GATS in expressing the
obligation to provide ‘treatment no less favourable’. The question
naturally arises: if the GATS negotiators intended that ‘treatment no
less favourable’ should have exactly the same meaning in Articles
II and XVII of the GATS, why did they not repeat
paragraphs 2 and 3 of
Article XVII in Article II? But that is not the question here. The
question here is the meaning of ‘treatment no less favourable’ with
respect to the MFN obligation in Article II of the
GATS. There is more
than one way of writing a de facto nondiscrimination provision.
Article XVII of the GATS is merely one of many provisions in the WTO
Agreement that require the obligation of providing ‘treatment no
less favourable’. The possibility that the two Articles may not have
exactly the same meaning does not imply that the intention of the
drafters of the GATS was that a de jure, or formal, standard
should apply in Article II of the GATS. If that were the intention, why
does Article II not say as much? The obligation imposed by
Article II is
unqualified. The ordinary meaning of this provision does not exclude de
facto discrimination. Moreover, if Article II was not applicable to de
facto discrimination, it would not be difficult — and, indeed, it
would be a good deal easier in the case of trade in services, than in
the case of trade in goods — to devise discriminatory measures aimed
at circumventing the basic purpose of that Article.
For these reasons, we conclude that ‘treatment
no less favourable’ in Article II:1 of the GATS should be interpreted
to include de facto, as well as de jure, discrimination.
We should make it clear that we do not limit our conclusion to this
case. We have some difficulty in understanding why the Panel stated that
its interpretation of Article II of the GATS applied ‘in casu’.”(54)
35. In Canada —
Autos, Canada argued that it was not possible to establish whether
treatment no less favourable had been granted or not, due to vertical
integration and exclusive distribution arrangements existing in the
motor vehicle industry between manufacturers and wholesale trade service
suppliers; Canada argued that these circumstances excluded any actual or
potential competition at the wholesale trade level. The Panel found that
these factual elements did not rule out the possibility of less
favourable treatment:
“We therefore find that vertical
integration and exclusive distribution arrangements between
manufacturers and wholesalers in the motor vehicle industry do not rule
out the possibility that treatment less favourable may be granted to
suppliers of wholesale trade services for motor vehicles. We also find
that vertical integration and exclusive distribution arrangements do not
preclude potential competition among wholesalers for the procurement of
vehicles from manufacturers and actual inter-brand competition for sales
to retailers.”(55)
(b) “like services and service suppliers”
36. The Panel in EC
— Bananas III, in a finding subsequently not reviewed by the
Appellate Body, addressed the issue of likeness under Article
II:
“[I]n our view, the nature and the
characteristics of wholesale transactions as such, as well as of each of
the different subordinated services mentioned in the head-note to
section 6 of the CPC, are ‘like’ when supplied in connection with
wholesale services, irrespective of whether these services are supplied
with respect to bananas of EC and traditional ACP origin, on the one
hand, or with respect to bananas of third-country or non-traditional ACP
origin, on the other. Indeed, it seems that each of the different
service activities taken individually is virtually the same and can only
be distinguished by referring to the origin of the bananas in respect of
which the service activity is being performed. Similarly, in our view,
to the extent that entities provide these like services, they are like
service suppliers.”(56)
37. The Panel in Canada
— Autos reiterated this approach, stating that “[w]e agree that
to the extent that the service suppliers concerned supply the same
services, they should be considered ‘like’ for the purpose of this
case.”(57)
(c) “aims-and-effects” test
38. In EC —
Bananas III, the Appellate Body rejected the application of the
so-called “aims-and-effects” test which had been previously adopted
by several GATT panels in interpreting GATT Article
III, to the national
treatment requirement contained in Article II or
Article VII of the GATS. See paragraph 131
below.
39. With respect to
the “aims-and-effects” test under GATT Article
III, see Article III
of the Chapter on the GATT 1994.
4. Exemptions from Article II
(a) Annex on Article II Exemptions
40. See Section
XXXIV.B.
(b) Exemptions in financial services
41. With respect to
exemptions from Article II of the GATS concerning financial services,
see the Fifth Protocol to the GATS,(58) adopted by the Committee
on Trade in Financial Services on 14 November 1997.(59)
(c) Exemptions in maritime transport services
42. With respect to
this issue, see the Decision on Maritime Transport Services adopted by
the Council for Trade in Services at its meeting of 28 June 1996, which
suspends negotiations on maritime transport services; the Decision
further states that such negotiations will resume with “the
commencement of comprehensive negotiations on Services” and that Article II of the
GATS will enter into force with respect to “international
shipping, auxiliary services and access to and use of port facilities”
when these negotiations have been concluded.(60)
(d) Exemptions in basic telecommunications
43. With respect to
this issue, see the Fourth Protocol to the GATS, adopted by the Council
for Trade in Services at its meeting of 30 April 1996.(61)
IV. Article III back to top
A. Text of Article III
Article III: Transparency
1. Each Member shall
publish promptly and, except in emergency situations, at the latest by
the time of their entry into force, all relevant measures of general
application which pertain to or affect the operation of this Agreement.
International agreements pertaining to or affecting trade in services to
which a Member is a signatory shall also be published.
2. Where publication as
referred to in paragraph 1 is not practicable, such information shall be
made otherwise publicly available.
3. Each Member shall
promptly and at least annually inform the Council for Trade in Services
of the introduction of any new, or any changes to existing, laws,
regulations or administrative guidelines which significantly affect
trade in services covered by its specific commitments under this
Agreement.
4. Each Member shall
respond promptly to all requests by any other Member for specific
information on any of its measures of general application or
international agreements within the meaning of paragraph
1. Each Member
shall also establish one or more enquiry points to provide specific
information to other Members, upon request, on all such matters as well
as those subject to the notification requirement in paragraph
3. Such
enquiry points shall be established within two years from the date of
entry into force of the Agreement Establishing the WTO (referred to in
this Agreement as the “WTO Agreement”). Appropriate flexibility with
respect to the time-limit within which such enquiry points are to be
established may be agreed upon for individual developing country
Members. Enquiry points need not be depositories of laws and
regulations.
5. Any Member may notify
to the Council for Trade in Services any measure, taken by any other
Member, which it considers affects the operation of this Agreement.(62)
B. Interpretation and Application of Article III
1. General
(a) Electronic commerce
44. With respect to
the applicability of Article III to electronic commerce, see the
Progress Report adopted by the Council for Trade in Services in the
context of the Work Programme on Electronic Commerce on 19 July 1999.(63)
(b) Accountancy services
45. With respect to
transparency in domestic regulations in the field of accountancy
services, see the Disciplines on Domestic Regulation in the Accountancy
Sector, adopted by the Council for Trade in Services at its meeting of
14 December 1998.(64)
2. Article III:3
(a) Format for notifications
46. On 1 March 1995,
the Council for Trade in Service approved the “Guidelines for
Notifications under the General Agreement on Trade in Services”.(65)
3. Article III:4
(a) Enquiry points
47. On 28 May 1996,
the Council for Trade in Services adopted the “Decision on the
Notification of the Establishment of Enquiry and Contact Points”,
which calls upon Members to notify the establishment of enquiry points
pursuant to Paragraph 4 of Article III.(66)
V. Article III bis
back to top
A. Text of Article III bis
Article III bis: Disclosure of
Confidential Information
Nothing in this Agreement
shall require any Member to provide confidential information, the
disclosure of which would impede law enforcement, or otherwise be
contrary to the public interest, or which would prejudice legitimate
commercial interests of particular enterprises, public or private.
B. Interpretation and Application of Article III bis
48. In EC —
Bananas III, the Panel referred to Article III
bis in the context of
concluding that information provided by the complainants sufficiently
established that entities of Complainants’ origin control subsidiaries
established in the European Communities that provide wholesale trade
services in bananas in and to the European Communities:
“As to the second point, i.e., whether these
non-EC companies control subsidiaries that supply wholesale trade
services in bananas and are commercially present in the EC, the
Complainants submitted a list entitled “Principal banana wholesaling
companies established in the EC that were owned or controlled by the
Complainants’ services suppliers, 1992”. The EC notes that no formal
records of shareholders and company registrations were submitted by the
Complainants. However, we recall that, according to Article III Bis
of GATS, “nothing in GATS requires any Member to provide confidential
information, the disclosure of which … would prejudice legitimate
commercial interests of particular enterprises”. According to the
Complainants, their information was limited in part based on
confidentiality concerns. Nonetheless, we believe that the Complainants’
evidence is sufficient to establish that there are non-EC companies that
control subsidiaries that supply wholesale trade services in bananas and
that are commercially present in the EC. In this regard, we note that
while the EC argued that more evidence should have been submitted by the
Complainants, it did not present information that would cast doubt on
the evidence presented by the Complainants. As a consequence, we must
assess whether that evidence is sufficiently credible to be accepted by
us. In making our objective assessment (Article 11 of the DSU), we are
persuaded that the Complainants have sufficiently established that
entities of Complainants’ origin control subsidiaries established in
the EC that provide wholesale trade services in bananas in and to the
EC.”(67)
Footnotes:
1. (footnote original)
Appellate
Body Report on EC — Computer Equipment, para. 82. back to text
2. Panel Report, US — Gambling, paras. 6.106–6.108.
back to text
3. Panel Report, para. 6.107. back to text
4. Appellate Body Report in US — Gambling, paras. 188–189.
back to text
5. Panel Report, China — Publications and Audiovisual
Products, para. 7.1219. back to text
6. Appellate Body Report, China — Publications and
Audiovisual Products, paras. 392–394. back to text
7. (footnote original) We consider such reading of the
terms in China’s GATS Schedule to be consistent with the approach
taken in US — Shrimp, where the Appellate Body interpreted the
term “exhaustible natural resources” in Article XX(g) of the GATT
1994. (Appellate Body Report, US — Shrimp, paras. 129 and 130)
We observe that the International Court of Justice, in Costa Rica v.
Nicaragua, found that the term “comercio” (“commerce”),
contained in an 1858 “Treaty of Limits” between Costa Rica and
Nicaragua, should be interpreted as referring to both trade in goods and
trade in services, even if, at the time of the conclusion of the treaty,
such term was used to refer only to trade in goods. (International Court
of Justice, Judgment, Case concerning the Dispute regarding
Navigational and Related Rights (Costa Rica v. Nicaragua), 13 July
2009) back to text
8. (footnote original) The GATS Uruguay Round specific
commitments entered into force on 1 January 1995. The specific
commitments on the movement of natural persons, attached to the Third
Protocol to the GATS, entered into force on 30 January 1996; the
specific commitments on financial services, attached to the Second
Protocol to the GATS, entered into force on 1 September 1996; the
specific commitments on basic telecommunications services, attached to
the Fourth Protocol to the GATS, entered into force on 5 February 1998;
the specific commitments on financial services, attached to the Fifth
Protocol to the GATS, entered into force on 1 March 1999. The specific
commitments of individual acceding countries entered into force at the
time of each accession. back to text
9. Appellate Body Report, China — Publications and
Audiovisual Products, paras. 396–397. back to text
10. S/C/M/1, paras. 14–15. back to text
11. S/C/1, para. 6. back to text
12. WT/GC/M/30, section 4. The adopted Work Programme can be
found in WT/L/274. With respect to the 1999 the Interim Report to the
General Council, see S/C/M/34, Section A. With respect to the 1999
Progress Report, which discusses, inter alia, the issue of public
telecommunications transport networks and services within the context of
the Work Programme on Electronic Commerce, see S/L/74. back to text
13. Panel Report, EC — Bananas III, para. 7.285.
back to text
14. Panel Report, EC — Bananas III, para. 7.286.
back to text
15. Appellate Body Report, EC — Bananas III, para. 220;
applied by the Panel in US — Gambling, paragraph 6.251. back to text
16. Appellate Body Report, Canada — Autos, paras. 151–152
and 155; applied by the Panel in US — Gambling,
paras. 6.250,
6.254. back to text
17. Appellate Body Report, Canada — Autos,
paras. 164–166.
back to text
18. Panel Report, China — Publications and Audiovisual
Products, para. 7.971. back to text
19. Panel Report, US — Gambling, para. 6.287.
back to text
20. Panel Report, US — Gambling, para. 6.285.
back to text
21. (footnote original) S/L/74. back to text
22. (footnote original) Work Programme on Electronic
Commerce — Progress Report to the General Council, adopted by the
Council for Trade in Services on 19 July 1999, S/L/74, 27 July 1999.
para. 4. This view was not, however, unanimous since the Report adds
that “[s]ome delegations expressed a view that these issues were
complex and needed further examination”. back to text
23. (footnote original) Panel
Report on US — Gambling,
para 6.285 back to text
24. (footnote original) Ibid. The reference by that
panel to the principle of technological neutrality was not referred to
by the Appellate Body in its report on the subsequent appeal in that
case. back to text
25. Panel Report, China — Publications and Audiovisual
Products, paras. 7.1256–7.1258. back to text
26. Panel Report, Mexico — Telecoms, para. 7.45.
back to text
27. Panel Report, Mexico — Telecoms,
paras. 7.30–7.31.
back to text
28. Panel Report, Mexico — Telecoms,
para. 7.34.
back to text
29. Panel Report, Mexico — Telecoms,
para. 7.36.
back to text
30. Panel Report, Mexico — Telecoms,
para. 7.42.
back to text
31. Panel Report, Mexico — Telecoms,
para. 7.38.
back to text
32. Panel Report, Mexico — Telecoms,
para. 7.41.
back to text
33. Panel Report, Mexico — Telecoms,
para. 7.375.
back to text
34. Article XXVIII provides that:
“(e) ‘sector’ of a service means,
(i) with
reference to a specific commitment, one or more, or all, subsectors of
that service, as specified in a Member’s Schedule,
(ii) otherwise,
the whole of that service sector, including all of its subsectors;” back to text
35. (footnote original) If this were not the case, and a
Member scheduled the same service in two different sectors, then the
scope of the Member’s commitments would not be clear where, for
example, it made a full commitment in one of those sectors and a
limited, or no, commitment in the other. At the oral hearing in this
appeal, both the United States and Antigua agreed that the entries in a
Member’s Schedule must be mutually exclusive. [REF to AB Report] See
also Panel Report, paras. 6.63, 6.101, and 6.119. back to text
36. Panel Report, Canada — Periodicals, paras. 5.14–5.16.
back to text
37. (footnote original) Appellate Body Report on United
States — Standards for Reformulated and Conventional Gasoline,
adopted on 20 May 1996, WT/DS2/AB/R, p. 23. Also cited in the Appellate
Body Report on Japan — Taxes on Alcoholic Beverages, p. 12. back to text
38. Panel Report, Canada — Periodicals, para. 5.17.
back to text
39. (footnote original) “Border Tax Adjustments”,
Report of the Working Party adopted on 2 December 1970 (L/3464), BisD
18S/97, para. 15 (emphasis added). back to text
40. Panel Report, Canada — Periodicals, paras. 5.18–5.19.
back to text
41. Appellate Body Report, Canada — Periodicals, pp. 21–22.
back to text
42. Appellate Body Report, EC — Bananas III, para. 221.
back to text
43. (footnote original) Appellate Body Report, Canada — Periodicals, p. 19, DSR 1997:I, 449, at 465. back to text
44. (footnote original) Appellate Body Report, EC — Bananas III, para. 221. back to text
45. (footnote original) Appellate Body Report, Canada — Periodicals, p. 17, DSR 1997:I, 449, at 463. (footnote omitted)
See also United States’ appellee’s submission, para. 136 and
footnote 217 thereto. back to text
46. Appellate Body Report, China — Publications and
Audiovisual Products, paras. 193–195. back to text
47. S/C/M/1,
para. 14. back to text
48. S/C/1,
para. 6. back to text
49. S/L/74, para. 9. back to text
50. Appellate Body Report, Canada — Autos, paras. 170–171.
back to text
51. Appellate Body Report, Canada — Autos, para. 181.
back to text
52. Panel Report, EC — Bananas III, para. 7.301.
back to text
53. Panel Report, EC — Bananas III, para. 7.303.
back to text
54. Appellate Body Report, EC — Bananas III, paras. 231–234.
back to text
55. Panel Report, Canada — Autos, para. 10.254.
back to text
56. Panel Report, EC — Bananas III, para. 7.322.
back to text
57. Panel Report, Canada — Autos, para. 10.248.
back to text
58. S/L/45. back to text
59. S/L/44. back to text
60. S/L/24, para. 4. back to text
61. S/L/19, para. 3. back to text
62. Paragraph 4 of the Annex on Telecommunications sets forth
special provisions with regard to the application of Article III with
respect to telecommunication services. back to text
63. S/L/74,
para. 9. back to text
64. S/L/64. back to text
65. S/C/M/1,
paras. 10–11. The approved Guidelines can be found
in S/L/5. back to text
66. S/C/M/10, paras. 9–10. The decision can be found in S/L/23.
back to text
67. Panel Reports, EC — Bananas III, para. 7.331.
back to text
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