Trade in services

The terms and conditions for the provision of services at international level is laid down by the World Trade Organisation’s General Agreement on Trade in Services. 

 

When joining the World Trade Organisation (WTO), the accessing country will be required to comply with international obligations equivalent to the obligations fulfilled by the other members, including the obligations that regulate the trade in services. Trade in services between the WTO members is regulated by an annex to the agreement that establishes the WTO or the General Agreement on Trade in Services (GATS).

Both the WTO and the GATS rely upon the principle of most-favoured-nation-treatment, which means that entrepreneurs and service providers of any WTO member state must be treated equally and not be discriminated against by other members states, provided that reservations or exemptions are not laid down in the schedule of specific commitments. The commitments will be extended to measures that influence market entry and the equal treatment of service providers.

The definition of services trade under the GATS is four-pronged, depending on the territorial presence of the supplier and the consumer at the time of the transaction:

  • From the territory of one member into the territory of any other member 
  • In the territory of one member to the service consumer of any other member
  • By a service supplier of one member, through commercial presence, in the territory of any other member
  • By a service supplier of one member, through the presence of natural persons of a member in the territory of any other member

 

 

Schedule of specific commitments for trade in services
 

The schedules of specific commitments and the list of exemptions from MFN treatment specify the commitments and exemptions that a WTO member state has taken to other members in the sphere of trade in services.

When Estonia joined the WTO in 1999, Estonia’s commitments and reservations to other member state for the opening of services market were laid down with a schedule of specific commitments. Estonia’s schedule of specific commitments is highly liberal in the sphere of services and this is the line that we have followed into today.

Upon joining the European Union in 2004, the specific commitments of Estonia and other accessing countries were consolidated with the general schedule of specific commitments of the European Union. Restrictions on trade in services must not increase as a result of European Union enlargement – that was the principle observed during the process.

As the result, the EU-25 consolidated schedule of specific commitments was born, matching the number of the member states; however, the schedule has not yet been ratified at national level.

As two more enlargement rounds have taken place since the 2004 enlargement, resulting in Bulgaria and Romania joining the European Union in 2007 and Croatia in 2013, the EU-27 and EU-28 schedules of specific commitments are to be prepared to apply the continuity of rights principle.

 

 

Doha Development Agenda
 

Doha Development Agenda (DDA) was launched in 2001 and aims at additional liberalisation of international trade in 20 spheres, including trade in services. 

 

At the Fourth Ministerial Conference in Doha, in November 2001 WTO member governments agreed to launch new negotiations, also known, semi-officially, as the Doha Development Agenda. The main purpose of the agenda is to improve trading capacities of developing countries. The Agenda’s aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules in 20 spheres of trade, including trade in services.

The declaration of ministers who met in Doha, Qatar, specified the mandate for negotiations, including the sectors of agriculture, services and intellectual property, which had already been discussed earlier. The ministers also approved a decision to facilitate implementation of WTO agreements by developing countries.

The developing countries did gain a considerable victory in the sphere of intellectual property rights and health; however, the discussions soon came to a grinding stop in other matters, as the parties involved were unable to reach consensus concerning the market entry of developed countries and agricultural subsidies. Therefore, the Doha Development Agenda is seen as a general failure for the developing countries.

The breakthrough was very close in summer 2008; however, consensus was not achieved as the global recession gained impetus and it has not been reached to date.

 

Plurilateral trade in services agreement

 

The leading World Trade Organisation countries hold negotiations about plurilateral trade in services agreement (TiSA - The Trade in Services Agreement) that are aimed at further liberalisation of international trade in services.
 

To overcome the stalemate reached at the Doha Development Agenda, the leaders of different countries admitted to having met a dead end at the eight WTO ministerial conference in December 2011 and published political guidelines for the promotion of the negotiations in the spheres where progress can been achieved, considering, among other things, the principles of transparency and involvement.

The negotiations did make progress carried by this spirit, above all, in the sphere of simplification of trade. Certain WTO members also started to consider the options for concluding separate trade in services agreements, at the initiative of the United States of America and Australia, to facilitate the Doha Development Agenda negotiations with interested WTO members.

Today, the initiative for the conclusion of trade in services agreement includes, apart from the European Union, 22 WTO members, more specifically:

  • The United States of America, Australia, Columbia, Costa Rica, Hong Kong, Israel, Iceland, Japan, Canada, the Republic of Korea, Liechtenstein, Mexico, Norway, Pakistan, Panama, Paraguay, Peru, Switzerland, Taiwan, Chile, Turkey and New Zealand.

The total cross-border trade between the European Union member states and the aforementioned WTO members totalled, in 2010, to approximately two thirds of total global cross-border trade (trade inside the European Union, between the member states, is not included in this volume).

What is a plurilateral agreement?
Plurilateral agreements mean agreements that do have more than two parties, yet could be construed rather as bilateral and not multilateral agreements, based on the procedure for their conclusion and entry into force or other parameters. 

 

The European Union
 

In the European Union, trade in services is regulated, among others, by free trade and other bilateral economic agreements between the European Union and third countries or regions.
 

The European Union also actively negotiates and concludes trade agreements. The European Union has entered into bilateral trade agreements with Iceland, South Korea, Mexico and Norway.

Negotiations have been completed, yet not agreements have not been concluded yet with Central America, Columbia, Peru and Armenia, Georgia, Moldova and Ukraine.

Negotiations are in process with a number of important countries, like the United States of America and Canada, but also China, India, Japan, Morocco and the ASEAN countries (Malaysia, Thailand, Vietnam).

Preparations are being made to start negotiations with Egypt, Jordan and Tunisia.

 

Last updated: 29 July 2014