Description and explanation
I'm publishing this (and further analysis) to the steem blockchain because I believe its valuable information regarding one of the worlds largest trade deals, being negotiated by your government in secret that affects you.
See also: TISA core text draft.
TISA: UPDATED ANALYSIS OF THE LEAKED ‘CORE TEXT’ FROM JULY 2016
The Trade in Services Agreement (TISA) is being negotiated by a self-selected group of mainly rich countries, calling themselves the ‘Really Good Friends of Services’. The leaked ‘core’ text provides further evidence of their game plan to bypass other governments in the World Trade Organization (WTO) and rewrite its services agreement in the interests of their corporations. It also makes the new risks from TISA to governments’ right to regulate in their national interest much clearer.
Many of the basic rules are carried over from the WTO’S General Agreement on Trade in Services (GATS), so that TISA can be exported back into the WTO without having to revise the core rules. By adding new rules and changing some existing ones they aim to tighten the handcuffs on the freedom of governments to regulate their services.
This paper updates the earlier analysis by referring to the July 2016 draft text. It comments on two areas of controversy: I) the most-favoured-nation (MFN) provision, which requires a TiSA party to give services and service suppliers from a TiSA country the best treatment it gives those of any other country; and (ii) rules that will restrict certain kinds of domestic regulation of services, which are also subject to a separate annex. Comments on these two issue are inserted in bold italics into the previous analysis of the core TiSA text on pages 5-6 (MFN) and pages 78 (domestic regulation) of this paper. The proposed structure of TiSA has also been updated.
What TISA reinforces
While TISA threatens to impose more extreme restrictions on governments, the problem lies with the core rules themselves. The following illustrates some of their main implications
1 (see footnotes for references to the leaked text):
➢ Trade in services agreements treat services as marketable commodities,
2 and deny or subordinate or deny altogether their social, cultural, environmental, employment, and development functions. People are not viewed as citizens or members of their communities they are ‘consumers’.
➢ Those who provide the services do not need to have any connection to the people or communities that rely on their services they can be ‘supplied’ from offshore,
4 or by a temporary visitor,
5 or through foreign firms who establish a local presence but whose priority is to deliver profits to offshore shareholders.
6 None of these ‘suppliers’ has any longterm responsibility or accountability to the country that ‘consumes’ them.
- Professor Jane Kelsey, Faculty of Law, University of Auckland, New Zealand
1This list is illustrative and not an extensive analysis of all the GATS rules carried through to TiSA.
3Article I-2(g) and (i)
4Article I-1.2 (a) and (b)
5Article I-1.2 (d)
6Article I-1.2(c) and Article I-2 (d)
➢Governments sign away their right to give preferences to local providers of services, such as broadcasting, education, electricity or sanitation, or to limit foreign investors and require majority local directors for sensitive services sectors.
➢ The core rules on market access restrict governments’ ability to shape those ‘markets’ by limiting the size or growth of certain activities, such as banks, tourist ventures or hypermarkets, whether nationwide or in local areas, and whether they are locally or foreign owned.
➢ The restrictions apply at central and local government level, and nongovernment bodies like professional bodies.
➢ These rules are sweeping in their scope, because they limit governments’ rights to use almost every tool available to them any law, regulation, rule, procedure, decision, administrative action or any other form.
➢ They also apply to any measures that ‘affect’ ‘trade’ in a service,
11 even if it does so indirectly, such as payment or distribution systems, or for a noncommercial reason, for example environmental objectives, or restrictions on sale of unhealthy products.
➢ Further, they apply to any aspects of the supply chain for a particular service its production, distribution, marketing, sale and delivery.
➢ A public or private monopoly, such as a postal service or agricultural marketing and distribution board can be challenged for using its monopoly to cross subsidise or advantage any nonmonopoly services it provides.
➢ The pretend ‘carveout for public services’ only applies to the very rare situations where a service is provided through a public monopoly for free.
➢ The exceptions for public health, environment, public order and morality must be established as a defence to a complaint, and are subject to many onerous tests.
15 They have proven ineffective as safeguards in the WTO, succeeding fully in only 1 out of more than 40 disputes.
➢ Privacy protections are illusory. In addition to all the hurdles for other exceptions, laws and regulations to protect individual’s privacy in relation to processing and disseminating personal data and protecting confidentiality must not be inconsistent with the provisions of the agreement!
8 Article I3
9 Article I1.3(a). As with the GATS, there is a requirement for central government to ‘take such measures as may be reasonably available to it to ensure their observance’; some more recent FTAs apply to all levels of government without that proviso.
10 Article 12(a)
11 Article I2(c)
12 Article I2(b)
13 Article [... ] Monopolies and Exclusive Service Suppliers
14 Article I1.3(b) and (c)
15 Article I9
17 Article I9(ii). See the discussion of the leaked TiSA ecommerce text. For reasons that are not clear, the text from the GATS on the right not to disclose confidential information that would impede law enforcement, or otherwise be contrary to the public interest, is in square brackets denoting disagreement.
➢ Governments cannot restrict crossborder movements of capital that are essential to a service, or inflows of capital that relate to foreign investment, where they have made commitments in those services. 18 There are very limited options for governments to impose capital controls, even in situations of an actual or threatened balance of payments emergency. If they manage to meet those circumstances, the kinds of controls they can adopt are severely limited and would face a high risk of being challenged.
What is new about TISA
Services are much more exposed to existing and new rules: Three features of TISA combine to go far beyond the GATS. First, the core rules are supplemented by new substantive restrictions on what governments can do.
Second, there are new or more extensive criteria for decision-making and rights for commercial firms, including foreign firms, to pressure governments to protect their interests.
Third, changes to scheduling bring more services under the two main rules on non-discrimination in favour of locals (national treatment) and not restricting the size and shape of, and foreign presence in, the market (market access). The TISA text also anticipates much greater use of ‘additional commitments’, whereby governments will become bound to a range of new restrictions on certain activities or sectors, which may or may not be linked to
Scheduling: In the GATS, the national treatment and market access rules only apply to the services that governments agree to make subject to them. Each country has its own list or schedule, and there are several ways to limit its exposure – for example, not committing to the nondiscrimination rule or retaining the right to limit its ‘market’ in certain ways. It can also limit its exposure to certain ways of delivering the service, for example by a foreign investor or over the Internet.
Part II of TISA sets out different rules for market access and national treatment, although the provisions refer to Sections A and B and Parts I and II of schedules that are not explained in this text. Services sectors are still brought under the market access rule using a positive list, meaning it only applies to a sector that is explicitly committed, and is subject to any limitations that are specified.
National treatment (foreign services and suppliers must be treated at least as well as their local counterparts) is where the major change occurs. It is presumed that all services, and all ways of supplying them, are covered by the TISA rule, unless they are explicitly protected.
A government can protect the future right to use a measure that relates to a sector, subsector or activity by listing it in Section A of Part 1 of its schedule.
18 Article I3 fn 2 and Article I7
19 Article I8: Restrictions to Safeguard the Balance of Payments
20 Article I5: Additional Commitments
21 Article II1: Scheduling of Market Access Commitments
22 Article II2.4: Scheduling of National Treatment Commitments, through Section A of Part I of its Schedule.
A government can also list lesser protections in its schedule,
23 which preserves its right to apply current measures that breach the national treatment rule. However, it cannot increase the level of ‘noncompliance’
24 (ie new restrictions on foreign firms or benefits to local ones) and a ratchet will apply that automatically locks in any new liberalisation.
Sectors that are not listed in the schedule under one or other of these parts will be required to apply the national treatment rule, potentially forever. This ‘negative list’ approach is designed to extend a government’s obligations under TISA far beyond the positive list approach of the GATS, and puts a country’s future regulatory capacity at risk of error, omission, unforeseen or unforeseeable situation, or a highly liberalising government that is intent on binding the hands of its successors.
The EU has also proposed a special schedule for the temporary movement of (elite) services personnel, which appears to apply a positive list approach to both market access and national treatment rules.
Making the new sectoral and other annexes part of the agreement: The other major expansion of the GATS is through new ‘disciplines’, such as those on domestic regulation, transparency, and ecommerce, and new or revised annexes on specific sectors, such as maritime transport, telecommunications and financial services.
26 The TISA parties want to make sure that these are considered part of the actual agreement, especially as their game plan is to get TISA recognised as a plurilateral agreement in the WTO. They also want to make sure the new disciplines and sectoral annexes are in a form that allows them to be included in countries’ GATS schedules as ‘additional commitments’.
No special treatment for developing countries: None of the development provisions in the GATS are repeated in the core TISA text. Clearly ‘gold standard’ does not allow for any development sensitivities. That includes the requirement in GATS that much less is asked of developing countries when they enter into nonWTO trade in services agreements, and that the other countries make concessions in areas of interest to developing countries. That means any developing country participation in, or seeking to join, TISA will be subject to the same
Some existing provisions may be expanded, depending on ‘new and enhanced disciplines’:
There may be new definitions,
27 changes to the mechanism for adopting ‘additional commitments’,
28 and to the provision on Annexes, 29 depending on what is in the ‘new and enhanced disciplines’ being developed under TISA. (Please refer to the other leaked TISA documents).
23 Article II2.1, through Section B or Part I or Part II of its Schedule
24 Article II2.2
25 Article II2.3
26 Drafter’s note to Article [...]: Annexes
27 Drafter’s note at end of Article I2
28 Placeholder: [Article II4: Scheduling Additional Commitments] [Under discussion]
29 Article [...] Annexes
Where have they not agreed ..
The ratchet effect of other agreements into TISA by the most-favoured-nation’ (MFN) rule :
Under the ‘most-favoured-nation’ rule all parties to TISA are entitled the best treatment that a government gives to the ‘like’ services and suppliers of any other country, for any measure that is covered by the agreement, even if that other country is not a TISA party or even a member of the WTO.
30 How far governments can limit this rule is especially important because TISA countries that have signed up to stronger rules and obligations in other free trade or investment agreements could have to provide the same treatment to all the other TISA countries.
The entire provision on Most-Favoured-Nation Treatment has square brackets that indicate it has not been agreed to. The text reveals several points of disagreement, although it is understood that there are three options under consideration:
(i) the MFN obligation applies without qualification. That would mean that any better
treatment given through any existing or future agreement would have to be shared, as well as any better treatment given on an individual basis, for example through an administrative decision on granting a license or approving a foreign direct investment in a service sector. This would have a massive ratcheting effect that maximises liberalisation, without the country even being able to claim it was receiving some corresponding benefit in return.
(ii) no MFN provision. This would give governments the most control over the expansion of the scope of TiSA, and is therefore objected to by TiSA advocates because it has the least liberalizing effect.
(iii) an MFN provision with an exclusion for economic integration agreements that meet the
requirement in Article V of the GATS for exemption from the MFN obligation. That requires the agreement to cover substantial services sectors, weighted according to the ‘trade in services’ between the parties, and is meant to include special flexibilities for developing countries (although this requirement is often ignored, as it is in TiSA itself).
The July 2016 text shows that the Switzerland and Norway have joined the EU in objecting to the MFN obligation unless there is a proviso is included. The US remains opposed to an article that cross-references MFN to economic integration agreements.
However, Switzerland and Norway appear to limit the restriction on MFN to existing agreements that have been entered into and have been notified to the WTO as complying with the GATS Article V rules, or that the country is entering into, which suggests the negotiation is concluded and is in the process of approval. Turkey wants it to extend to future agreements as well.
Japan and Colombia suggest a negatively worded right to enter into FTAs that cover services, provided they are notified to the WTO as complying with the GATS rules.
30 Article [...] Most-Favoured-Nation Treatment
31 [Article [...] Economic Integration – GATS Article V] [Linked to Article on MFN]
Colombia is also concerned to prevent one TISA party, or one of its investors, from using the MFN provision in TiSA to say it is entitled to the same rights another TiSA party has given to another country and its investors through a bilateral investment treaty or an investment chapter in an FTA, including controversial investor protections and their enforcement through investor-state dispute settlement (ISDS). A recent attempt by a foreign investor to use the MFN provision in the GATS to gain access to ISDS in a bilateral investment treaty was rejected, but it was a majority decision of two arbitrators to one and could have gone the other way.
Under the GATS, countries could list any measures they wanted to exempt from this, but they had to do so at the time they adopted the GATS. Importantly, this is a negative list of what is excluded from the MFN rule, although it is not limited to FTAs and c an include, for example, preferences for film co-production arrangements, rights of access for categories of workers from specific countries, or obligations to developing countries. The GATS exemptions were meant to be temporary and be reviewed after 5 years, but most of those that were scheduled in 1994 are still in place. The TISA parties disagree about how the way those exemptions should be identified, and whether it should be subject to the same conditions as the GATS (meaning they are temporary and reviewed after 5 years).
Government procurement is more extensively covered: TISA repeats part of the GATS provision on government procurement, which says the non-discrimination and market access rules do not apply to rules, regulations and requirements where government agencies procure services. But that exclusion only applies where the services are procured for governmental purposes and not for commercial resale or to use in the supply of services for sale. It would not apply where governments are contracting for supply of electricity or water services, or construction and operation of transport or social services through public private partnerships and contracts.
The TISA provision reiterates the GATS provision,
33 but drops the reference to future negotiations on government procurement of services. The entire government procurement provision in the core text is in square brackets. However, there is a separate proposal on government procurement; the analysis of that leaked proposal explains its implications .
Requiring Reviews of Administrative Decisions: A large number of countries want all parties to maintain tribunals or procedures where an aggrieved service firm can obtain prompt review of administrative decisions that ‘affect trade in services’, and appropriate remedies where they are justified.
35 If the procedures are not independent of the agency that made the decision it needs to provide for an ‘objective and impartial review’. Similar language was proposed for the Domestic Regulation Annex,
36 and may be moved into the core text. Only Mauritius appears to oppose this. There is stronger disagreement on whether governments
can establish the tribunals or procedures ‘as soon as practicable’ or they must be in existence at time agreement comes into force – countries like Australia, Canada, the US, EU and Japan oppose such flexibility.
32 Jarrod Hepburn, ‘ICSID tribunal rejects bid to use WTO agreement as gateway to investment treaty arbitration’, Investment Arbitration Reporter, 7 August 2016
33 [GATS Article XIII: Government Procurement]
34 See new analysis on Wikileaks
35 Article [...]: Review of Administrative Decisions]
Domestic Regulation: The provision on domestic regulation in the core text is much more limited than in the annex on domestic regulation that has been leaked several t imes.
37 The US has a longstanding sensitivity over certain ‘disciplines on domestic regulation’ and has blocked their development in the GATS. The more extensive ‘disciplines’ in the annex reflect that tension between the US and countries like Australia and New Zealand that propose strong restrictions on how governments regulate, especially for technical standards for services, professional qualification and, licensing requirements.
The core text has a rhetorical paragraph that affirms the right of governments to regulate and introduce new regulations, which was moved from the Annex to the core text. However, this ‘right to regulate’ is still subject to compliance with the TISA rules.
38 There is disagreement on whether the goal of regulation should be for public policy or just policy objectives – Switzerland’s reference to ‘national policy’ objectives has been dropped.
There is considerable disagreement on whether there needs to be specific reference to the right to regulate for universal service obligations (often used, for example, for telecommunications or postal services). Switzerland, Hong Kong, Mexico and Turkey are proposing such a reference, but its effect is weak. It says the domestic regulation rules do not prevent members from introducing or maintaining regulations to ensure provision of universal service obligations – but it does not allow them to adopt an approach that is inconsistent with the rules in the agreement. Hong Kong suggests making it explicit that universal service provision must be consistent with a party’s obligations and commitments in TiSA. Reference to universal service obligations is opposed by countries like Australia, Canada, the US, EU, Japan and Norway, presumably on the basis that this is covered by the
rhetorical affirmation of the ‘right to regulate’.
The GATS also has a sweeping provision that says all measures of general application that affect trade in services must be administered in a ‘reasonable, objective and impartial manner’. That only applies to ‘sectors where specific commitments are undertaken’. That was problematic in itself, because it was not clear whether a very small commitment in one services subsector, in one mode, subject to many limitations, brought that entire service
sector under this discipline. It becomes even more problematic in TiSA because of the hybrid positive and negative list of scheduling. The US wants to make sure the obligation is still limited by a Party’s schedule, but is debating the right wording. Other countries, such as Australia, Switzerland, Japan, New Zealand and Norway want it to apply across the board.
36 February 2014 text (https://wikileaks.org/tisa/domestic/) and analysis (https://wikileaks.org/tisa/domestic/analysis/Analysis-TiSA-Domestic-Regulation-Annex.pdf) . See new text and analysis on Wikileaks
37 TiSA Annex on Domestic Regulation, https://wikileaks.org/tisa/document/20150423_Annex-on-Domestic-Regulation/
38 [Article [...] Domestic Regulation]
Transparency: There is a placeholder for a core provision on transparency, with a cross-reference to a US text proposal. It is clear that transparency will go beyond the GATS requirement to publish relevant measures of general application. ‘Transparency’ in TISA means ensuring that commercial interests, especially but not only transnational corporations, can access and influence government decisions that affect their interests rights and opportunities that may not be available to local business or to national citizens. They may want to stop or change government decisions they don’t like, or rally to support those that are being challenged. Several texts on Transparency have been leaked, along with transparency provisions in other chapters. (Please see the separate analyses of these documents.
Subsidies: There is simply a placeholder for a provision on subsidies. Subsidies are a ‘measure’
covered by the core rules. It would breach the national treatment rule to restrict them to domestic services and suppliers, unless the right to do so has been protected in the schedule. The actual texts of some FTAs have excluded subsidies (and even grants and similar supports) from the rules.
There is no indication of whether that is being considered for TISA, or whether they are considering whether to repeat the GATS provision that commits to negotiate rules on ‘trade distorting subsidies’ and provide consultations where a party says it has been disadvantaged by payment of a subsidy a provision that has largely been ignored.
39 223 January 2015 text (https://wikileaks.org/tisa/transparency/01 2015/) and analysis (https://wikileaks.org/tisa/domestic/analysis/AnalysisTiSATransparencyArticle.pdf)
40 [Placeholder for subsidies]
The structure of TISA
As expected, many basic provisions of what is called the ‘core text’ for TISA are identical to the General Agreement on Trade in Services (GATS) in the World Trade Organization (WTO). That is to make it easier to integrated back into the GATS. New schedules of commitments of sectors will greatly extend the coverage and impact of the rules. In addition there will be referred to as ‘new and enhanced disciplines’. Disciplines are tradespeak for restrictions on
what governments can do in relation to services.
Provisions that are different from the GATS are in italics. The corresponding GATS provision is in brackets.
PART 1: GENERAL PROVISIONS
Scope (Art 1 and Art 28)
Most-Favoured-Nation Treatment (Art 2)
Economic Integration (Art 5)
Market access (Art 16)
National treatment (Art 17)
Disclosure of Confidential Information (Art III bis)
Domestic Regulation (Art 6)
Additional Commitments (Art 18)
Review of Administrative Decisions (new)
Transparency (Art III)
Recognition (Art 7)
Payments and Transfers (Art 11)
Restrictions to Safeguards for Balance of Payments (Art 12)
Monopolies and Exclusive Service Suppliers (Art 8)
General Exceptions (Art 14)
Security Exceptions (Art 14 bis)
Denial of Benefits (Art 28)
Government Procurement (Art 13)
(Subsidies: Art 15)
PART II: SCHEDULING COMMITMENTS
Scheduling of Market Access Commitments (cf Art 20)
Scheduling of National Treatment Commitments (cf Art 20)
Scheduling Measures Inconsistent with both Market Access and National Treatment (cf Art 20)
Scheduling of Additional Commitments (cf Art 20)
[PART III: NEW AND ENHANCED DISCIPLINES
Movement of natural persons
PART IV: INSTITUTIONAL PROVISIONS (as proposed by EU)
Establishment of TiSA Committee
Chair of TiSA Committee
Functions of TiSA Committee
Notification of the intent to modify or withdraw commitments
Openness [to accession]
Procedures and requirements [for accession]
Objective of multilateralization
Process leading to multilateralization
Annexes, Protocols and footnotes
Entry into Force
Relation to other Agreements
Dispute settlement [as proposed by EU]
Suspension and termination procedures
Annex I: Rules of Procedure
Annex II; Code of Conduct for Arbitrators and Mediators
Standard provisions of GATS in TISA
Because the core text reflects the strategy of creating a text that can ‘dock’ with the GATS many of the core definitions and rules about coverage are also the same:
- supply of services
- ‘modes’ of supplying services;
- commercial presence
- application to local government
- services supplied in exercise of government authority
Notes from @ausbitbank
This analysis makes a lot more sense if you open a second browser window to the original leaked core text and use control-f to search for the articles being referred to.
Please show your support for Wikileaks by upvoting and resteeming, and discuss in the comments below!