Completing the Gats Framework: Addressing Uruguay Round Leftovers

Abstract

This paper explores three ongoing areas of rule-making activity under the General Agreement on Trade in Services - emergency safeguards (ESM), subsidies and government procurement. It suggests that as policy makers turn their attention to a range of new issues in the context of a second set of GATS negotiations, it is essential that new impetus be given to completing what the Uruguay Round left unfinished. The paper first examines the desirability, feasibility and prospects for developing multilateral rules on an emergency safeguard mechanism and trade distorting subsidies, in the context of the ongoing GATS negotiations. Using the existing framework of trade in goods as a model, the paper examines whether and how relevant GATT principles might be applicable in these two areas in the context of services trade. The paper suggests that the very feasibility of an ESM remains an open question, given the state of our knowledge of services trade. The paper cautions, however, that the clear political expectation on the part of many developing countries that concrete disciplines must arise from the current discussions suggests that it is likely that the GATS will feature some form of ESM in the future, much as its ultimate substantive provisions and operational modalities remain to be determined. On subsidies, the paper suggests that the desirability of disciplines in this area will require a more thorough identification phase to determine the extent to which subsidies exist in services industries and result in adverse trade or investment effects. As with safeguards, the feasibility of subsidy disciplines will need to factor in the specificities of services trade and investment. While some guidance could come for the SCM Agreement, it is not a panacea. The paper's third section turns its attention to whether and how disciplines governing public purchases of services should best be addressed under WTO law. The paper suggests that procurement regimes for services, even if explicitly discriminating against foreign suppliers, are unlikely to have major repercussions on domestic or foreign welfare so long as markets are contestable. The priority issue from a developing country perspective may therefore lie more in removing barriers to access (i.e. trade) and presence (investment) in goods and services markets and enforcing domestic competition laws than in developing a GATS-anchored set of procurement disciplines.

Keywords: GATS, trade in services, emergency safeguard measures, subsidies, government procurement, Doha Development Round

JEL Classification: F13, F15, K33