‘Plurilateral’ WTO services deal struck after breakthrough text released

Creating new rules without officially calling them ‘rules’ solves an immediate problem but leaves long term questions

The deal is designed to make regulation more predictable | Antonino Visalli via Unsplash

Skip this update and go straight to the article

This article was revised in December 2021, but follows the structure of the original version from September 2021.


UPDATE, DECEMBER 3, 2021:

The deal was eventually announced in Geneva on December 2, 2021, even though the Ministerial Conference had been postponed.

A lightly revised version of the September “reference paper” was released along with a list of the 68 participating members (counting the EU as 28) that had submitted “schedules” (lists) of commitments to streamline domestic regulation. These were combined into a single declaration.

The legally binding part of the deal is those commitments, which will be added to the schedules of commitments participating countries already attached to the WTO’s General Agreement on Trade in Services.

The reference paper itself will not be an official WTO agreement, but the new schedules of commitments will refer to the principles in the reference paper, making those commitments legally binding in practice.

By December 2, 2021, the 68 participants were:

Albania; Argentina; Australia; Austria; Bahrain; Belgium; Brazil; Bulgaria; Canada; Chile; China; Colombia; Costa Rica; Croatia; Cyprus; Czech Republic; Denmark; El Salvador; Estonia; European Union; Finland; France; Germany; Greece; Hong Kong, China; Hungary; Iceland; Ireland; Israel; Italy; Japan; Kazakhstan; Korea, Republic of; Latvia; Liechtenstein; Lithuania; Luxembourg; Malta; Mauritius; Mexico; Moldova, Republic of; Montenegro; Netherlands; New Zealand; Nigeria; North Macedonia; Norway; Paraguay; Peru; Philippines; Poland; Portugal; Romania; Russian Federation; Saudi Arabia, Kingdom of; Singapore; Slovak Republic; Slovenia; Spain; Sweden; Switzerland; Chinese Taipei; Thailand; Turkey; Ukraine; United Kingdom; United States; Uruguay


See also:
Explainer: The 18 WTO plurilaterals and ‘joint-statement initiatives’ | Participants in WTO plurilaterals | WTO news story | Comprehensive coverage on the independent website on WTO plurliaterals | Hamid Mamdouh on the legal options for adding another plurilateral agreement (investment facilitation) to the WTO rulebook.


By Peter Ungphakorn
POSTED SEPTEMBER 29, 2021 | UPDATED DECEMBER 6, 2021

Almost 70 members of he World Trade Organization (WTO) announced a deal to discipline domestic regulation of services on December 2, 2021, two months after they agreed on the rules they would apply.

The final text saw only minor adjustments compared with the original announced on September 27, 2021, and described as a breakthrough allowing the final deal to be struck.

The September announcement paved the way for the participants to agree on the complete package by the Ministerial Conference (November 30 to December 3 this year), the WTO said. At that time the talks’ participants were officially had 65, but actually 66 WTO members. This has now risen to 68 (or officially 67)

All that remained after the September 27 announcement was for the participants to go through each other’s individual commitments on how the new disciplines would be applied, the WTO said.

The participants include all major traders in services except the India and the United Arab Emirates. They cover over 90% of global services trade. The US and Singapore are among the latest to join the talks.

The 12-page text agreed on September 27 (and slightly revised on November 26) disciplines how governments authorise companies and individuals to provide services, particularly requirements and procedures for licensing and qualification, and technical standards affecting services trade.


Completing the deal makes the WTO’s ailing negotiating function look slightly healthier

“This includes processing of applications for licenses and regulatory approvals, publication of relevant information, ensuring right of appeal, [and] appointing an enquiry point who has to respond to questions,” tweeted George Riddell, director of trade strategy at EY, a professional services organisation.

“Basically, for services operators it increases predictability.”

The text includes flexibilities for countries according to their policy objectives and levels of development, non-discrimination between men and women authorised to supply services — a first in the WTO — and an optional section for financial services.

Developing countries would be allowed up to seven years to implement the disciplines in specific sectors.

The disciplines set out general principles. How participants are willing to apply those principles in the many services sectors — from travel and telecommunications to finance and health — remains to be seen.

Several may already be complying with the disciplines. It is common for countries to convert what they are already doing into legally binding WTO commitments. This might not change anything in practice, but it increases predictability.

Completing the deal makes the WTO’s ailing negotiating function look slightly healthier, even if it was a negotiation among countries that were already keen.

But it will have been achieved through a number of ruses. The most crucial is to negotiate among only part of the membership, in this case less than half of the WTO’s 164 members.

Still not known: commitments in individual sectors are still secret | Bernd Dittrich via Unsplash
Still not known: commitments in individual sectors are secret | Bernd Dittrich via Unsplash
Dodging consensus problemsBack to top

“Plurilateral” negotiations (involving only some of the members) are seen as a way to sidestep the deadlocks in most “multilateral” talks (involving the full WTO membership). Five subjects currently negotiated or discussed in the WTO are plurilateral (list below).

WTO decisions are by consensus. This has proved elusive in the main topics being negotiated in the WTO where the membership is often deeply divided. When only some of the members are participating, consensus is easier to achieve because those countries are already in favour of the proposed outcome when they join in.


India and South Africa have raised the possibility that they might block adding any new deal to the WTO agreements

India, South Africa and some other countries have criticised these plurilateral talks, officially known as “joint statement initiatives”, for violating the WTO’s multilateral nature.

They have raised the possibility that they might block adding any new deal to the current set of WTO agreements by refusing to join the needed WTO-wide consensus to do so.

The talks on domestic regulation of services aim to avoid that problem by using only “schedules” (or lists) of commitments made by individual members under the deal.

Countries make these commitments unilaterally and each country’s commitments are unique. However, they typically hold back until they are happy that a large enough number of other members will do the same, and that each set of commitments is good enough. That critical mass was achieved in the final months before the deal was officially announced..

The commitments would then be added to their existing commitments on services, which are attached to the WTO’s General Agreement on Trade in Services (GATS).

Leaked information suggests this has been achieved by a few words in each country’s “schedules” document saying the country is applying the disciplines agreed in the November 26, 2021 reference paper.

Putting rules in commitments: China’s original draft schedule of commitments, 2019
Putting rules in commitments: China’s draft, one of several leaked draft schedules of commitments from 2019. Click the image to see it full size

Although the reference paper is not an official WTO agreement, those disciplines will be legally binding on each participant through the new “schedules”. The disciplines will only be in the service sectors where each participant has already made commitments in its existing “schedules”. They will not have to apply in sectors it has not already committed to liberalisation.

This comes under the reference paper’s section on “Sectoral Coverage and Scheduling Modalities”. Paragraph 7 requires participants to make the disciplines part of their new commitments

7.           Members shall inscribe the disciplines in Section II in their Schedules as additional commitments under Article XVIII of the [General Agreement on Trade in Services]. Members may choose to inscribe the alternative disciplines in Section III for their commitments in financial services.

Paragraph 8 clarifies that the disciplines need only apply to sectors with existing liberalisation commitments:

8.           The disciplines inscribed pursuant to paragraph 7 of this Section apply where specific commitments are undertaken. In addition, Members are encouraged to inscribe in their Schedules additional sectors to which the disciplines apply.

This approach was already released in a WTO fact sheet from a year ago (November 2020). This described how the disciplines would be inscribed in the “schedules” of commitments and that each participant would apply them equally to all WTO members. without discrimination (most-favoured nation treatment or MFN):

Participating members have agreed to incorporate the final set of disciplines into their respective GATS Schedules as “additional commitments” pursuant to GATS Article XVIII. GATS Article XVIII allows WTO members to negotiate commitments regarding measures on qualifications, standards, or licensing matters.

The disciplines will complement the existing specific commitments undertaken by participating members in their respective GATS Schedules. They will not affect any existing rights and obligations under the GATS or any other WTO Agreements.

The disciplines will become binding only for those WTO members who inscribe them into their GATS Schedules. They will be applied on a most-favoured nation basis, meaning that services suppliers from all WTO members will be treated equally

Some limited opposition is possible but the usual outcome is at most some minor adjustments (as happened with EU and UK post-Brexit tariff quotas in agriculture)


Non-participants are essentially free riders

So long as the commitments apply equally to service providers from all WTO members (non-discrimination known as “most-favoured-nation” treatment or MFN), non-participants are essentially free riders.

India, South Africa and their allies might oppose the principle of “plurilateral” negotiations, but their room to block the outcome in practice is limited.

One problem might be if the specific commitments are written in a way that favours only the countries participating in the talks. That would violate non-discrimination.

So far the draft commitments (upgraded from “indicative draft schedules of specific commitments” to “pre-finalisation schedules”) have not been made public, so their impact is difficult to assess. But leaked schedules suggests discrimination might not be a problem.

New rules? Maybe just part of their individual commitments | Priscilla Du Preez via Unsplash
New rules? Maybe just part of their individual commitments | Priscilla Du Preez via Unsplash
New rules?Back to top

Producing new rules is potentially complex. Those negotiated rules would normally be added to the WTO rule book (to Annex 4 for plurilateral agreements), and all WTO members would have a say, even those that did not participate in the talks.

These particular negotiations have produced what look like new rules, but the term “agreement” is carefully avoided. The agreed text is simply a “reference paper”.

Participants are not turning it into a formal WTO agreement, even though that has been done before with the plurilateral Government Procurement Agreement. They have done it through individual commitments, meaning any WTO member will be able to challenge any participant legally over alleged violation of the disciplines.

One problem with this approach is that in principle the rules would have legal effect, but anyone looking for them would have to dig into the specific commitments, not the official WTO rule-book of agreements. They would not be found on the WTO website page listing further negotiations in services after 1994.


Participants are not turning it into a formal WTO agreement

Agreements in those further negotiations were attached to the WTO agreements by a diplomatic document called a protocol. The services regulation deal does not even have a protocol.

Another — which is not possible in this case because the “schedules” refer explicitly to the reference paper instead of copying its provisions — is to forget the paper once the specific commitments have been legally established.

This is what happened with cuts in agricultural tariffs and subsidies in the 1990s, which were based on a non-binding document called “modalities”. In this case, only alleged violations of the specific commitments can be challenged, not the general disciplines they were supposed to come from.

ParticipantsBack to top

The participants, officially 65* on September 27, 2021, were:

Albania, Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark, El Salvador, Estonia, European Union, Finland, France, Germany, Greece, Hong Kong, Hungary, Iceland, Ireland, Israel, Italy, Japan, Kazakhstan, Republic of Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mauritius, Mexico, Moldova, Montenegro, Netherlands, New Zealand, Nigeria, North Macedonia, Norway, Paraguay, Peru, Poland, Portugal, Romania, Russian Federation, Saudi Arabia, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Kingdom, United States, Uruguay

New participants by December 2, 2021, bringing the official total to 67*:

Bahrain, Philippines

* The eagle-eyed will spot that the two lists contain 68 names, not 67. If the EU itself is counted (it’s a WTO member in its own right) together with its 27 member states, that makes 28 individual participants. It would bring the total number of participants in these talks to 68. I’ve been told that the EU, which has a counting system that no one else can understand, has instructed the WTO that this must be 27 not 28. In that case is the WTO’s membership 164 or 163? It’s unclear why the WTO had to concur.

At the time of writing, the five main plurilateral (or “joint statement initiative”) talks, with their participation numbers, is:

domestic regulation in services (68 WTO members)
electronic commerce and digital trade (86)
investment facilitation for development (100)
micro, small and medium-sized enterprises (98 or 90)
trade and gender (115)

This list is updated periodically, with explanations of the sources, here.


Updates:
December 3–6, 2021 — adding the December 2 announcement, and revising the whole article to reflect that, adding image of China’s draft schedule from 2019
October 3, 2021 — adding detail on the number of participants and how they are counted
September 30, 2021 — revising the text and the participants list to include the US (following confirmation that the WTO website report was omitted the US by mistake); adding confirmation from the WTO factsheet about the approach; adding the list of plurilateral subjects at the end; adding some links, including to the 1993 “modalities” paper; minor edits

Image credits:
Tanker in Brazil | Antonino Visalli via Unsplash
Containers in Rotterdam | Bernd Dittrich via Unsplash
Phone | Priscilla Du Preez via Unsplash

Draft schedules from 2019 were leaked to bilaterals.org

Author: Peter Ungphakorn

I used to work at the WTO Secretariat (1996–2015), and am now an occasional freelance journalist, focusing mainly on international trade rules, agreements and institutions. (Previously, analysis for AgraEurope.) Trade β Blog is for trialling ideas on trade and any other subject, hence “β”. You can respond by using the contact form on the blog or tweeting @CoppetainPU

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