1

Workshop on Scheduling Specific Commitments for Construction and related engineering services and energy-

related servicesHappy Valley Hotel, 18 October 2012

mjelitto@sadc.int

Key concepts of Trade in Services and

State of play in the SADC services negotiations

Multiple negotiations…but similarly structured agreements

• Swaziland participates in trade in services negotiations in four international fora– WTO (GATS)– COMESA (Services Regulations)– SADC (Protocol on Trade in Services)– SADC EPA (with the European Union)

• The basic concepts and rules are the almost the same in all fora.

Scope and DefinitionInclude• All measures by state

parties (at all government levels) affecting trade in services

• All services and suppliers in any service sector

Exclude• Measures affecting air

transport traffic rights• Services supplied in the

exercise of government authority

• Government Procurement

Trade in Services is a supply of services in the four modes of supply: - Cross-border - Consumption abroad - Commercial presence - Presence of a natural person

4

The 4 Modes of Supply

Service Supplier

Service Consumer

Service Supplier supplies servicefrom territory of

one Member State

Service Consumer receives service

in territory of anyother Member State

Cross border supply - Mode 1

Service supplied into the territory

of another Member State

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The 4 Modes of Supply

Service Supplier

Service Consumer

Consumption abroad - Mode 2

Service Consumer

Service supplied in territory of one Member to the service

consumer of another Member State

Service Consumer receivesservice in territory of supplier

Service Supplier supplies service

in territory of one Member State

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The 4 Modes of Supply

Service Supplier

Service Consumer

Commercial Presence - Mode 3

Service supplier establishes a commercial presence in the

territory of another Member State

Any type of business or professional establishment

Service supplied through commercial

presence

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The 4 Modes of Supply

Service supplied through presence of natural persons in the territoryof another Member State

Service Consumer

Natural Persons - Mode 4

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In what mode are the following services supplied?

o A professional accountant from Swaziland travels to Malawi to provide accounting services to a medium-sized company.

o An insurance company from Zambia establishes a subsidiary in Swaziland.

o A truck registered in Swaziland is repaired in South Africa.o Download of music over the internet o Student from Swaziland takes a long-distance degree course

offered by the London School of Economicso Car insurance bought from company established abroad

o Does ownership of company matter?

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Business Services

Communication

Construction

Distribution

Education

Environmental Services

Health Related Services

Financial Services

Tourism

Recreation, Culture, Sports

Transport

Other Services

Typical Services sector coverage

PlusEnergy-related services(elements of Business, Distribution, transport

services)

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Key obligation: MFN Treatment

Upon entry into force of this Protocol, with respect to any measure covered by the protocol, each State Party shall accord immediately and unconditionally to services and service suppliers of any other State Party treatment no less favourable than it accords to like services and service suppliers of any other State Party or third country. (Art 4:1)

Exceptions from MFN

• Services preferences granted between SADC MS (4:2)

• Future preferential agreements of SADC MS with third countries (4:3)

• Existing preferential agreements of SADC MS with third countries (4:4)– Obligation to afford reasonable opportunity to other

MS to negotiate the preferences on a reciprocal basis• MFN Exemption Lists (4:5)

SADC MFN Review QuestionsWhat are the consequences of the following scenarios?

• … Swaziland wants to conclude a Services EPA with the EU. Does it have to extend the same treatment granted to EU suppliers also to all other SADC service suppliers?

• … SACU MS want to give each other better treatment than other SADC MS in Financial Services and Road Transport Services.

• … Swaziland and India agree on preferences given to Indian software service supplier.

Schedules of Specific Commitments: Basic design

SCHEDULE OF SPECIFIC COMMITMENTS OF MEMBER X

Sector or Sub-Sector

Limitations on Market Access

(Art 14)

Limitations on National Treatment

(Art 15)

Additional Commitments (only existing GATS ACs)

(1) (1) (2) (2) (3) (3) (4) (4)

(1) (1) (2) (2) (3) (3) (4) (4)

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First Column: How to describe service sectors?

▪ There is no compulsory system However, according to SADC Negotiating & Scheduling Guidelines (a) clear description of sector or subsector is needed

(b) Reference to use of GATS Scheduling Guidelines (S/L/92)

▪ Reference instruments:

- Services Sectoral Classification List (W/120) - UN Central Product Classification List (CPC)

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Second Column: Limitations under Article 14 (Market Access)

• All restrictions falling under Article 14 must be scheduled, regardless of whether they - apply pre- or post-entry - are discriminatory or not.

• Quantitative restrictions can be expressed numerically, or through economic needs tests.

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Examples of Art. 14 limitations

• Number of suppliers (a)– The number of licenses for cosmetology schools is

limited to 48 total licenses• Value of transactions or assets (b)

– Foreign banks limited to 30 percent of total domestic assets of all banks

• Number of operations or quantity of output (c)– Restrictions on broadcasting time available for foreign

films

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Examples of Art. XVI limitations (ctd)

• Number of persons employed (d)– In any artistic production given in a public place, the

proportion of national performers shall not be less than 80 %• Specific types of legal entity (e)

– Foreign companies are required to establish subsidiaries• Participation of foreign capital (f)

– Foreign investors can hold up to 51 % of the capital

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Third Column: Limitations under Article 15

• Treatment shall be “no less favourable than accorded to own like services and services suppliers”.

• relevant benchmark: no modification of the conditions of competition” in favour of own like services or service suppliers.

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Typical National Treatment Limitations

• Discriminatory subsidies and other fiscal measures• Nationality and residency requirements ( mode 3)• Discriminatory licensing/registration/qualification/

training requirements• Knowledge transfer requirements• Prohibitions on foreign land/property ownership• Local content requirements

See also S/L/92, Attachment 1

To schedule or not to schedule?

1.Foreign companies must provide training to local workers.

2. The board of Directors of any company must be composed to 50% of nationals.

3. Foreign companies must invest at least 500’000 E.

4. Foreign employees are only permitted if no suitable local person is available.

5. Foreign companies must be registered and adhere to local labour laws.

6. Only qualified foreign engineers are granted a work permit

The SADC Trade in Services Agenda – Overview and State of Play

Sub-sectors No. of Members(LDCs in

brackets)

List of WTO Members

20 or less 44(21) Angola, Bahrain, Barbados, Benin, Botswana, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Democratic Republic of Congo, Costa Rica, Cyprus, Fiji, Gabon, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Madagascar, Malawi, Maldives, Mali, Malta, Mauritania, Mauritius, Mozambique, Myanmar, Namibia, Niger, Paraguay, Rwanda, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Solomon Islands, Sri Lanka, Suriname, Swaziland, Tanzania, Togo, Uganda, Zambia

21-40 23(6) Bangladesh, Bolivia, Brunei Darussalam, Burundi, Cote D’Ivoire, Djibouti, Dominica, El Salvador, Ghana, Grenada, Guatemala, Kenya, Macao, Mongolia, Nigeria, Papua New Guinea, Peru, Qatar, Senegal, Sierra Leone, Tunisia, Uruguay, Zimbabwe

41-60 10 Antigua and Barbuda, Belize, Cuba, India, Morocco, Netherlands Antilles, Nicaragua, Pakistan, Trinidad and Tobago, UAE

61-80 14 Brazil, Bulgaria, Ecuador, Egypt, Hong Kong (China), Israel, Jamaica, Kuwait, Liechtenstein, Panama, Poland, Romania, Singapore, Venezuela

81-100 14(1) Argentina, Chile, China, Czech Republic, Dominican Republic, Indonesia, Lesotho, New Zealand, Oman, Panama, Slovak Republic, Slovenia, South Africa, Turkey

101-120 12(1) Albania, Australia, Bulgaria, Canada, Estonia, Gambia, Jordan, Latvia, Lithuania, Philippines, Switzerland, Thailand

121 and more

29 Colombia, Croatia, EC (15), Georgia, Hungary, Iceland, Japan, Korea, Kyrgyz Republic, Latvia, Malaysia, Mexico, Moldova, Norway, USA

WTO GATS Commitments of SADC Member States

SADC Member States

South

Africa

Leso

tho

Mala

wi

Mau

ritius

Zimbab

we

Botswan

a

Mozam

bique

Zambia

DRC

Swazi

land

Angola

Namibia

Tanzan

ia

9180

3327

21 19 17 16 12 9 5 3 1

Number of GATS Commitments

Swaziland’s commitments by sector*

Business

Communication

Constructi

on

Distrib

ution

Education

Health

Environmental

Finan

cial

Tourism

Transp

ort05

101520253035404550

non-committedcommitted

*Denotes incidence of commitments, by sub-sector, without assessment of depth/quality

Liberalization of Trade in Services in SADC

• Work on Trade in Services started in 2000 with the development of a framework agreement (initially foreseen as an Annex to the Trade Protocol)

• “Protocol on Trade in Services” was adopted by Ministers of Trade in July 2009

• Protocol was approved by Council be approved by the Summit on the recommendation of the Council on 18 August 2012, and signed by 10 Heads of State

• Note: Several other SADC Protocols address issues related to trade in Services – Finance and Investment (M3)– Draft Protocol on Movement of Persons (M4)– Sector-specific Protocols (e.g. covering transport, Communications, finance etc.)

SADC - First Round of negotiations

1. Objective for first round of negotiations: – Each Member State will provide better treatment

to SADC MS in each priority sector than is provided in their GATS schedule

– No new restrictions to be introduced during the negotiations (“standstill”)

• Plus: GATS Article V • Substantial sectoral coverage (~ 6 sectors)• And elimination of substantially all discrimination (~better

than GATS commitments sufficient(?))

Timelines for first round of Negotiations

end August 2012

First phase: requests and offers

April 2012

Requests in at least 2 sectors

end November

2012

Offers in at least 2 sectors

end March 2013

Requests in at least 2 sectors

end June 2013

Offers in at least 2 sectors

Begi

nnin

g of

Neg

otiati

ons

Sector focus in the first phase:1) Communication Services

2) Financial Services3) Transport Services4) Tourism Services

Timelines for first round of negotiations (ctd)

-> Thereafter: Energy-related and Construction Services

Requests: end August 2013Offers: End November 2013

Additional Elements:- Sector Studies (market analysis in all MS)- Sector Fora (bringing regional stakeholders together)

- Transport ~ 11-12 September 2012 - Telecommunication ~ December 2012

Negotiations under SADC –main principles

• Conducted through request - offer method • Requests exchanged before offers• Requests to one or more trading partner• To be circulated through the SADC Secretariat• Full transparency: requests to any trading

partner shared with all trading partners