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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
No jurisprudence or decision of a competent WTO
body.
Part I: Scope and
Defination
II. Article I
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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
1. With
respect to measures relating to judicial and administrative assistance
in the context of Article II of GATS, as referenced in
paragraph 20 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.(1)
The adopted conclusion, inter alia, states that none of the provisions
of the GATS would apply to such measures.(2)
(b) Measures
relating to the entry and stay of natural persons
2. With
respect to the basis for drawing the distinction between “temporary”
and “permanent” residency in the context of GATS, see paragraph
150
below.
(c) Electronic
commerce
3. 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.(3)
2. Article I:1
(a) “measures
affecting trade in services”
4. The
Panel on 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.”(4)
5. Based
on its interpretation of the scope of the GATS set out in paragraph
4 above,
the Panel on 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”.(5)
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.”(6)
6. In
Canada — Autos, the Panel reiterated the statement of the Panel
on EC — Bananas III that Article I of the GATS does not a
priori exclude any measure from the scope of application of the
Agreement. The Panel on Canada — Autos then went on to state
that a determination of whether the measures at issue in the case before
it were measures “affecting trade in services” within the meaning of
Article I of GATS “should be done on the basis of the
determination of whether these measures constitute less favourable
treatment for the services and service suppliers of some Members as
compared to those of others (Article II) and/or for services and service
suppliers of other Members as compared to domestic ones (Article XVII)”.(7)
The Appellate Body reversed this finding, holding that whether a measure
“affects” trade in services must be assessed before any further
consistency of this measure with other GATS provisions 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.”(8)
7. After
rejecting the notion that the question whether a measure “affected”
trade in services could be ascertained by examining whether such a
measure violated Article II or Article XVII of GATS, the
Appellate Body in Canada — Autos then indicated the criteria
which it considered relevant for determining whether a measure “affected”
trade in services:
“[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.’(9)
(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.”(10)
3. Article I:2(a)
(a) Relevance of
where the supplier operates, or is present
8. The
Panel on 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”.(11)
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.”(12)
(b) Relevance of
ownership and control of the infrastructure used to supply the service
9. The
Panel on 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.”(13)
10.
The Panel on 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.”(14)
11.
The Panel on 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.”(15)
(c) Relevance of degree of interaction between
different operators
12.
Referring again to the definition of “public long-distance voice
telephone services” in the UN 1991 Provision Central Product
Classification, the Panel on 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.”(16)
(d) Relevance of supply by means of “linking”
to another operator
13.
In arriving at the conclusion discussed in paragraph 8
above, the
Panel on Mexico — Telecoms considered Mexico’s claim that the
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.”(17)
4. Article I:2(c)
(a) Supply by a firm commercially present in
one Member into the territory of another Member
14.
The Panel on 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).(18)
5. Relationship with
the GATT 1994
15.
In Canada — Periodicals, the Panel, 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’ ….”(19)
16.
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.’…(20) 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 plane in the WTO
Agreement, without any hierarchical order between the two.”(21)
17.
The Panel on 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, …’… (22)
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.”(23)
18.
On appeal, the Appellate Body on 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.(24)
19.
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 on 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.”(25)
Part II: General Obligations and Disciplines
III. Article II
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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
20.
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:(26)
“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.”(27)
(b) Electronic
commerce
21.
With respect to the application 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.(28)
2. Interpretation
22.
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 service 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.”(29)
23.
The Appellate Body on Canada — Autos subsequently
disapproved of the Panel’s application of Article II of 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 analysing 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.”(30)
3. Article II:1
(a) “no less
favourable treatment”
24.
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.”(31)
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”.(32) 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 non-discrimination 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’.”(33)
25.
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.”(34)
(b) “like services
and service suppliers”
26.
The Panel on 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 headnote 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.”(35)
27.
The Panel on Canada — Autos reiterated this approach:
“We 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.”(36)
(c) “aims-and-effects”
test
28.
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 GATS. See paragraph 76 below.
29.
With respect to the “aims-and-effects” test under GATT Article
III, see Chapter on the GATT 1994, Section
IV.C.1(c).
4. Exemptions from Article II
(a) Annex on Article
II Exemptions
30.
See Section XXXIV.B.
(b) Exemptions in
financial services
31.
With respect to exemptions from Article II of GATS concerning
financial services, see the Fifth Protocol to the GATS,(37)
adopted by the Committee on Trade in Financial Services on 14 November
1997.(38)
(c) Exemptions in
maritime transport services
32.
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 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.(39)
(d) Exemptions in
basic telecommunications
33.
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.(40)
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.(41)
B. Interpretation and Application of Article III
1. General
(a) Electronic
commerce
34.
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.(42)
(b) Accountancy
services
35.
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.(43)
2. Article III:3
(a) Format for
notifications
36.
On 1 March 1995, the Council for Trade in Service approved the “Guidelines
for Notifications under the General Agreement on Trade in Services”.(44)
3. Article III:4
(a) Enquiry points
37.
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.(45)
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
No jurisprudence or decision of a competent WTO
body.
Footnotes:
1.
S/C/M/1,
paras. 14-15. back to text
2. S/C/1, para. 6. back to text
3. WT/GC/M/30, section 4. The adopted Work
Programme can be found in WT/L/274. With respect to the 1999 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
4. Panel Report on EC — Bananas III, para. 7.285. back to text
5. Panel Report on EC — Bananas III, para. 7.286. back to text
6. Appellate Body Report on EC —
Bananas III, para. 220. back to text
7. Panel Report on Canada — Autos, para. 10.234. back to text
8. Appellate Body Report on Canada —
Autos, paras. 151-152 and 155. back to text
9. (footnote original) Panel Report,
para. 10.239. back to text
10. Appellate Body Report on Canada —
Autos, paras. 164-166. back to text
11. Panel Report on Mexico —
Telecoms, para. 7.45. back to text
12. Panel Report on Mexico —
Telecoms, paras. 7.30-7.31. back to text
13. Panel Report on Mexico —
Telecoms, para. 7.34. back to text
14. Panel Report on Mexico —
Telecoms, para. 7.36. back to text
15. Panel Report on Mexico —
Telecoms, para. 7.42. back to text
16. Panel Report on Mexico —
Telecoms, para. 7.38. back to text
17. Panel Report on Mexico —
Telecoms, para. 7.41. back to text
18. Panel Report on Mexico —
Telecoms, para. 7.375. back to text
19. Panel Report on Canada —
Periodicals, paras. 5.14-5.16. back to text
20. (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
21. Panel Report on Canada —
Periodicals, para. 5.17. back to text
22. (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
23. Panel Report on Canada —
Periodicals, paras. 5.18-5.19. back to text
24. Appellate Body Report on Canada —
Periodicals, pp. 21-22. back to text
25. Appellate Body Report on EC —
Bananas III, para. 221. back to text
26.
S/C/M/1, para. 14. back to text
27. S/C/1, para.
6. back to text
28. S/L/74, para. 9. back to text
29. Appellate Body Report on Canada —
Autos, paras. 170-171. back to text
30. Appellate Body Report on Canada —
Autos, para. 181. back to text
31. Panel Report on EC — Bananas
III, para. 7.301. back to text
32. Panel Report on EC — Bananas
III, para. 7.303. back to text
33. Appellate Body Report on EC —
Bananas III, paras. 231-234. back to text
34. Panel Report on Canada — Autos, para. 10.254. back to text
35. Panel Report on EC — Bananas
III, para. 7.322. back to text
36. Panel Report on Canada — Autos, para. 10.248. back to text
37. S/L/45. back to text
38. S/L/44. back to text
39. S/L/24, para. 4. back to text
40. S/L/19, para. 3. back to text
41. 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
42. S/L/74,
para. 9. back to text
43. S/L/64. back to text
44. S/C/M/1,
paras. 10-11. The
approved Guidelines can be found in S/L/5. back to text
45. S/C/M/10, paras. 9-10. The
decision can be found in S/L/23. back to text
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