ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Regulatory Freedom under GATS: Financial Services Sector

The 2008 financial crisis and the rescue of big firms, costing trillions of dollars to taxpayers, has created a strong global push for the restructuring and re-regulating of big banks and financial firms. This has produced two reactions: on the one side, heavy lobbying by banking and financial firms to block reforms and weaken enforcement. On the other side, a campaign by some northern NGOS, one or two members of the World Trade Organisation, and the latest by the United Nations Conference on Trade and Development, about the General Agreement on Trade in Services posing impediments for reform and the need for rule changes to overcome them. This paper finds the campaign to change GATS misguided and meritless. The GATS provides near-total freedom to regulate the financial services sector for prudential reasons and to ensure the integrity and stability of the financial system. The changes being proposed will be against developing country interests, mess up the GATS and impact its integrity as a viable trade agreement.

SPECIAL ARTICLE

Regulatory Freedom under GATS: Financial Services Sector

B K Zutshi

The 2008 financial crisis and the rescue of big firms, costing trillions of dollars to taxpayers, has created a strong global push for the restructuring and re-regulating of big banks and financial firms. This has produced two reactions: on the one side, heavy lobbying by banking and financial firms to block reforms and weaken enforcement. On the other side, a campaign by some northern NGOS, one or two members of the World Trade Organisation, and the latest by the United Nations Conference on Trade and Development, about the General Agreement on Trade in Services posing impediments for reform and the need for rule changes to overcome them. This paper finds the campaign to change GATS misguided and meritless. The GATS provides near-total freedom to regulate the financial services sector for prudential reasons and to ensure the integrity and stability of the financial system. The changes being proposed will be against developing country interests, mess up the GATS and impact its integrity as a viable trade agreement.

The author acknowledges the contribution of Charavarti Raghavan, editor emeritus, South-North Development Monitor, who had read an earlier draft of this paper. Views and interpretations in this paper are that of the author.

B K Zutshi (beekayzee@gmail.com) was India’s ambassador and permanent representative to the GATT from June 1989 to November 1994.

I
n the context of the enhanced need for better regulation of financial services following the 2008 financial crisis, it is being argued in some quarters that the World Trade Organisation’s (WTO) General Agreement on Trade in Services (GATS) law, rules and scheduled financial services commitments, will stand in the way of carrying out regulatory reforms and interventions to address issues thrown up by this crisis or those that may arise from future crises. The GATS law, rules and financial services commitments are under scrutiny and debate in that context.

A comprehensive articulation of this point of view is contained in the Barbados communication (JOB/SERV/38) to the WTO. There are also others, from some NGOs and civil society groups, mostly from developed countries, who subscribe to and promote this view and are seeking changes in the GATS law, which will amount to invalidating the GATS in its application to trade in the financial service sector. One such NGO is Citizen Watch from the United States (US) which is advocating changes in the GATS more or less on the same lines; its views are reflected in two memoranda.1 These very views find a place in the latest Trade and Development Report (TDR 2011) of the United Nations Conference on Trade and Development (UNCTAD).2

The following paragraphs test the validity of these claims about the alleged handicap of carrying out effective regulatory reforms and interventions in the sector within the existing GATS framework and the further claim that the proposed changes are in the interests of developing countries.

Genesis of 2008 Banking Crisis and Efforts at Reform

Before embarking on that exercise, it would be pertinent to refer briefly to the consensus among scholars and commentators on the genesis of the 2008 crisis and to ask whether the GATS financial services commitments contributed to the crisis in any manner whatsoever.

The consensus on the origins of the crisis traces it to the “efficient market” hypothesis, a core element of the “rational market” theory, more or less codified by the Chicago School in the late 1960s. Under this theory3 markets are best left to regulate themselves and do not need any oversight by the State; in fact, the theory views such oversight as curbing industry’s innovative and creative capacities, allegedly resulting in loss of efficiency. In the US, this led to the piecemeal dismantling (since about the 1980s) of the regulatory structures put in place after the Great Depression of the 1930s, ultimately resulting in the repeal of the Glass-Steagall Act, which had placed a firewall between investment banking and intermediation activities of banks in relation to savings (deposits)

november 12, 2011 vol xlvi no 46

and lending (loans). Under this policy approach of attributing ultimate wisdom to the market, the role of prudence (and its lack) on the part of the operators was completely overlooked, resulting in poor enforcement of even the regulations still in place.

The proximate cause of the crisis was the reckless sub-prime lending and their being pooled with other mortgage loans and securitised (somehow managing to secure in the process top investment grade ratings from the rating agencies), and marketed and sold off around the world to investors. In the US, the problems were compounded by traded “innovative” synthetic market instruments like over-the-counter (OTC) derivatives of different kinds – structured mortgage securities, collateralised debt obligations, etc, which even the originators and issuers (mostly banks, but also other financial institutions) themselves did not fully understand; and overly positive ratings of these toxic mortgage-related products given by rating agencies.4 The connection between these products and the underlying assets was almost lost in the process of further market transactions. Over the years, from being the lubricant of the real economy, finance has acquired a life of its own, with most of the growth in the finance sector resulting from the financialisation of the economy. In the US,

in 1978, the financial sector borrowed $13 in the credit markets for $100 borrowed by the real economy. By 2007, these borrowings had increased to $51. In other words, for the same amount of borrowing by households and nonfinancial companies, borrowing by financial institutions had quadrupled. Worldwide, over-the-counter derivatives (almost nonexistent in 1978) grew to over $33 trillion in market value by 2008.5

There are also serious allegations of deliberate suppression of facts about the true worth of these products in the extant market conditions, amounting to outright fraud on the part of the concerned financial institutions and the rating agencies.6 Apparently, the motivation for this conduct was greed: to, any which way, improve profitability (among other things, necessary to pay obscene sums as bonuses to bank executives and staff) of the banks and other financial institutions.7 Serious issues of conflict of interest were overlooked and no heed paid to the fiduciary duty owed by these financial service suppliers to their depositors, policyholders and investors. Unfortunately, the regulators also paid no heed, even when alarm bells were sounded by some commentators. The crisis, having originated in the US, quickly spread across the globe, affecting other markets and economies in varying degrees, depending on the nature and extent of their integration with the global financial service markets.

It is obvious that this way of running and regulating the financial services sector was not dictated by members’ obligations and commitments under the GATS. Therefore, it can be averred, perhaps without any fear of contradiction, that there was no link b etween the crisis and the liberalisation in this sector under GATS, even for members with relatively the most liberal commitments, as in overall terms the GATS commitments in this sector are rather modest. Why then are changes being sought in the GATS law? Apparently, it is being argued that whatever may have been the origins of the crisis, members’ freedom of regulatory i ntervention to address the problem today is constrained by GATS

Economic & Political Weekly

EPW
november 12, 2011 vol xlvi no 46

obligations and commitments. And, therefore, there is a need to make changes in the GATS law, with such changes projected as being particularly in the interests of developing countries.

In the context of the need to avoid such crises arising in the future, it is pertinent to take note of the current efforts at regulatory reform in the two major trading blocs of the US and the European Union (EU). In the US, the Dodd-Frank Act is intended to strengthen regulatory oversight of the financial service sector; the EU (in the UK as well as in the continental Eurozone area) has also introduced and/or is proposing changes in its regulatory regime to the same effect. In both cases detailed regulations to give effect to the law are being formulated. These efforts, however, have been critiqued as being less than optimal to address the problem, and as a result, a lost opportunity (provided by the crisis) to undertake fundamental, root and branch reform of the financial services regulatory structure. (Even one of the authors of the US legislation, senator Dodd has been widely cited in the media as saying that the effectiveness of the reforms under the Dodd-Frank law would be known only in the next crisis!) Effective rule-making under, and implementation of, the Dodd-Frank Act appears to have lost traction already in the face of industry resistance through intense lobbying efforts. Some 300 mandated regulations under the Act are yet to be issued, but Wall Street firms are attempting, perhaps with some success, to block even these. Even enforcement of regulations already in place is a pparently being sought to be diluted through the budgetary process of cutting funds for enforcement agencies.

GATS as a Part of the Multilateral Trading System

The multilateral trading system (MTS), as embodied in the WTO presently (and previously in the GATT), is based on reciprocal exchange of concessions (with some strictly defined deviations), between members and subject to enforcement, if necessary, by way of trade sanctions through the inbuilt dispute settlement system. This provides essential integrity to the MTS and to trade r elations between members of the WTO. That such exchanges of concessions involve some diminution of members’ available p olicy space (varying according to the extent and nature of concession for individual members), is inherent in the system.

Therefore, the issue of loss of sovereignty, or shrinkage in available policy space (invoked as a slogan in this debate) has to be viewed as a cost-benefit equation in the multilateral trade e xchanges by individual participants; the equation has to be balanced by each participant as between the cost of remaining out by not making any concession and thus retaining full sovereignty and thereby freedom of action on the subject, and the benefit e xpected to accrue by making the concession and accepting some constraints on policy freedom.

In the absence of any ex ante criteria to judge the outcome, its impact on individual participants becomes a matter of political judgment. This is true of most negotiations except perhaps the tariff negotiations on goods, which can be quantitatively evaluated on the basis of trade statistics. In other areas, including in market access exchanges in the services sector, quantitative evaluation is not possible in the absence of comparable statistics. In spite of the fact that outcomes in several rounds, particularly in the Uruguay Round (UR), have been seen as unbalanced between groups of countries, particularly between the developed and d eveloping countries, the system has served the international community well for over 60 years now. This, however, does not mean that it is perfect and cannot be improved. That, however, is a separate debate.

This is also not to suggest that it is not legitimate for participants in negotiations to seek to preserve as much policy space as possible, but that has to be consistent with the basic tenets of the system; privileging, in the name of regulatory freedom, any s ector or set of commitments from the application of the basic tenets themselves, as is being sought to be done in case of the financial services sector under the GATS, is an unacceptable a ssault on the integrity of the MTS. An equally plausible case can be made out for such privileging, in the name of freedom of regulatory intervention, in many other service sectors, and an even more plausible case can be made for such freedom in the TRIPS agreement’s obligations for developing countries. Potentially, this can unravel the whole MTS.

Regulatory Intervention Provisions in the GATS

It is against this background that we will test the validity of the claim that GATS obligations in financial services constrain members’ freedom of regulatory intervention to address problems like those thrown up by the 2008 crisis. That calls for looking at and analysing the scope for regulatory intervention in the GATS in r espect of all sectors in general, and that of the financial services sector, in particular.

Regulation is a sine qua non for liberalisation in services, whether undertaken domestically or multilaterally, in order to address, among others, issues of market failure and public and social policy concerns. The GATS explicitly recognises members’ freedom to “regulate and to introduce new regulations” in services (preamble). This freedom is practically unrestrained save the transparency obligation of publication and notification of regulations and their reasonable and impartial application, though it would not, of course, include the freedom to regulate in a manner as to violate, negate, or avoid specific commitments or do away with the general obligations, like the MFN obligation. This is applicable to all domestic regulations outside the scope of Article XVI (market access) and Article XVII (national treatment), which have to be scheduled, and those relating to quali fication requirements and procedures, technical standards and licensing requirements. The latter will be subject to whatever disciplines may be eventually negotiated under Article VI: 4, on the basis of policy objectives and criteria mentioned therein. In the interim, domestic regulations in these areas are subject to disciplinary guidelines laid down in Article VI: 5, in respect of sectors where specific commitments have been undertaken. Article VI: 4 have a specific focus on the types of regulations which, in the absence of any disciplines, can be potentially used for circumvention of a ccess commitments. More on Article VI: 4 later.

In addition, in the case of financial services, there is near-total freedom for regulatory intervention for prudential reasons even if that results in violation of obligations under the agreement. This special dispensation for financial services was provided in recognition of the sector’s centrality to national economies.

A key concern in respect of financial services in the UR negotiations was how to ensure freedom of action to participants, through regulatory intervention for, (a) prudential purposes, and (b) to protect and preserve the integrity and stability of the financial system, and, at the same time, make the sector a part of the framework agreement. This became a matter of crafting a provision with a right balance between these two objectives.8 That balance is reflected in paragraph 2 of the annex on financial services. The annex also elaborates on some other provisions of general application, like recognition and dispute settlement, and makes significant changes in some others, like the definition of “services supplied in the exercise of governmental authority” and domestic regulation, in their application to the financial services sector. For the purpose of this paper, the two relevant provisions of the annex are those on domestic regulations and dispute settlement. The analysis below is confined to these two provisions.

Domestic Regulations

The provision on domestic regulations reads as under: 2 Domestic regulations

(a) Notwithstanding any other provision of this agreement, a Member shall not be prevented from taking measures for prudential reasons, including for the protection of investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system.

Where such measures do not conform with the provisions of the Agreement, they shall not be used as a means of avoiding the Member’s commitment or obligation under the Agreement (emphasis added).

This provision has been dubbed the “prudential measures d efence” (PMD), and is considered insufficient, even contradictory, or at any rate, less than an iron-clad guarantee against a possible challenge under the dispute settlement (DS) provisions of the WTO. Doubts, fears and apprehensions of the provision’s efficacy as a regulatory tool run along the following lines: absence of definition of prudential measures; alleged contradictory nature of the text in that what it gives under the first sentence is taken away by the second sentence (italicised above); and lastly, on that account, and on account of a lack of definition of a prudential measure, a regulatory measure undertaken in terms of this provision will be challengeable under the DS provisions, resulting in uncertainty.

The best way to start analysing the provision would be to engage with the text to see what it tells us and in that light see whether the doubts, fears and apprehensions about its efficacy as an enabling provision for intervention to address the regulatory challenges of the sector thrown up by the 2008 crisis, and any future crises in the sector, can stand scrutiny.

Paragraph 2(a) of the annex is an overriding provision as it starts with the expression “notwithstanding any other provision of this agreement”. In the same sentence, it then provides for freedom of regulatory intervention for “prudential reasons” which are spelt out in some detail but prefaced by the word “including” making them illustrative and non-exhaustive (but also ensuring that all items mentioned thereafter are per se “prudential”). The wording thus provides scope for inclusion of other measures as long as they are for “prudential reasons”. The contention that “prudential”

november 12, 2011 vol xlvi no 46

covers only “micro-prudential” measures, and not macro or any other conceivable variety of “prudential” is far-fetched, and ignores that the ordinary meaning and usage of the term is comprehensive enough to include every adjectival sub-set. The second sentence begins with the expression “where such measures do not conform with the provisions of the agreement”, thereby further reinforcing the intent of allowing members to take regulatory measures for prudential reasons which may be contrary to their commitments and obligations under the agreement, but with the caveat that the provision is not abused for avoidance of a commitment or an obligation, in the name, and under the guise, of a measure taken for prudential reasons.

No Definition of Prudential Measure?

Let us now turn to the elements on which the provision is being assaulted. The first is that there is no definition of a prudential measure. This is being seen as providing scope for uncertainty in the DS proceedings and leaving the matter in the hands of DS panels. This writer’s recollection is that the need and desirability of defining “prudential reasons” was debated during the negotiations,9 but the idea was abandoned because it was felt that a definition, howsoever exhaustive, would not necessarily capture all possible needs of the future and may, in fact, restrict the scope of remedial action. Since the objective was to give a broad-based authority to members for regulatory intervention, even to negate their commitments and obligations under the agreement, it was felt that a list of illustrative and non-exhaustive policy goals would give greater flexibility to members for such intervention. The expression “including for” ensures that the scope of the provision is not restricted to the stated policy goals and can cover other policy goals so long as they are for “prudential reasons”. This was, in fact, by way of abundant caution, even though during the negotiations no one came up with any examples of measures for prudential reasons which would not be captured by the stated policy goals in the provision. The provision is thus truly in the nature of a “carve out” of the financial service sector for prudential reasons.

(It is unfortunate though that no negotiating history of the GATS was drawn up by the WTO secretariat in spite of requests to that effect by several delegations, including the Indian delegation. Such a negotiating history (as provided for in the Vienna Conventions on plenipotentiary diplomatic negotiating conferences) was drawn up in respect of the Tokyo Round, and was a pproved by the plenipotentiaries at the final meeting concluding that round. For the UR, before Marrakech, the secretariat is known to have put together all the material for drawing up a n egotiating history, but for reasons that were not explained, a draft history was not placed before the Marrakech ministerial and its approval obtained. Even after coming into force of the Marrakech Treaty on 1 January 1995, several delegations had suggested to the secretarial to draw up a negotiating history of the framework agreement under the supervision of a representative group among the negotiators who were still around at that time and the memory of the whole negotiating process was still fresh in their minds. In that context it may be mentioned that the negotiating history of this provision mentioned in Tucker T memorandum10

Economic & Political Weekly

EPW
november 12, 2011 vol xlvi no 46

does not necessarily reflect the whole of this history as it does not take into account the many informal papers such as room documents which were used in the process of these negotiations, not only in respect of this provision, but also other provisions of the GATS, and even other agreements in the UR negotiations.)

Next, let us look at the alleged contradiction between the two sentences of paragraph 2(a) of the annex. It is absurd to suggest that the second sentence of paragraph 2(a) contradicts the first sentence or that the two sentences cancel out each other. This flies in the face of the rules of interpretation of legal texts in terms of public international law, under which each expression (in a legal text) has to be ascribed a meaning and the whole text is to be read and interpreted harmoniously, so that no text or e xpression is rendered inutile. The second sentence is an essential anti-circumvention safeguard to ensure that there is no abusive use of the prudential carve out provisions with the intent of avoiding a commitment.

In a featured article in the ILSP Law Journal11 on what may be an appropriate standard for jurisprudence on prudential measure under the GATS annex on financial services, Jung Byungsik does not see any contradiction between the two sentences of paragraph 2(a) and holds that “the prudential carve out provisions of the GATS annex on Financial Services 2(a) clearly states that a national authority has prudential discretion as long as the discretion is not abused. In other words the sole ground of violation of the prudential carve out is the abuse of discretion” (page 50). He then opines that the appropriate standard for jurisprudence on the issue would be the “good faith” standard and not the “least restrictive” standard, because the text of paragraph 2(a) does not subject it to the “necessity” test. This has been said by Jung with reference to financial derivative measures (p 55), but would be applicable across the board to all prudential measures taken u nder the annex. This makes eminent sense.

There is nothing new or novel about such a caveat in this agreement, as the whole MTS is replete with anti-circumvention provisions. In fact, without this proviso, the agreement would be deeply flawed as that would amount to leaving the sector out of the purview of the dispute settlement provisions of the WTO in regard to the core obligations of the sector, which would in turn mean an assault on the integrity of the services agreement itself as a viable international trade agreement. As to the application of the caveat in practical terms, the facts and circumstances of individual cases under dispute will show whether or not a challenged measure was for prudential reasons or taken with the intent of avoiding a commitment. As an additional safeguard, and to ensure that panel findings on the subject are based on sound, expert knowledge, the annex mandates that “Panels for disputes on prudential issues and other financial matters shall have the necessary expertise relevant to the specific financial service under dispute” (paragraph 4 of the annex).

Search for Iron-Clad Guarantees

Some advocates and commentators on the issue are looking for an iron-clad guarantee of certainty that all measures taken in the name of prudential reasons and requirements will not be challenged, or at least, not successfully. This would be a worry, if the DS system of the WTO was based on ex ante rather than post facto principles, that is, if members were required to get an authorisation for invoking a provision and introducing a measure. Since the system allows a member to interpret a provision and introduce a measure, leaving it to aggrieved parties to bring the matter before the Dispute Settlement Body, there is no uncertainty about a member’s ability to make the required intervention. Also, the burden of proof is on the member challenging a measure as being inconsistent with a particular provision. As to certainties in outcomes, there are no certainties even in one’s life (except death and taxes), much less in disputes on trade matters. A provision of the nature reflected in paragraph 2(a) of the annex, and for that matter any other provision of law, in its meaning and import, has to meet the test of understanding and interpretation by an ordinary person of prudence. And paragraph 2 of the annex more than meets that test.

In the two advocacy pieces (memoranda) of Public Watch, one by Tucker T and the other by Wallach L and Tucker (both 2010), it has been proposed not only to delete the second sentence, but also add language to the first sentence to put the burden of proof on the challenging member about the contested measure not being for “prudential reasons”. This would be redundant as the burden to prove that the real intent of such a measure was the circumvention of the obligation (and not for prudential purpose) already rests on the challenging member, as brought out earlier.

The suggested deletion of the second sentence of paragraph 2(a) of the annex would imply non-application of the DS provisions to the core obligations in this sector. This may be unacceptable to a majority of the WTO members, as it would deprive them of the valuable right of compelling their trading partners to live put to their obligations by invoking the DS system. It may be recalled that the developed countries at one stage in the UR negotiations wanted to take the sector out of the purview of the GATS and have it as a stand-alone agreement. This was totally unacceptable to developing country participants. Deleting the anti-circumvention safeguard from paragraph 2(a) of the annex will bring about somewhat of a similar situation, if not the same one, by invalidating the application of the GATS to the sector.

The Barbados communication and comments from some other civil society groups have also given examples, which in their view are doubtful candidates for qualification under paragraph 2(a) of the annex. For instance, it has been suggested that restricting the size of banks to address the problem of “too big to fail” (TBTF) financial institutions may violate the provisions of Article XVI:2

(b) and/or (c) in case of members with no limitations under these provisions in their schedules of commitments. Given that paragraph 2(a) of the annex permits regulatory intervention even where it may involve violation of a commitment, as brought out in the preceding paragraphs, it is difficult to understand the logic of this view. In fact, addressing the problem of TBTF institutions by restricting their size, however that may be done, falls squarely within the scope of ensuring “the integrity and stability of the financial system”, if not also that of “protection of investors, d epositors and policyholders or persons to whom a fiduciary duty is owed by a financial service supplier”, provided, of course, the measure is applied on a non-discriminatory basis between foreign and domestic suppliers, in cases of full market access commitments. This is equally applicable to some of the other examples, like higher capitalisation requirements for large banks, or restrictions on short selling, “naked” or not. Even measures linked to capital management in Tucker T (2010), in cases where a member may have a specific commitment on capital movement, depending on facts and circumstances and the purpose of a particular regulatory intervention, can be covered under paragraph 2 (a) of the annex. An example would be to address the problems of sudden influx of “hot money” which may lead to appreciation of the receiving countries’ currency and create the potential for destabilising the financial markets by sudden outflows, thereby posing a threat to “the integrity and stability of the financial system”. Measures such as a tax on such inflow to moderate the influx would fall within the scope of the dispensation for prudential purposes in the annex. More on capital management techniques (CMT) and capital transactions tax later.

In the understanding of this writer, in the prudential carve out provision of the annex, as analysed in the preceding paragraphs, there is hardly any room for uncertainty about their applicability to most of the examples given by the advocates of amendments to GATS law.

Critique of Suggested Changes to GATS Law

The Barbados communication (with an annex of possible amendments) has also raised several other issues having to do with the basic architecture of the GATS and the way market access commitments were undertaken by the members in the UR, like questions about GATS provisions on market access and national treatment and their reflection in the commitment schedules on financial services in the case of a group of countries (mostly developed country members, but also by some developing country members), which had used the alternative, optional modality for making their commitments in this sector. The basic modality for making market access commitments was that laid down in Parts III and IV (Article XIX in particular) of the agreement. In case of the financial services sector, however, an alternative modality was provided for making commitments on a voluntary basis. This modality is to be found in the “Understanding on Commitments in Financial Services” (hereinafter referred to as the Understanding). Apart from changes in the annex on financial services, the Barbados communication proposes amendments to the provisions of the Understanding as well some GATS articles.

This approach mixes several issues, which have to be treated separately given their different purposes, and differences in their legal status. For instance, it mixes the provision of Article XVI on market access (which it also misreads), with the particular (and optional) modality of undertaking commitments in terms of the Understanding. Another area in which there is the same problem of mixing of issues is that relating to capital controls and possible safeguard action for balance-of-payment (BOP) reasons. These issues would need to be untangled for a meaningful analysis, which in turn calls for an understanding of the GATS architecture and its distinguishing features from the GATT, the agreement on trade in goods.

The GATS and the GATT share a common paradigm inasmuch as both agreements have a set of general provisions applicable

november 12, 2011 vol xlvi no 46

across-the-board to all sectors, and specific negotiated market a ccess commitments reflected in individual member-country schedules which form an integral part of the concerned agreement. There is though a significant variation in the types of general provisions applicable to the GATS agreement in contrast with those that apply to the GATT agreement. In case of the GATT agreement, market access and national treatment are general, mandatory obligations, as there is a prohibition on quantitative restriction on imports and on discriminatory treatment between the goods of domestic and foreign origin, once imported. The only way to provide protection to domestic goods is by way of tariffs, which are subject to progressive reductions through negotiations and are then bound in the schedules attached to the GATT. Non-tariff barriers are also negotiable and subject to binding commitments. In case of the GATS, however, market access and national treatment are negotiated commitments and can be subject to limitations, conditions and qualifications as reflected in members’ schedules.

The notion of market access in goods trade is based on the physical reality of goods having to cross inter-state borders. Given the nature of services transactions, there are no physical barriers to be crossed in inter-state trade in the sector. Therefore, the notion of market access in the GATS is an artificial construct. This is not the place to elaborate on how and why it came about that way except to say that it was seen by developing countries, along with the “bottom up” approach to service sector liberalisation, in contrast to the “top down” approach advocated by the developed countries, as an essential element in the notion of progressive liberalisation embodied in Part IV of the agreement, which in turn was perceived as a matter of balance of rights and obligations in the agreement between the developed and the d eveloping countries.

In fact, what Article XVI does is to define “full market access” as being the absence, in a member’s schedule of commitments, of any terms, limitations and conditions from the exhaustive and closed list of six types of measures listed in paragraph 2 of the Article; four types of these measures are quantitative in nature (including economic needs tests), and the remaining two types, qualitative, one on the legal form of commercial presence of foreign entities and another on limitations on foreign direct investment (FDI) in such entities, both being relevant only to mode 3 commitments. Members can, however, attach terms, limitations and conditions in respect of these measures, as may be negotiated, which will then have to be recorded in members’ schedules. The four quantitative types of restrictions have to be recorded separately for each mode of supply of a service.

Likewise, Article XVII defines full national treatment as treatment “no less favourable” (either formally identical treatment or formally different treatment) between domestic services and service suppliers and like services and service suppliers of members in respect of all measure affecting the supply of services, but allows “conditions and qualifications” to be attached to it as may be negotiated, which are then recorded in members’ schedules. In the interests of completeness on scheduling, it may be mentioned that the agreement also provides for negotiating and scheduling, as additional commitments, measures outside the

Economic & Political Weekly

EPW
november 12, 2011 vol xlvi no 46

scope of Articles XVI and XVII, which may also include measures falling under Article VI: 4.

The notion of progressive liberalisation embodied in Part IV envisages increasing the level of specific commitments through successive rounds of negotiations, the first one beginning no later than five years from the date of entry into force of the WTO agreement, and periodically thereafter, by adding new sectors to, and progressively dropping existing limitations and conditions to market access and conditions and qualifications on national treatment in members’ schedules. In fact, under this mandate, services negotiations for further liberalisation were launched in January 2000 and subsequently got subsumed in the Doha Development Agenda (DDA), where they are presently comatose along with the rest of the remaining (sans most of the so-called Singapore Issues), DDA.

Understanding on Commitments in Financial Services

It is in the backdrop of this architecture of the GATS agreement that we need to consider the position and legal status of the U nderstanding on Commitments in Financial Services in order to understand the implications (and the feasibility) of amending the Understanding, as suggested in the Barbados communication and promoted by some other NGOs, for the ostensible purpose of providing greater flexibility to members to regulate the financial services sector.

As pointed out earlier, specific commitments for liberalisation under Parts III and IV of the framework agreement are envisaged to be undertaken on the basis of the “bottom up” or the “positivelist” approach, and, in fact, that is what a majority of the members did in the UR. However, on the request of a group of developed country members, it was agreed to enable members, voluntarily and subject to their application on a most-favoured-nation basis, to undertake specific commitments in the financial ser vices sector on the basis of what was known as the “top down” or the “negative list” approach, where commitments under the schedules would reflect only the reservations or deviations from an approved, standard liberalisation package. In this case, the modalities were negotiated by interested delegations and incorporated in the document, which came to be known as the Understanding on Commitments in Financial Services. The modalities laid down a standard liberalisation package, defining the financial services in respect of which commitments would be undertaken, as well as indicate the extent of liberalisation thereof. Members who opted to make commitments on the basis of the Understanding had the option of reproducing in their schedules the access commitment content of the Understanding, with or without reservations or deviations, or in the alternative, incorporate the Understanding in their schedules by reference and record only the reservations and deviations, if any. Most of the members who undertook commitments in terms of the Understanding did take reservations from the standard package, and that too in important respects, and by reference incorporated the Understanding in their schedules.

The Understanding, however, is not an integral part of the GATS agreement, and, in fact, it is not a part of the legal documents of the UR protocol. Its status is no different than that of the modalities of liberalisation for, say the agriculture sector in the UR, or for the matter of the modalities on the basis of which commitments were made in the goods sector. The market access commitments in these sectors are only those reflected in the schedules of commitments. If members want to make changes in them, they cannot ask for changes in the modalities which formed the basis for those commitments, but have to take recourse to the provisions laid down in Article XXVIII of the GATT. The corresponding provisions for modification of GATS schedules are in Article XXI of the GATS. There are substantive difference in the rules and procedures (for modification of schedules) under the two agreements. In the case of the goods sector, negotiations are restricted to between the member seeking modification and the member with whom the original concession was negotiated (initial negotiating rights) and with any other member determined as having “a principal supplying interest”, which is defined on the basis of trade flows during the reference period. The basis for participation in these negotiations is the statistics of trade flows in the goods sector.

In the services sector, UR commitments among participants were not negotiated based on any trade statistics under the different modes of supply, as there was no such comparable cross border trade statistics available. The International Monetary Fund (IMF) statistics on “invisibles” only partially reflected services trade flows and that also did not correspond to mode-wise flows under the GATS. Hence the notions of “initial negotiating” rights and “principal supplier” interests could not be applied in the rules and procedures for modification of GATS schedules. In that light, Article XXI of the GATS leaves it to members to raise claims for negotiations with a modifying member on self-selection basis and provides for arbitration if the modifying member does not entertain any affected member’s claim for participation and/or for compensatory adjustment. In any such arbitration proceedings, all other members having claims in respect of the proposed modification are required to participate. Compared to the GATT law on the subject, Article XXI of the GATS is weighted in favour of the modifying member as, at the end of the day, the modifying member can modify or withdraw a commitment without further intervention on the part of an affected member, if the modification is in conformity with the arbitration award.

Absence of Trade Statistics

It may be mentioned, in parenthesis, that the problem of lack of trade statistics in accordance with the definition of trade in services through four different modes of supply remains unresolved to this day, even after over 15 years of the coming into force of the GATS agreement. During the UR negotiations, developing countries were of the view that in the absence of comparable trade statistics under different modes of service delivery, there was no way to meaningfully judge the balance in exchanged concessions. This posed a difficult choice: whether to postpone market access negotiations in services until such time that such statistics were built up and became available. Developing countries were in favour of doing so, but developed countries maintained that for them this would pose a serious problem and may prove a dealbreaker. It was, however, agreed that this issue would have to be addressed and that before the next round of further liberalisation, due in five years from the date of coming into force of the GATS, “an assessment of trade in services in overall terms and on a sectoral basis” would be carried out (Article XIX:3). This implied that within that period a methodology for collection of comparable data on trade in services in four modes would be evolved, and at least data collection on that basis would have started. In that light, it is unfortunate that not only does the problem remain unresolved, but no meaningful steps seems to have been taken to resolve it; the WTO and the concerned UN agencies have much to answer for in this regard.12 (The manual that has since been drawn up for collection of data is still based on the IMF’s BOP and EBOP criteria and gives the value of transactions between residents and non-residents, and not on the basis of the GATS definitions of trade in services.)

Reverting back to the status of the Understanding in the scheme of the GATS agreement, the above analysis clearly establishes that it was only an alternative modality available to participants for making commitments on a purely voluntary basis and ceased to have any legal status after the commitment schedules were established. For members who made commitments, with or without reservations, in terms of the Understanding, their legal obligations on market access arise from their schedules as it does for others who made commitments under the provisions of Parts III and IV. Members that did not make their commitments in the sector under the provisions of the understanding have no legal obligations arising from the Understanding. For those who made commitments using the route of Understanding, the only way for individual members to change their scheduled obligations is to take recourse to Article XXI of the GATS for modification of schedules and not by retrospective amendment of the Understanding.

The Barbados communication seems to be premised on the assumption that all those who have taken commitments under the Understanding have done so without any qualifications or reservations. This is far from the real position in this regard. A host of qualifications and reservations have been taken by members from specific elements of the Understanding. While some such reservations are common in all schedules, others are common in most schedules. For instance, all members in the group have taken horizontal commitments on temporary entry of personnel under mode 4 and not under paragraph 9 of the Understanding. In respect of the Standstill and New Financial Services obligations, most members have taken some kind of reservation from all or some elements of these obligations, or attached some qualifications to them. Mode 1 commitments are also absent in most cases, including in particular in the schedules of the US and the EU.

Both the US and the EU have attached, through the head notes to the Financial Services Commitments section, qualifications to the provision of new financial services. In the case of the US, the qualification reads: “the offer of new financial services or products is subject, on a non-discriminatory basis, to relevant institutional and judicial form requirements”. And in case of the EU, it says: “The admission to the market of new financial services or products may be subject to the existence of, and consistency with, a regulatory framework aimed at achieving the objectives indicated in Article 2(a) of the Financial Services Annex”.

november 12, 2011 vol xlvi no 46

The point to be made here is that the amendments proposed in the Understanding, even if that were legally possible, will alter the rights and obligations of members differentially, both intra se among the members of the group and inter se between them and those that have taken commitments under Parts III and IV of the GATS. This will have implications for the balance of rights and obligations of WTO members, not only for the GATS agreement, but also for the UR outcome as a whole, since the outcome was finally accepted as a single undertaking.

In any case it is clear from the analysis above that the freedom of regulatory intervention under the annex is more than sufficient to address all the issues raised in the Barbados communication and those raised by other civil society groups, and that there is no need for any amendments to Article XVI and the annex in order to provide greater flexibility or greater certainty in this regard. In fact, the proposed changes to Article XVI, based as they are on a misreading of the provision itself, will mess up the entire legal framework for multilateral liberalisation of the service s ector. If any member, however, feels that it cannot live up to its current commitments in this sector, for whatever reason, it can take recourse to Article XXI to modify or withdraw them.

Proposed Changes in Other Articles of the GATS

Article XVI is not the only article in which changes are being sought on the basis of its misreading. The same is true, in varying degrees, of the payments and transfers (Article XI) and balance of payments safeguard (Article XII) provisions; changes in these provisions are being sought for the ostensible purpose of addressing such diverse issues as capital controls, exchange actions, high indebtedness, severe fiscal imbalances, financial service instability, etc. Another variant basis for seeking changes in Articles XI and XII is the alleged conflict (Tucker T 2010) of these provisions with such policy instruments as the financial transactions tax (FTT) and CMT. This also finds a reflection in UNCTAD TDR (2011).

This is a cocktail of issues, some more important than others; all of them, however, cannot be resolved through the mediation of the financial service sector, and certainly not by the proposed changes in the GATS law as will be demonstrated through an analysis of the GATS Articles XI and XII provisions in the following paragraphs.

Article XI essentially deals with international payments and transfers for current transactions (as distinct from capital transactions) in relation to specific commitments of members under the GATS. It may be noted here that it is not special to the financial services sector, but is applicable across-the-board to all service sectors in which commitments have been undertaken; it is an important component of the discipline to ensure that the right of access is not frustrated by any action in this area. A multilateral trade agreement would be deeply flawed in the absence of such a provision. In the case of the goods trade, the corresponding provision is Article XV of the GATT 1994. This provision is much more detailed and the rationale of the distinction between current and capital payments, exchange rate policy issues and the jurisdictional separation for dealing with them multilaterally comes through clearly in this provision.

Economic & Political Weekly

EPW
november 12, 2011 vol xlvi no 46

On the lines of Article XV of the GATT in respect of the trade in the goods sector, the basic thrust of Article XI of the GATS is twofold: to prohibit restrictions on payments and transfers for current transactions related to members’ specific commitments and to re-emphasise the jurisdictional separation between the WTO and the IMF in regard to current and capital transactions. Since some financial services by their very nature involve capital movement, it extends the payments and transfers discipline to such transactions also, if there is a specific commitment in respect of such transactions.

To tease this out a little further, Article XI: 1 prohibits restrictions on payments and transfers for current transactions in relation to members’ specific commitments unless covered by Article XII, if invoked. Article XI: 2 asserts IMF jurisdiction on capital transactions, including exchange actions, but permits restrictions on capital transactions only for balance-of-payments reasons under Article XII, or at the request of the IMF. In addition, it prohibits restrictions on any capital transactions inconsistently with members’ specific commitments regarding such transactions, as in the case of any financial service commitment involving capital movement under mode 1, and for FDI under mode 3. This is logical and is linked to the clarification in footnote 8 under Article XVI on market access. More on this a bit later.

The Tucker T (2010) memorandum has faulted this provision on several grounds, one of which is the alleged differential standards of restriction on payments and transfers in respect of current transactions and those for capital transactions, based on differences in the language used in the text in the two subsections. The memorandum holds that the “GATS does not spell out how these substantive standards differ. The ‘relating to’ standard in Article XI (1) may be interpreted more broadly than the ‘inconsistently’ standard in Article XI (2). A ‘consistent imposition’ of capital controls under Article X1 (2) would likely be one that did not run afoul of countries’ commitments under Article XVI (1).”

This is a misreading of the text of Article XI. If anything, expressions “relating to” and “inconsistently” are not standards of restrictions. There is complete prohibition on restrictions on current transfers and payments in respect of specific commitments; “relating to” defines the scope of application of the prohibition as being limited to specific commitments only, with no such obligation in respect of non-scheduled cross-border service transactions. Substituting “relating to” by “inconsistently” in Article XI (1) would change the entire meaning of the provision for consistency with specific commitment is not the issue being addressed here. Likewise, substituting “inconsistently” by “relating to” in subsection 2 would not convey the scope of restriction being applicable only to the transactions for which commitments have been made which may not be a full commitment in terms sector coverage and/or may have conditions or qualifications attached to it. To illustrate: suppose a mode 1 commitment in financial services is open for all transactions except for business-to-consumer (B2C) capital transactions. Among others, it would imply a commitment to allow business-to-business (B2B) capital transactions. In this case Article XI (2) discipline would mean that restrictions can be imposed on B2C capital transactions only and not on B2B or other types of transactions. However, as brought out earlier, B2B transactions can also be restricted under the circumstances, and for the reasons, envisaged in paragraph 2(a) of the annex or for BOP reasons under Article XII.

The same memo raises the issue of lack of clarity in the classification of current and capital transactions and also points out, and rightly so, that while the IMF does not place any restrictions on members freedom to regulate capital movement, Article XI of GATS restrains members from imposing capital controls in case of commitments in the financial services sector. While it is desirable to gain greater clarity in defining, and distinguishing between, the two types of transactions, the responsibility for which lies on the IMF, the necessary disciplines to ensure that payment restriction do not stand in the way of members right to market access cannot be given a go-by until that utopia of clarity and unambiguity in this regard is achieved. In terms of the objective of this discipline, there is no difference between payments and transfers for current transactions relating to all other service sectors where commitments have been undertaken, and capital payments and transfers in respect of a financial service commitment which involves capital movement, to make sure that members’ access rights are not frustrated by restrictions on transfers and payments.

Blurring of Distinction

Another issue raised in the Tucker T (2010) memorandum is the blurring of distinction between transactions under modes 1 and 2 because of the difficulty in ascertaining in some cases, whether in a transaction, it is the service or the consumer that moved cross-border in order to classify the transactions between these two modes. This has come about as a result of the development of e-commerce. At the time the definition of trade in services was negotiated, e-commerce was not even on the horizon. This is, therefore, an issue which needs to be addressed, but in doing so current commitments under both modes have to be protected, particularly since mode 2 commitments are much more preponderant than mode 1 commitments. However, the solution13 suggested in the memorandum will not resolve the issue, as in cases of no commitment under mode 1, the footnote under Article XVI would not apply, even if a mode 2 transaction were to be misclassified as a mode 1 transaction. The clarification would be redundant. In reverse, if a mode 1 transaction were to be misclassified as a mode 2 transaction in cases of “no commitments” under mode 2, it would not matter, but in cases of commitments under mode 2, although the footnote would not apply, it would be desirable to find a neater solution to this classification issue, at the very least to ensure that these misclassifications do not result in converting a commitment into a “no commitment” and vice versa.

The suggestion14 of dropping footnote 8 to Article XVI will not make any difference to the rights and obligations of members in regard to commitments involving capital transactions. The footnote is by way of a clarification; the substantive obligation flows from the nature of the service which has been committed, and from Article XI (2) disciplines on payments and transfers. It may be mentioned in passing that this footnote, proposed by the EU, was debated at length (during the negotiations), in the context of its implications for substantive commitments under mode 1 in financial services and under mode 3 for FDI. It was agreed that there were no implications, one way or another, for the substantive market access obligations. Since, however, the EU delegation, reportedly at the behest of the financial services industry, was keen to have the clarification in regard to something that was perceived to have been substantively conceded, it was agreed to accommodate the proposal.

Article XII on BOP safeguard restrictions is another provision in which changes are being sought. It has to be noted that this is a contingent protection provision and an exception to the general rule of not imposing restrictions on trade in services on which specific commitments have been made, including on payments and transfers related to such commitments. Its invocation is permissible only in conditions of “serious balance-of-payments and external financial difficulties or threat thereof” and subject to specific disciplines and periodic monitoring. IMF has a decisive say in the assessing the balance-of-payment and the external financial situation of a consulting member under Article XII.

Capital Controls

In the Barbados communication, the apparent reason for seeking changes in Article XII is to gain authority to impose capital controls (by restrictions on trade in services), to prevent capital flight, among others, for reasons of “high indebtedness, severe fiscal imbalances, financial service instability, etc”. It may be noted here that the IMF, in assisting the BOP Committee to carry out an assessment of the balance-of-payments and the external financial situation of a consulting member, would already have factored in all the three elements relating to indebtedness, fiscal situation and the status of the financial service sector; such an assessment would have to necessarily include trade in goods also. Procedural requirements as well as substantive disciplines for safeguard action under Article XII of the GATS mirror the provisions of the goods trade agreement in this regard as laid down in Articles XII, XVIII-B and the Understanding on the Balance-of-Payments Provisions of the GATT 1994. The link between safeguard actions in the two trade agreements has been brought out through Article XII: 5, and footnote 4. This is only logical.

Capital flight, the ostensible reason (in the Barbados communication) for seeking these changes, is a complex issue and cannot possibly be attributed to members’ commitments in financial services, even for those that have made relatively liberal commitments under the Understanding. If, however, it has created a balance-of-payments crisis or a threat thereof, safeguard action under Article XII is permissible, subject to its procedural requirements and substantive disciplines. It is also possible to address this issue by restrictions on capital movement, under paragraph 2(a) of the annex on financial services, “to ensure the integrity and stability of the financial service system”, depending on the nature and intensity of such capital flight or even inward capital movement (hot money), even though that may be in violation of a specific commitment in the financial services sector. In addition, the IMF has the authority under the GATS Article XI: 2 to request WTO members to impose capital controls in respect of specific commitments under the GATS agreement, apart from the authority on the subject it enjoys under the Articles of Agreement of the IMF.

november 12, 2011 vol xlvi no 46

There is also a proposal to involve the “BIS, or preferably the IMF”, in the consultation process with the BoP Committee under Article XII: 5 and authorise the selected institution to pronounce on the legality of any withdrawal of commitments. First, it is to be noted that IMF is already involved in these consultations to determine whether a member’s balance-of-payments and external financial situation is such as to warrant resort to the safeguard action of temporary restrictions on specific commitments undertaken by it under the GATS. Statistical and other facts presented by the IMF relating to foreign exchange, monetary reserves and balance of payments have to be accepted and cannot be challenged; it is mandatory for the BOP Committee to base its assessment of the consulting member’s BOP and external financial situation on the statistics and facts presented by the IMF. What is new in the proposal is to give the IMF the authority to pronounce on the legality of the safeguard action taken with the approval of the committee, and thereby deprive other members’ of their right, under the dispute settlement system, to challenge the safeguard action on grounds of violation of their rights. This will amount to a serious violation of the WTO system itself. There is no good reason to do so as has been explained earlier in this paper: the DS system does not prevent a member from taking a measure, which is brought before the DS system post-facto. Even if it were possible to involve any external agency in the DS system, IMF would stand disqualified as an interested party because of its involvement in the assessment of the BOP situation of the consulting member. BIS cannot possibly be given any role in this regard, as its remit has nothing to do with trade matters and not all WTO members are members of the BIS.

The Tucker T (2010) memorandum views disciplines envisaged for safeguard action for balance-of-payments reasons as adding draconian layers of restrictions on a member’s freedom to address capital management through such instruments as the FTT and CMTs. This way of appraising the issue ignores the rationale and the need for disciplines for such safeguard action, and without as much as a passing nod for the over 60-year experience of dealing with BOP issues in the GATT/WTO. These disciplines essentially seek to minimise, if not eliminate, abusive use of these safeguard provisions. A trade agreement with the facility of safeguard action and without any disciplines on that action would be a deeply flawed agreement. Admittedly, GATS has added a new dimension to this issue as a result of financial service being a part of the agreement with specific commitments in the sector, particularly since some financial services commitments involve capital movement. But that aspect of it has been addressed through special dispensation in the annex on financial services, unparalleled in a trade agreement.

In order to place FTT and CMT types of interventions beyond any doubt and beyond the pale of a possible challenge under the WTO DS system, the Tucker memorandum has suggested a dispensation on the lines of the 2001 Doha Round “Declaration on the TRIPS Agreement and Public Health”.15 It may be pointed out here that the Tucker memo for a declaration refers to the form through which substantive amendments to the GATS agreement are sought to be brought about. This paper has attempted to show that the proposed amendments are unnecessary for the purpose

Economic & Political Weekly

EPW
november 12, 2011 vol xlvi no 46

for which they have been proposed, and, indeed, if they were brought about, they would adversely impact the integrity of the GATS as a viable trade agreement with consequences difficult to anticipate fully. Incidentally, it may be mentioned that the TRIPS dispensation in regard to public health is far from a clean exemption from the pharmaceutical product patent obligations, riddled as it is with conditions and qualifications. For the sake of the argument if WTO were to go down that route, such a dispensation would have to have a caveat for non-abuse, minimally, and may require other conditions and qualifications to keep the GATS as a viable trade agreement. In contrast the dispensation under the annex is much cleaner and also broad-based in regard to the policy instruments that may be deployed to achieve the policy goals.

The other memorandum of Citizen Watch by Wallach L and Tucker T on alleged unanswered questions about conflicts between financial service regulations and GATS law, has overlaps, with regard to the problems as well as proposed solutions, with Tucker’s memorandum about the use of FTT and CMT. It is not therefore necessary to go into most aspects of the issues raised therein as the same have been dealt with already in this paper in some detail. There are, however, two points that need to be clarified.

The first is the quote16 from the UN Commission of Experts on Reforms in the International Monetary and Financial System chaired by the Noble Prize winning economist Joseph Stiglitz to the effect that “agreements that restrict a country’s ability to r evise its regulatory regime” in the financial service sector would need to be changed. GATS have been mentioned as being one such agreement along with bilateral and regional trade and i nvestment agreements. Since this paper has not analysed other agreements mentioned in the quote, the comments here are in regard to the GATS agreement only.

The detailed analysis in this paper does not uphold, even by a long shot, this ex cathedra pronouncement in regard to the GATS. Quite to the contrary, it has shown how GATS provides ample scope for members to revise their regulatory regimes to meet a variety of policy goals, among them those of the prudential kind and of preserving the integrity and stability of the financial system, even when it leads to violations of their obligations and specific commitments under the agreement, subject only to the anticircumvention safeguard against abusive use of this dispensation with an intent to avoid an obligation or a specific commitment.

The second point in this memorandum that needs to be clarified is about the alleged unsatisfactory and/or no response by the WTO Secretariat to questions on the alleged conflicts between financial services regulations and the GATT law, as reflected in the WTO Secretariat document, “Financial Services: Background Notes” dated 3 February 2010.17 The questions relate to the interpretation of certain specific provisions of the GATS, the interplay between these provisions themselves and with regulatory regimes of members (at least some of them), in the financial services sector. Expectations of authoritative interpretations in this regard from the WTO Secretariat are misplaced, because the secretariat is not authorised to interpret WTO law. Authoritative interpretations can be given only by the WTO members acting jointly,18 or can come through jurisprudence, built over time, u nder the WTO dispute settlement system. In the case of the former, it will have to be based on a consensus among the members, which may be difficult to obtain, as it will involve a regular process of negotiations. The GATS is still a relatively young agreement and it will take time to build up the necessary jurisprudence for the agreement.

US-Antigua Gambling Dispute Outcome

The Tucker T and Wallach L memoranda have cited the US-Antigua gambling dispute panel report 19 in the context of its views on Article XI; UNCTAD TDR reflects these views and also makes its own comments, which seem directed at the interpretation of s everal clauses like the general safeguard clause, (Article XIV) and the market access clause (Article XVI) of the GATS, in the panel report. The burden of these comments is the alleged inflexibility (even unreasonableness), of the interpretations of these provisions, giving rise to apprehensions that such interpretations will stand in the way of members ability to intervene effectively to address the 2008-like crisis in the financial services sector and/or prevent such crises arising in the future. This needs some clarification, both in regard to the context as well as the assailed interpretations. (Before going any further though, there is a disclosure to be made here: this writer chaired the gambling panel.)

To begin with it has to be noted that this dispute was about a commitment on “recreational sporting services” and not on financial services. Antigua had alleged that gambling was a part of the recreational sporting services on the basis of the classification of service sectors (W/120) used by the US to make the commitment in its schedule of specific commitments for this sector. It further alleged that, given the scheduled entry, which did not have any limitations or conditions on “national treatment”, the commitment covered remote supply of gambling services under mode 1. The panel found this to be the case, rejecting the US contention that since they had a long-standing ban on the remote supply of gambling services domestically, they could not have contemplated, much less intended, to make any commitment in these services, multilaterally. This argument of the US intention did not find favour with the panel on the ground that it could not second guess US intensions at the time the commitment was made; the only way the panel could proceed in this regard was to interpret and apply the GATS in the light of the facts and evidence before it. In appeal,20 this finding was upheld by the Appellate Body (AB), although (on technical grounds) under the provisions of the Vienna Convention on the Law of Treaties, the AB classified the two documents (W/120 and the 1993 scheduling guidelines), relied upon by the panel for its finding, only as a part of the “negotiating history” of the GATS and not the “context” as per panel’s understanding. However, the AB relied upon these very documents to uphold the panel finding.

As an alternative plea, the US invoked the general exception defence (Article XIV) to justify the ban on remote supply of gambling services on grounds of public morals and public order, which under Article XIV(a) is subject to a “necessity test”. The panel held that the US had not met the test as it had not entertained Antigua’s suggestions to explore the possibilities of using less trade restrictive measures to achieve the policy purpose of the ban. And that as a result there was discrimination between domestic and foreign suppliers of these services. The AB overruled this finding on the ground that Antigua should have proved its case for recourse to less restrictive alternative by the US in the panel proceedings and not merely in bilateral consultations with the US in the DS process. While the panel had held three US federal laws and several state laws as containing some provisions inconsistent with the US commitments for remote supply of gambling services and thereby resulting in discrimination between domestic and foreign suppliers of these services, the AB held that such discrimination between domestic and foreign suppliers of remote betting services was only for horse racing under the Interstate Horseracing Act.

Judicial Economy

The panel had exercised judicial economy with respect to Antigua’s claims under Articles XI and XVII of the GATS, which means that these provisions were not interpreted by the panel in the light of the facts and circumstances of the case. Judicial economy in respect of an issue or issues is exercised when findings on those aspects would not materially change the outcome in a case. (It may be noted here that Article XVII on national treatment in the GATS has not come up for interpretation in the DS process so far; given that there may be conditions attached to the national treatment commitment in some cases, the implications of the invocation of the general exception provision of the GATS will depend on facts and circumstances of individual cases.) It is in the light of this background of the outcome of the US-Antigua gambling dispute that we need to appraise the comments on these provisions of the GATS by the Citizen Watch and in the UNCTAD TDR.

Having exercised judicial economy in regard to Article XI, the panel nonetheless made the observation that the discipline on payments and transfers in the provision was necessary to secure members’ rights under specific commitments. The Citizen Watch comment in this regard is that the observation is an indication of how the provision is likely to be interpreted in future cases, which will stand in the way of effective regulatory intervention. This provision has been analysed in detail already in this paper. There is no doubt that the provision embodies an important discipline for effective enforcement of market access obligations, and in fact, a trade agreement without this discipline will be a deeply flawed agreement, and therefore, depending on the facts and circumstances of individual cases, any and all DS proceedings will uphold this right. It has also been pointed out that since some financial services commitments involve capital transfers, it is logical to treat payment and transfer issues relating to them on the same lines as current transactions in other cases. However, as also pointed out earlier, regulatory intervention is still possible under the financial services annex, even to the extent of violation of a commitment for prudential reasons or to ensure the integrity and stability of the financial system.

In the TDR, the issues in this regard have been confused as between payments and transfers for current transactions and capital transactions.21 The TDR also holds that the

GATS market access rules prohibit government policies that limit the size or total number of financial service suppliers in covered sectors... Thus if countries have already committed to certain kind of deregulation,

november 12, 2011 vol xlvi no 46

they cannot easily undo them, even with regard to critical issues as the bank size. Under the same rules, a country may not ban highly risky financial service in a sector (i e, banking, insurance or other financial services) once it has been committed under the GATS rules (p 101).

This is also the argument advanced by advocacy groups and is based on a substantial misreading of the provisions of the GATS, as demonstrated already. The examples in the quote have been shown to be amenable to intervention under the prudential carve out provision of the annex on financial services.

This has been further elaborated in the TDR in the notes (p 107). Note 5 states:

The relevant case law provides some indication of how these rules may

be interpreted in future. A WTO tribunal has already established a

precedent of this rule’s strict application in its ruling on the US internet

gambling ban, which prohibited both US and foreign companies from

offering online gambling to US consumers. This ban was found to be a

‘zero quota’ and thus in violation of GATS market access requirements.

This ruling was made even though the US government pleaded that inter

net gambling did not exist when the original commitment was made

and, therefore, could not have been excluded from the commitment list

(emphasis added).

The TDR quotation above, apart from being a distorted reading of the panel report and its findings, the pleading (italicised above) attributed to the US government is factually incorrect. The issue was not internet gambling per se, but cross-border r emote supply of gambling services, that is, supply of a service “from the territory of one member into the territory of any other member” (mode 1 supply definition). The quote confuses the mode of delivery of a service with the means or a platform used for the delivery. Remote delivery is possible through other means like post, telegraph and telephone (for some services) and antedates the GATS; there would have been no mode 1 if it was only through internet as the technology was not even on the horizon when this definition was negotiated. In this regard, the panel report has maintained that mode 1 definition of supply is technologically neutral for means of delivery. This finding was not even appealed against by the US. The plea taken by the US has been mentioned already and it was that remote supply of gambling services was already prohibited domestically and therefore their making a commitment in this regard was not intended.

The reading of the panel findings appears to be based on a misreading of Article XVI on market access, which has been analysed in great detail in this paper. So we will leave it at that.

Disciplines on Domestic Regulations: Article VI: 4

Incomplete GATS

The GATS, as a trade agreement, remained incomplete in some important respects at the end of the UR negotiations. These r elated to Subsidies, Emergency Safeguard Measures, Government Procurement and Disciplines on Domestic Regulations u nder Article VI: 4. Negotiations on these issues were started way back in 1995 and continued through the market access liberalisation round for services launched in January 2000 until they got subsumed in the DDA negotiations, where they are presently stuck.

Economic & Political Weekly

EPW
november 12, 2011 vol xlvi no 46

There is opposition from some quarters on developing and applying any disciplines on domestic regulations under Article VI: 4. The issue is examined in the following paragraphs.

The importance of regulations in services has already been brought out earlier, as also GATS explicit recognition of members’ freedom to regulate and to introduce new regulations in services; special dispensation for financial services in this regard has also been covered in some detail. A few words about the need for disciplines in this area: the philosophy underlying Article VI: 4 is to ensure that regulations in the focused areas, which deal with consumer protection and related public policy concerns, are not used as non-tariff barrier(s) to deny or circumvent access in committed sectors. Article VI: 4 mandates development of necessary disciplines relating to qualification requirements and procedures, technical standards and licensing requirements with the objective of ensuring that such requirements are:

(a) based on objective and transparent criteria, such as competence and the ability to supply the service; (b) not more burdensome than necessary to ensure the quality of the service; (c) in the case of licensing procedures, not in themselves a restriction on the supply of the service.

Under a ministerial decision at Marrakech, a working party was mandated to examine and report with recommendations on the disciplines necessary to ensure the realisation of the objectives of Article VI: 4 in the case of professional services, priority being given to the accountancy sector. Based on the recommendations of this working party, the Decision on Disciplines relating to the Accountancy Sector was adopted by the Council for Trade in Services in December 1998.22 The acceptance of the decision by members was on a voluntary basis. Subsequently, by a decision in April 1999,23 the Trade in Services Council set up a Working Party on Domestic Regulations (WPDR) to develop any necessary disciplines under Article VI: 4 mandate. The mandate of the WPDR is to develop generally applicable disciplines for all sectors, but may also develop disciplines as appropriate for individual sectors or groups thereof, keeping open the issue of application of disciplines on horizontal or sectoral basis.

The present status of these negotiations rests with the WPDR chairman’s draft document24 on disciplines on domestic regulations as a basis for further negotiations, but is presently in limbo along with the rest of the DDR agenda in services. This is not the place to critique the draft except to say it is a comprehensive document and should be a good basis for concluding these negotiations, although the draft has diluted the “necessity test” mandated in Article VI: 4(b), which is not warranted, as this test has proved an effective instrument in the case of the GATT agreement against imposition of non-tariff barriers in the name of freedom to regulate, and there is also sufficient jurisprudence on the subject built over more than 50 years to reassure members that this will not be a leap in the dark in case of the GATS.

The only issue to address here is that of the objections being raised against developing disciplines on these specific regulatory issues. There is not any specific objection to fulfilling the mandate under Article VI: 4, except the vague and general argument that this will further curtail members’ policy space and will prove burdensome to them, particularly to the developing countries.

The cost-benefit equation between loss of policy space in making a concession and loss of possible benefits in not doing so, inherent in all multilateral agreements, has been dealt with in some detail earlier in this paper; suffice it to say here that preservation of as much policy space as possible, however important it may seem on its own, has to be weighed against loss of possible benefits. It is this writer’s considered view that in this case the cost-benefit equation is decidedly in favour of accepting the disciplines, even though it may result in some diminution of the policy space and may prove burdensome to some extent.

Disciplines for Developing Countries

The opposition to developing disciplines is also being promoted as of particular interest to developing countries. In fact, it is particularly in the interests of developing countries to have these disciplines. To understand and appreciate the underlying rationale for such disciplines, we have to ask ourselves the question about why we have accepted disciplines under technical barriers to trade, sanitary and phytosanitary measures and import licensing procedures agreements in the case of the goods trade and then to ask whether that rationale is not appropriate in the case of the services trade agreement. The rationale for these agreements is that while it is legitimate and necessary for members to regulate these aspects covered by these agreements for reasons of health, safety, etc, such regulations should be used to serve those policy purposes only and not be used to circumvent access rights of members under the trade in goods agreement by erecting non-tariff barriers. If this rationale is good enough for trade in goods, then why is it not so for trade in services?

This writer has not come across any argument to counter that. On the contrary, regulations on the issues listed in Article VI: 4 have even a greater rationale for disciplines in the service sector, because regulations play a much greater role in services trade. Robust and enforceable disciplines on these regulatory issues are of critical importance in the services sector for exploiting market access opportunities in areas of export interest to members, developed and developing countries alike. They are particularly so for developing countries in areas of export interest to them, like in professional services. These disciplines will be equally useful for them in importing services into their markets. In that light, I would reiterate that it would be in the interest of developing countries to generalise the application of a “Necessity Test” to regulatory instruments in all sectors. The present situation of the absence of disciplines on these regulations is distinctly weighed in favour of the developed country members. As to the burden of such disciplines, exaggerated as it is, can be eased by measures already included in the chairman’s draft text.

Developing Country Interests

It may be observed that opposition to the development of disciplines under Article VI: 4 is not the only issue that is being promoted as being particularly in the interests of developing countries. The assault on the GATS on the alleged ground that it is

REVIEW OF AGRICULTURE

June 26, 2011

(CTO5K\GCPF2TQFWEVKXKV[7PFGTUVCPFKPIVJG5VTGPIVJU QH5OCNNJQNFGTUCPF+ORTQXKPI6JGKT.KXGNKJQQFU ō4COGUJ%JCPF2#.CMUJOK2TCUCPPC#TWPC5KPIJ

5RTGCFCPF'EQPQOKEUQH/KETQKTTKICVKQPKP+PFKC 'XKFGPEGHTQO0KPG5VCVGU ō-2CNCPKUCOK-CFKTK/QJCP-4-CMWOCPW54COCP

9CVGT*CTXGUVKPI6TCFKVKQPUCPFVJG5QEKCN/KNKGWKP+PFKC #5GEQPF.QQM ō5JTK-TKUJCP

+TTKICVKQPKP6GNCPICPC6JG4KUGCPF(CNNQH6CPMU ō)CWVCO2KPING

(CTOGTUŏ5WKEKFGUKP2WPLCD#%GPUWU5WTXG[QHVJG 6YQ/QUV#HHGEVGFKUVTKEVU ō455KFJW5WMJRCN5KPIJ#5$JWNNCT

4GQTKGPVKPI.CPF7UG5VTCVGIKGUHQT5QEKQGEQPQOKEGXGNQROGPV KP7VVCT2TCFGUJ ō#TWP%JCVWTXGFK0)2CVKN50)QUYCOK

0CVKQPCN9CVGT2QNKE[#P#NVGTPCVKXGTCHVHQT%QPUKFGTCVKQP ō4COCUYCO[4+[GT

4GXKVCNKUKPI*KIJGT#ITKEWNVWTCN'FWECVKQPKP+PFKC ō,%JCNNC2-,QUJK2TCDJCMCT6CODQNK

For copies write to: Circulation Manager,

Economic and Political Weekly,

320-321, A to Z Industrial Estate, Ganpatrao Kadam Marg, Lower Parel, Mumbai 400 013. email: circulation@epw.in

november 12, 2011 vol xlvi no 46

a hurdle in the way of better regulation of the financial service sector and, therefore, warranting significant changes on the suggested lines is also being promoted as being of particular benefit to the developing countries.

It has been shown earlier in this paper that the thesis that some GATS provisions and financial service sector commitments, are effectively preventing WTO members from carrying out necessary financial service sector regulatory reforms in order to cope with the consequences of the 2008 crisis in the sector and to forestall such crises arising in the future, does not stand scrutiny. Quite to the contrary, GATS gives full freedom to members to regulate services, short of thereby causing breach of any specific commitments, applicable to all sectors; but in the case of the fi nancial services sector it even permits violation of any obligation, including of specific commitments, for prudential reasons of protection of investors, depositors, etc, or to ensure the integrity and stability of the financial system, except that this flexibility cannot be used to circumvent an obligation or a specific commitment in the sector. This provision in the annex on financial services is quite clear and there is no room for any uncertainty in this regard. It has also been shown that the examples of alleged impermissible regulatory interventions under the GATS are not correct. In fact, in all those examples interventions would be permissible.

It has also been demonstrated that changes being proposed in Articles XI, XII and XVI are based on mixing of different issues, and misreading of these provisions. For instance issues relating to “capital transactions”, which are outside the scope of the trade agreements under the WTO, are being mixed with “current transactions”, of relevance to trade agreements and hence dealt with in these agreements, except for specific commitments on capital movement under the GATS, which have to be subject to its disciplines in order to preserve the integrity of the GATS as a trade agreement, but at the same time provides for regulatory intervention of unparalleled scope (for a trade agreement) under the annex on financial service. Otherwise also, multilaterally, capital movement and exchange policy issues are under the jurisdiction of the IMF.

There is also the problem of mixing of modalities for making specific commitments with the actual specific commitments r eflected in the schedules, like in the case of a group of members, overwhelmingly from developed countries, in terms of alternative modality recorded in the Understanding. The mixing is about how members who have taken specific commitments under the Understanding may seek modifications in those commitments. It has already been shown that members can seek modifications in their schedules only under the provisions of Article XXI, and that proposed changes to the provisions of the Understanding would amount to a retrospective amendment of this modality for changing commitments in the sector, which is not legally permissible and will result in changing the balance in the exchange of concessions, intra se between the members of the group and inter se between them and members who have used the original modality under Parts III and IV of the GATS for making their commitments.

It has also been shown that if the objective is freedom for regulatory intervention, there is no need to resort to the ruse of modifying commitments themselves by changes in the Understanding.

Economic Political Weekly

EPW
november 12, 2011 vol xlvi no 46

That objective can be realised by the use of the flexibilities for regulatory intervention available for the sector in the annex. However, if any member feels that it cannot live up to any of its FS commitments, for whatever reasons, the only recourse is to seek modification of such a commitment under Article XXI.

It is difficult to see what kind of benefits will accrue to the d eveloping countries if the proposed changes to the GATS agreement were to materialise. On the contrary, the proposed changes in Articles XI, XII, and XVI will completely mess up the framework agreement, which is believed to be the most developing-countryfriendly agreement to have come out of the UR Round. That is not to say that the agreement is perfect and could not have been better, or cannot be improved in the future. But that will by no means happen through the proposed changes. There is a certain seductive allure for developing countries if changes in trade agreements in general, and the services agreement in particular, are promoted as being in their interests, though they get to see through the game sooner or later. Nevertheless, the propaganda value of this effort to seek changes in the GATS should not be underestimated and needs to be countered effectively.

What is unfortunate in this though is that, for the purpose of strengthening regulatory oversight on the financial services sector, which is desperately needed, particularly in the US and the EU, the effort of seeking changes in the GATS is altogether misdirected. GATS commitments had nothing to do with the banking crisis of 2008, nor did they prevent necessary regulatory intervention. This effort should be directed towards countering the financial services industry’s frenetic lobbying against meaningful improvement in regulatory oversight of the industry through fundamental reform of the regulatory framework and its rigorous implementation in the US and EU, particularly the former.

Conclusions

Changes in the GATS (mooted in the Barbados communication, and by some NGOs and most recently by the UNCTAD in TDR-201), ostensibly to provide freedom for WTO members for regulatory intervention in their financial service sector to meet the challenges in the sector to overcome the effects of the 2008 crisis and to prevent such crises in the future, will not serve that purpose; the effort in fact is misdirected.

Specific commitments of members in the financial service s ector were in no way responsible for the crisis; it started in the US, based on almost a religious faith in the “efficient market hypothesis”, resulting in reckless deregulation of the sector, c ompounded by lax regulatory oversight, the greed of the industry and its indifference to the fiduciary duty it owed to its investors and depositors.

GATS obligations and commitments were neither responsible for the crisis, nor do they stand in the way of necessary regulatory reform in the sector.

The GATS in fact provides full freedom to members to regulate all services sectors in which they have made specific commitments, but this freedom does not permit violation of obligations and commitments under the agreement.

However, under the special dispensation provided for the financial service sector, such regulatory intervention may even result in violation of a specific commitment in the sector, but of this effort should not be underestimated and needs to be with a safeguard against any abusive use of this facility. None of countered effectively. the examples cited by some protagonists of regulatory changes While these changes are being promoted as being of particular that cannot be undertaken because of the GATS, stand scrutiny; benefit to developing countries, the analysis does not support all of them can be accommodated under the special dispensa-that view. Inasmuch as the proposed changes will mess up the tion for regulatory intervention provided in the GATS annex on agreement, they are not of any benefit to members, whether definancial services. veloped or developing country members. Given that the agree-

Changes proposed to the Articles of the GATS, the annex on ment is considered as developing-country-friendly, any changes financial services and the Understanding on commitments in in it should not militate against that feature. financial services mix up several issues like modalities for spe-Those promoting change to the GATS agreement in order to cific commitments with scheduled specific commitments, current facilitate regulatory intervention in, and oversight of, the finantransactions with capital transactions, etc. These changes, if cial services sector should, if they want any real reform in the carried out, will mess up the GATS altogether and may even destroy regulatory framework for the sector, instead direct their efforts its integrity as a viable framework for trade in services. While at countering the financial services industry lobbies in the US it is not easy to amend a WTO agreement, the propaganda value and the EU.

Notes subject at the time. Even the notion of trade in footnote to GATS Article XVI(1). This would help services in four modes of delivery took shape in protect the current and capital account regula

1 T Tucker (2010): “The WTO Conflict with Finanthe 1988-89 (mid-term review) process, and the tions of nearly 40 countries with ample mode 2 cial Transactional Tax and Capital Management actual definition of these modes as it appears in but not mode 1 commitments” (P.17 of the first Techniques and How to Fix It”, Memorandum, the GATS was settled only a few months before the memorandum referenced at footnote 2).

Public Citizen, Washington DC, 9 July. Available

1990 Brussels ministerial conference. That draft 14 Ibid: 17.

at http://WWW.citizen.org./documents/Memos

text had a blank page for the financial services

capital control pdf; and 15 Ibid: 17.

annex. In respect of a large number of other pro-

L Wallach and T Tucker (2010): “Answering Criti- 16 “Agreements that restrict a country’s ability to

visions, the negotiators themselves were far from

cal Questions about Conflicts between Financial revise its regulatory regime...In particular, there

clear. If the round (by some miracle) had been

Regulations and WTO Hitherto Unaddressed by is concern that existing agreements under the

concluded at Brussels, the services agreement

the WTO Secretariat and Other Official Sources”, WTO Financial Services Agreement might, were

would have had to be reopened. It was only dur

22 June. Available at http://WWW.citizen.org./ they enforced, impede countries revising their

ing 1991-93, the period when political negotia

documents/Memos %20 %20 Unanswered % 20 regulatory structures in ways that would promote

tions were more or less under suspension, that the

questions % 20 memo %20 for %20 Geneva pdf growth, equity and stability….” (p 1 of L Wallach

Brussels draft text was further negotiated in the

and T Tucker 2010).

2 UNCTAD/TDR/2011, pp 100-02.

name of doing “technical work” on the draft. It was 3 The idea, with many caveats (often ignored in

17 WTO documents S/C/W/312 S/FIN/W/73.

in this process that the provisions on financial oversimplification) that the market sets a just 18 See Article IX: 2 of the Marrakesh Agreement

services, among others, were negotiated. price or the price is discovered in the market, has E stablishing The World Trade Organisation.

9 Participants’ experts from finance ministries and

been around since the early classical economists. 19 “United States – Measures Affecting the Cross

central banks were deeply involved, along with

But its formulation/simplification and codification border Supply of Gambling and Betting Services”,

trade negotiators, of both developing and deve

took on a life of its own as a result of the work of a Report by the Panel WTO document WT/DS285/R,

loped countries, in the negotiating process for the

range of economists at the Chicago School. See dated 10 November 2004.

framework agreement and on financial services.

Justin Fox (2009): The Myth of the Rational Market

In fact, finance ministries had the final say in 20 “United States – Measures Affecting the Cross(HarperCollins).

all matters relating to financial services. In that border Supply of Gambling and Betting Services”,

4 See Frank Partnoy (2004): Infectious Greed: How light, to contend, as some seem to do, that negoti-Report of the Appellate Body, WTO document Deceit and Greed Corrupted the Financial Markets ators did not have a full understanding of the WT/DS285/AB/R, dated 7 April 2005. (Henry Holt); Partnoy (2009): FIASCO: Blood in

role of finance in the economy is, to say the least, 21 The TDR 2011 at page 100 mentions that “unless a the Water on Wall Street (W W Norton). disingenuous. serious balance-of-payments situation can be 5 Simon Johnson and James Kwak (2010): 13 Bankers 10 Pages 14-15 of the memo referenced at footnote 2. claimed, no restrictions on international pay(First Vintage Books edition), pp 59-60. ments and transfers to a country’s specific com

11 Jung Byungsik, “Standard of Review for Jurispru

6 There have been widespread reports in the main-dence on Prudential Measures”. Available at: http:// mitments are permitted”. It omits to mention that stream media in the US, as well as posts in spe-www.wcl.american.edu/journal/ilsp/v1/2/jung. the restriction applies only to current payments cialised weblogs like Nakedcapitalism, about the pdf - 2009-10-06. relating to specific commitments. There is no disvarious civil and criminal litigations being cipline on capital transactions except where the

12 See Chakravarthi, Raghavan (2002): “Developing

launched or underway in several states in the US, committed service involves capital movement.

Countries and Services Trade: Chasing a Black

and the scale of such fraudulent activities, as well Cat in a Dark Room, Blindfolded”, Third World 22 WTO document S/L/64, 17 December 1998.

as frantic efforts, so far unsuccessful, being made

Network, Penang, Malaysia. 23 WTO Document S/L/70, 28 April 1999. by leading Wall Street firms to reach some settle

13 “If a WTO member country has made commit-24 Informal note by the chairman of WPDR, dated ments involving some payments, but ensuring ments in a given sector for mode 2 but not for 20 March 2009 with a second revision of the draft blanket immunity to the institutions against any mode 1, the member is under no obligation to Disciplines on Domestic Regulations Pursuant to

further litigations.

comply with the Market Access provisions of the GATS Article VI: 4 (Room Document). 7 Yves, Smith (2010): ECONned: How Unenlightened

Self Interest Undermined Democracy and Corrupted Capitalism (Palgrave Macmillan).

8 It may be worth noting that talks and negotiations in “services” within the MTS, began with the 1982 GATT ministerial conference, and continued in the preparatory process for the Uruguay Round and ultimately found a place in its agenda, but on a separate track. That distinction, however, lost its original purpose once it was decided to set up a new organisation and make the whole UR outcome a single undertaking. Since even the notion of trade in services (considered by some as an oxymoron), was new, the task of crafting a multilateral framework agreement to cover the whole service sector regulated under a bewildering variety of rules and regulations, proved a daunting task. There was hardly any academic work on the

For the Attention of Subscribers and Subscription Agencies Outside India

It has come to our notice that a large number of subscriptions to the EPW from outside the country together with the subscription payments sent to supposed subscription agents in India have not been forwarded to us.

We wish to point out to subscribers and subscription agencies outside India that all foreign subscriptions, t ogether with the appropriate remittances, must be forwarded to us and not to unauthorised third parties in India.

We take no responsibility whatsoever in respect of subscriptions not registered with us.

MANAGER

november 12, 2011 vol xlvi no 46

Dear Reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Back to Top