For an organization seeking to regain relevance and facing continued delays in holding its 12th Ministerial Conference because of restrictions on travel from increased COVID-19 cases, the conclusion of the Joint Statement Initiative (JSI) on Services Domestic Regulation through the issuance of a declaration on December 2 was an important accomplishment. Sixty-seven WTO Members agreed to a reference paper and a process for amending services schedules for the participants over the next months with benefits accruing to all WTO Members and with transition periods for developing and least developed countries. See Declaration on the Conclusion of Negotiations on Services Domestic Regulation, 2 Deember 2021,WT/L/1129 (includes Annex 1, Reference Paper on Services Domestic Regulation, 26 November 2021, INF/SDR/2 and Annex 2S, Schedules of Specific Commitments, 2 December 2021, INF/SDR/3/Rev.1). The 67 WTO Members participating the JSI reportedly account for 90% of services trade. The 67 countries are Albania, Argentina, Australia, Kingdom of Bahrain, Brazil, Canada, Chile, China, Colombia, Costa Rica, El Salvador, European Union (and member states), Hong Kong, Iceland, Israel, Japan, Kazakhstan, Republic of Korea, Liechtenstein, Mauritius, Mexico, Republic of Moldova, Montenegro, New Zealand, Nigeria, North Macedonia, Norway, Paraguay, Peru, Philippines, Russian Federation, Kingdom of Saudi Arabia, Singapore, Switzerland, Taiwan, Thailand, Turkey, Ukraine, United Kingdom, United States and Uruguay.
According to the WTO press release on the completion of negotiations, the aim of the JSI was “slashing administrative costs and creating a more transparent operating environment for service providers hoping to do business in foreign markets.” WTO Press Release, Negotiations on services domestic regulation conclude successfully in Geneva, 2 December 2021, https://www.wto.org/english/news_e/news21_e/jssdr_02dec21_e.htm.
It is the first agreement at the WTO barring discrimination between men and women. WT/L/1129 at 10 (Annex I, para. 22(d), development of measures — “such measures do not discriminate between men and women.”).
The WTO and OECD released a short paper looking at the benefits to global services trade through a successful conclusion to the JSI on services domestic regulation. The study estimated that savings to service providers and their customers would be around $150 billion/year. See World Trade Organization and OECD, Services Domestic Regulation in the WTO: Cutting Red Tape, Slashing Trade Costs and Facilitating Services Trade, 19 November 2021, https://www.wto.org/english/news_e/news21_e/jssdr_26nov21_e.pdf. The four “key messages” in the study (page 1) are copied below.
“Key messages
“• Improving business climate: At the 12th WTO Ministerial Conference, the Joint Initiative on Services
Domestic Regulation will conclude negotiations on a set of good regulatory practices with a focus on procedural aspects of licensing and authorization procedures for services suppliers. By enhancing the transparency, efficiency, and predictability of regulatory systems, the disciplines on services domestic regulation that the Joint Initiative has negotiated will address the practical challenges that affect the ability of businesses and suppliers to operate.
“• Facilitating services trade: Building on efforts to identify and disseminate good regulatory practice, an
increasing number of “new generation” trade agreements have moved beyond the removal of quantitative restrictions and discriminatory measures to include a comprehensive set of disciplines largely equivalent to those developed by the Joint Initiative. At the same time, economies at all levels of income have also implemented reforms with a view to making their regulatory environment more trade facilitative for services businesses.
“• Lowering trade costs and generating broader trade benefits: Through the full implementation of the
disciplines on services domestic regulation, economies can lower trade costs and reap substantial trade
benefits: annual trade cost savings could be in the range of USD 150 billion, with important gains in financial services, business services, communications and transport services. Moreover, a positive correlation between the implementation of services domestic regulation measures and services trade by all four modes of supply, as well as a more active engagement of economies in global value chains, hints to even broader economic benefits.
“• Widespread gains beyond participants: Exporters from all WTO members will benefit from the improved regulatory conditions when they trade with participants of the Joint Initiative. However, significantly larger benefits will accrue to WTO members that are implementing the disciplines themselves in their internal regulatory frameworks.”
The study provides a summary of improved disciplines the 67 WTO Members have identified in the reference paper. The improved disciplines are grouped under transparency, legal certainty and predictability, regulatory quality and facilitation. See id at 2.
While the estimated savings once fully implemented is small in comparison to global services trade ($150 billion of 2019 estimated trade of $6.1 trillion (2.6%)(UNCTAD, 2020 Handbook of Statistics, page 33, data for 2019, https://unctad.org/system/files/official-document/tdstat45_en.pdf) as noted in the WTO press release, it is the first update of WTO rules on services in more than a quarter century. The negotiations had three co-chairs — Costa Rica, Australia and the European Union. Part of the EU’s statement by Ambassador Aguiar Machado from the December 2 meeting and announcement of the declaration is provided below. See Services Domestic Regulation Joint Initiative Meeting to conclude the negotiations (co-hosted by Costa Rica, the European Union and Australia), 2 December 2021, Geneva, https://eeas.europa.eu/delegations/brazil/108266/services-domestic-regulation-joint-initiative-meeting-conclude-negotiations-co-hosted-costa_en.
“Today, we are following up on a joint commitment we collectively took two years ago in Paris to finalize the negotiations that had started with the Joint Statement of Buenos Aires in 2017. Since then, several new Members have joined the group and a tremendous amount of work has been done by our negotiators under the valued Chairmanship of Costa Rica. In particular, warm welcome to the Philippines and Bahrain who joined our negotiations most recently.
“We are here today to conclude our negotiations in this JSI and on the Reference Paper with domestic regulation disciplines. This step will allow us to commence our respective domestic procedures required for the certification of our improved schedules of commitments, which will give legal effect to the negotiated disciplines.
“The work on services domestic regulation is of critical importance. It is the first WTO deliverable in the area of trade in services since a very long time. Our additional commitments for domestic regulation will benefit all other WTO Members by giving them the reassurance that we will apply good regulatory and administrative practices also to their service suppliers.
“Good regulatory practices are crucial for the well-functioning of today’s economy. I believe that the clear rules on transparency and authorisation in the area of services – that were agreed as part of this initiative – will facilitate trade in services significantly. Especially for micro, small and medium-sized enterprises who do not have the same resources and experience to cope with complex processes as their larger competitors.
“The services sector has been hit hard by the pandemic – as other parts of our economy. The adoption and implementation of the disciplines of the reference paper will reduce trade costs for service suppliers substantially and thus help the sector in its recovery. It is a sector where women entrepreneurs often play an important role. The reference paper recognises this role by ensuring non-discrimination between men and women in authorisation processes. This is the first rule of this kind in the WTO.
“Delivering on the WTO services agenda is a long overdue objective we all have. Since Buenos Aires, we have collectively developed a pragmatic approach to negotiations. We have allowed groups of interested Members to advance negotiations on some important issues – through open, inclusive and transparent processes.
“Today, we prove that this plurilateral approach can lead to tangible results. This demonstrates that the Joint Initiative model is a viable one. A large and diverse group of WTO Members can work together towards a common objective, overcome their differences, show flexibility and agree on tangible results that are important for businesses and consumers.
“I believe that this Joint Initiative can be a source of inspiration for work in other areas, allowing interested Members to move ahead while ensuring that the outcome, in its substance and its form, remains supportive of and strengthens the multilateral trading system.”
Since the collapse of the Doha Development talks in 2008, the reality has been that most progress on trade talks have taken place in bilateral, and plurilateral settings. The sole meaningful exception was the completion of the Trade Facilitation Agreement which hopefully will be supplemented by a completion to the Fisheries Subsidies negotiations in the near future. Stating at the WTO’s 11th Ministerial, many WTO Members have started Joint Statement Initiatives to seek progress on important issues facing the trading system.
As noted in earlier posts, India and South Africa (WTO Members who are not participating in any of the Joint Statement Initiatives) have raised objections to the use of JSIs to update rules claiming such approaches are inconsistent with existing WTO requirements. See, e.g., November 17, 2021: The role of plurilaterals in the WTO’s future, https://currentthoughtsontrade.com/2021/11/17/the-role-of-plurilaterals-in-the-wtos-future/.
The view of the participants in the services domestic regulation JSI is that existing WTO provisions permit the updating of service schedules by Members. The reference paper will apply to those who have participated or who later accept the reference paper. New obligations taken on by the 67 Members are applied by them on an MFN basis to all WTO trading partners.
The Declaration on Services Domestic Regulation and actions to implement it will be an early test of whether the WTO can proceed to update rules through open plurilaterals. While one can expect continued objections from India and South Africa, the path to renewed relevancy for the WTO will almost certainly run through finding room for open plurilaterals.