FTAA - Free Trade Area of the Americas
Chapter on Services
[Annex on Professional Services
1. The aim of this annex is to establish the rules to be observed by Parties in reducing and gradually eliminating barriers to the provision of professional services in their territories.
Processing Licensing and Certification Applications
2. Each Party shall ensure that its competent authorities, within a reasonable time after the submission of an application for a license or certification by a national of another Party:
Development of Professional Standards
- where the application is complete, make a determination on the application and inform the applicant of that determination; or,
- where the application is not complete, inform the applicant without undue delay of the status of the application and the additional information that is required under the Party’s law.
3. Parties shall encourage the relevant bodies in their respective territories to develop mutually acceptable standards and criteria for licensing and certification of professional service providers and to provide the Committee with recommendations on mutual recognition.
4. The standards and criteria referred to in paragraph 3 may be developed with regard to the following matters:
5. On receipt of a recommendation referred to in paragraph 3, the Committee shall, within a reasonable time, review it to determine whether it is consistent with the terms of this Agreement. Based on the Committee’s review, each Party shall encourage its respective competent authorities to implement the recommendation, where appropriate, within a mutually agreed time.
- education: accreditation of schools or academic programs;
- examinations: qualifying examinations for licensing, including alternative methods of assessment such as oral examinations and interviews;
- experience: length and nature of experience required for licensing;
- conduct and ethics: standards of professional conduct and the nature of disciplinary action for nonconformity with those standards;
- professional development and re-certification: continuing education and ongoing requirements to maintain professional certification;
- scope of practice: extent of, or limitations on, permissible activities;
- local knowledge: requirements for knowledge of such matters as local laws, regulations, language,geography, or climate; and,
- consumer protection: alternatives to residency requirements, including bonding, professional liability insurance, and client restitution funds, to provide for the protection of consumers.
6. Where the Parties agree, each Party shall encourage the relevant bodies in its territory to develop procedures for the temporary licensing of professional service providers of the other Party.
7. The Committee shall periodically, and at least once every three years, review the implementation of this Annex.]
[1. [Notwithstanding the provisions of this and other chapters of this Agreement] [Without prejudice to the foregoing provisions], [the Parties] [each Party] may adopt [or apply] measures [necessary to ensure the observance of laws and regulations for]:
a) [to protect][the protection of] public morals or [to maintain][the maintenance of] public order [and safety];
b) [to protect][the protection of] human[, plant] and animal life and health [and preserve][or the conservation of] the environment;
c) [to protect][the protection of] the national security;
d) to secure the compliance with laws and regulations related to:]
[e) protecting national, artistic, historical or archeological treasures;]
- the prevention of deceptive and fraudulent practices or to deal with the effects of a default on services contracts [for the purpose of supplying services to natural or juridical persons of the Parties];
- the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of the confidentiality of individual records and accounts; or
- guaranteeing public security;
[f) inconsistent with the objectives envisaged in the Articles on national treatment, provided that the difference in national treatment is aimed at ensuring the equitable or effective imposition or collection of direct taxes in respect of services or service suppliers of the other Party.]]
[2. The measures listed above in this Article shall not be applied in a manner disproportionate to their purpose, shall not have protectionist aims in favor of domestic services or service providers, and shall not be applied in such a manner as to constitute an unnecessary obstacle to intraregional trade in services or a means of discrimination against services and/or service providers of FTAA vis a vis the treatment accorded other countries whether or not they are Parties.]
[2. The provisions of this chapter do not apply to the social security systems of any Party, nor to activities in the territory of any Party related, even occasionally, to the exercise of official authority.]
[3. Nothing in this chapter shall prevent any Party from enforcing its laws, regulations and requirements with respect to entry, stay, work, labor conditions and establishment of natural persons, with the understanding that such enforcement, if any, shall not be carried out in a manner that nullifies or limits the benefits obtained by any of the Parties under any specific provision of this chapter.]]
Subject to the requirement that the following measures are not applied in a manner which would constitute a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised restriction to trade in services, nothing in this Chapter shall be construed to prevent the adoption or enforcement by any Party of measures:
a) necessary to protect public morals or to maintain public order;
b) necessary to protect human, animal or plant life or health;
c) necessary to secure compliance with laws or regulations which are not inconsistent with the provisions of this Chapter, including those relating to:
i) the prevention of deceptive and fraudulent practices or to deal with the effects of a default on services contracts;
ii) the protection of the privacy of individuals in relation to the processing and dissemination of personal data and the protection of confidentiality of individual records and accounts;
d) inconsistent with Article (National Treatment), provided that the difference in treatment is aimed at ensuring the equitable or effective imposition or collection of direct taxes in respect of services or service suppliers of other Parties;
e) inconsistent with Article (MFN), provided that the difference in treatment is the result of an agreement on the avoidance of double taxation in any other international agreement or arrangement by which the Party is bound.
[f) public safety.]]
1. No provision in this Chapter shall be construed to:
a) impose upon a Party the obligation to furnish information, the disclosure of which that Party deems contrary to its essential security interests; or
b) prevent a Party from adopting measures it deems necessary to protect its essential security interests with respect to:
i) the supply of services intended directly or indirectly to secure the provisioning of the armed forces;
ii) fissile or fusionable material or the materials used to manufacture them;
iii) those measures applied in war-time or in case of severe international tension; or
c) prevent a Party from adopting measures in fulfillment of their obligations assumed under the United Nations Charter for the maintenance of international peace and security.
[2. Measures adopted pursuant to subparagraphs b) and c) of paragraph 1 and their elimination shall be reported to ( ), to the extent possible.]]
[[Non-obligatory] Local Presence
No Party shall require a service provider of another Party to establish or maintain a representative office or any form of enterprise, or to be resident in its territory as a condition for the cross-border provision of a service.]
[Standard of Treatment
Each Party shall accord service providers from other Parties the better of the treatments required by the Articles on Most Favored Nation Treatment and National Treatment.]
Each Party shall recognize the licenses, certificates, professional titles and accreditations, granted by another Party in any service area requiring such documents, in accordance with the criteria agreed upon or the decisions on the issue adopted by the Committee on Services.]
Each Party may regulate the supply of services in its territory, to the extent that the regulations do not discriminate against services and service suppliers of the other Party, in comparison with its own like services or like service suppliers.]
The Parties may negotiate additional commitments in the field of regulations.]
[List of Specific Commitments
1. Each Party shall indicate on a List of Specific Commitments the service sectors, subsectors and activities in which it will assume commitments. In each sector and for each of the four modes of supply established in Article ( ), the Party shall specify:
a) the terms, limitations and conditions for market access;
b) the terms, limitations and conditions for national treatment;
c) the obligations related to additional commitments.
2. Any measures that are incompatible with the obligations referring to market access and, at the same time, national treatment shall be included in both columns of the List of Specific Commitments.]
[Reservations [or Commitments]
1. The Articles on Most-favored Nation Treatment, National Treatment and Non-obligatory local presence do not apply to:
a) any existing non-conforming measure that is maintained by:
i) a Party at the national or federal level, and at the provincial or state level, as set out in its [Section A][Schedule] of the Annex on “[Existing][and Future] Non-conforming Measures”; or
ii) a local or municipal government.
b) the continuation or prompt renewal of any non-conforming measure referred to in subparagraph (a); or
c) an amendment to any non-conforming measure referred to in subparagraph (a) to the extent that the amendment does not decrease the conformity of the measure, as it existed immediately before the amendment, with Articles ( ) (Most-favored Nation Treatment), ( ) (National Treatment) and ( ) (Non-obligatory local presence).
2. The Articles ( ) (Most-favored Nation Treatment), ( ) (National Treatment) and ( )(Non-obligatory local presence) do not apply to any measure that a Party adopts or maintains with respect to sectors, sub-sectors or activities, as set out in its [Section B][Schedule] to the Annex on “[Nonconforming and]Future Measures.”
[Liberalization of Nondiscriminatory Measures
3. (Sections A and B) shall be completed no later than two years after the date on which the Agreement comes into force. The Smaller Economies shall be granted a period of up to five years to complete their (Sections A and B).]
Each Party shall set out, in its non-discriminatory “Quantitative Restrictions” annex, its commitments to liberalize quantitative restrictions, licenses requirements, and other nondiscriminatory measures.]
1. Through future negotiations called by the Commission [Responsible for the Administration of the Agreement] [to be held periodically], the Parties shall [jointly] broaden the liberalization achieved in the different service sectors, with a view to eventually eliminating the remaining restrictions [set out in the Article on Reservations [or Commitments]].
2. The removal of the remaining restrictions shall include the progressive reduction and/or dismantling of the nonconforming measures set out in Section A, together with the progressive incorporation into Section A of the sectors, subsectors, and activities set out in Section B.]
1. The Committee for Trade in Services shall delegate to working groups the task of considering issues related to the harmonization of regulations in specific service sectors. This shall be done in a specific manner and for given periods of time.
2. For the purposes of this Paragraph, the work of the relevant international organizations shall be taken into account.]
[Committee on Cross-Border Trade in Services
The Committee on Cross-Border Trade in Services shall carry out the functions indicated in Article ( ).]
1. Each Party shall examine closely the issues raised by any other Party related to a matter affecting the operation of this Agreement and shall create the appropriate conditions for holding consultations on such issues.
[Council for Trade in Services
2. At the request of a Party, the Council for Trade in Services may hold consultations with one or more Parties on a specific issue on which there was no success in finding a satisfactory solution through the consultations provided for in paragraph 1.]
1. The Committee on Trade in Services is created. It is made up of representatives of each of the Parties, one regular and one alternate.
2. The functions of the Committee shall be:
a)To supervise the implementation of and
compliance with the Agreement on Services.
b) Take cognizance of those matters brought before the Committee by the
Parties on which the Committee shall issue recommendations it deems
c) Design mechanisms to assess cases on which the Committee does not
have sufficient technical expertise, taking into account the provisions
of the Dispute Settlement Body.
d) Establish such subsidiary organs as it considers appropriate for the
effective discharge of its functions.
e) The Council for Services shall have a Chair, a Vice-Chair and a
f) Draft its own regulations.]
Any dispute arising by virtue of the operation of this Agreement shall be settled based on the provisions of Chapter
( ) on Dispute Settlement of this Agreement.]
1. The provisions of GATS Article IV shall be incorporated into this Chapter with special emphasis made on the establishment of “enquiry points” and the availability of services technology.
2. Technical assistance in the area of Services within the FTAA, shall be channeled through the Council on Trade in Services.
3. The Parties shall foster, to the greatest extent possible, participation of both relatively developed and relatively less developed countries in the development programs of international and regional organizations.
4. The Parties shall foster and support cooperation in the area of services among relatively developed and relatively less developed countries.
5. In collaboration with the relevant international organizations, the Parties shall provide less developed countries of the hemisphere with information on services and developments in services for the purpose of strengthening the service sectors in such countries.
6. The Parties shall pay special attention to the initiatives of the relatively less developed countries to access technology transfer, training and other activities that foster the infrastructure development and expansion of their trade in services.]
[Relations with Other International Organizations
The Council for Services shall make the necessary provisions to engage in consultations and cooperation with the United Nations and its specialized agencies, as well as with other services-related intergovernmental organizations.]
[Restrictions to Protect the Balance of Payments2
1. In the event of serious balance of payments or external financial difficulties or threat thereof, a Party may adopt or maintain restrictions on trade in services with respect to measures covered by the Articles on most favored nation treatment, local presence, national treatment and market access, including payments or transfers for transactions relating to the sectors affected by such measures. It is recognized that certain balance of payments pressures may necessitate the use of restrictions in order to achieve, among other things, the maintenance of a level of financial reserves sufficient to implement its economic development program or economic transition.
2. The restrictions referred to in paragraph 1 supra:
a) shall not discriminate among Parties;
b) shall be consistent with the Articles of Agreement of the International Monetary Fund (IMF);
c) shall avoid unnecessary damage to the commercial, economic and financial interests of the Parties;
d) shall not exceed those necessary to deal with the circumstances referred to in paragraph 1 supra; and
e) shall be temporary or shall be phased out progressively as the situation indicated in paragraph 1 supra improves.
3. In determining the incidence of such restrictions, the Parties may give priority to the supply of services that are more essential to their economic or development programs, but such restrictions shall not be adopted or maintained for the purpose of protecting a given service sector.
4. Restrictions adopted or maintained under paragraph 1 supra or any changes therein shall be notified promptly to the Parties.
a) The Parties applying the provisions of this Article shall promptly consult on the restrictions adopted under said provisions.
b) The Council shall establish procedures for periodic consultations with the objective of enabling such recommendations to be made as it deems appropriate to the concerned Party.
c) Such consultations shall assess the balance of payments situation of the concerned Party and the restrictions adopted or maintained under this Article, taking into account, inter alia, such factors as,:
i) the nature and extent of the external financial difficulties and of the balance of payments;
ii) the external, economic and trading environment of the consulting Party;
iii) alternative corrective measures which may be available.
d) The consultations shall address the compliance of the applicable restrictions with paragraph 2 of this Article, in particular the progressive phaseout of restrictions, in accordance with sub-paragraph (e) of said paragraph.
e) In such consultations, all findings of statistical and other facts presented by the IMF relating to foreign exchange, monetary reserves and balance of payments shall be accepted, and conclusions shall be based on the assessment by the IMF of the balance of payments and external financial situation of the consulting Party.]
1. For the purpose of addressing problematic market conditions in particular service sectors, linked to the creation of new sectors, the correction of structural problems within the market or the threat of the disappearance of service sectors, a Party may adopt safeguard measures in a non-discriminatory manner with the proviso that they will be eliminated gradually as the reason for their adoption disappears. For this purpose, the Party shall notify it to the Committee for Trade in Services and offer evidentiary proof justifying the adoption of such measures.
2. The Committee on Services shall determine, inter alia, the procedures for the implementation of necessary measures in relation to:
a) urgent safeguard measures
b) trade-distortive subsidies.]
The Parties shall develop disciplines in order to avoid and counteract the effect of subsidies that distort trade in services. Negotiation of these disciplines shall be concluded no later than the date of the entry into force of the FTAA
1. Each Party shall adopt the measures necessary to prevent, avoid and sanction practices that distort competition in the trade in services within its domestic market, including those necessary to ensure that service providers established on their territories that enjoy a position of dominance in the market do not abuse their position.
2. The provisions of Article ( ) shall also apply to the cases of exclusive service providers, where one of the Parties, whether formally or
i) authorizes or stipulates a small number of service providers, or
ii) substantially hinders competition among suppliers on its territory.
3. The Committee for Trade in Services shall, at the request of one of the Parties that has reason to believe that a service provider from the other Party is abusing its dominant position, require the said Party to provide specific information on the relevant operations of the supplier.
4. The Parties shall study all aspects involved in existing international transport services within the hemisphere with a view to adopting the domestic laws to ensure that such services operate in a competitive environment and do not constitute an obstacle to expansion in regional trade.]
[Special and Differential Treatment
1. The Parties undertake to accord special and differential treatment to smaller economies and less developed countries in the Hemisphere, with respect to: time periods, temporary exceptions in fulfilling their obligations and special assistance to facilitate the adjustment process and improve competitiveness, taking into account the sensitivity of some service sectors, their importance in generating employment and their role in attaining the legitimate development goals of such economies.
2. The more developed countries shall accord special market access conditions to the services from smaller and less developed economies of the Hemisphere in those modes of supply in which their greatest competitive advantages lie.
3. For the purposes of bolstering development in emerging services sectors of interest to smaller and/or less developed economies in the Hemisphere, the Parties undertake to provide conditions that facilitate market access to service providers in such sectors and to foster technical and financial cooperation.
4. The increasing participation of smaller and/or less developed economies in trade in services within the Hemisphere shall be encouraged through the adoption of the provisions under Article IV of GATS relating to:
i) the strengthening of their domestic services capacity and its efficiency and competitiveness, inter alia through access to technology on a commercial basis.
ii) the improvement of their access to distribution channels and information networks; and
iii) the liberalization of market access in sectors and modes of supply of export interest to them.
5. The Parties shall provide the appropriate resources, including financial resources, to the extent permitted by their respective resources and regulations, to further the adjustment to the gradual process of liberalization of trade in services throughout the Hemisphere.
6. In fulfilling the obligations they assume, smaller and/or less developed economies shall be accorded relative flexibility with respect to opening up fewer sectors, liberalizing fewer types of transactions, gradually expanding market access in line with its development process and the adoption of special safeguards.]
TO THE REPORT OF THE NEGOTIATING GROUP ON SERVICES
ISSUES FOR FURTHER DISCUSSION
Disciplines on Subsidies
This communication from Mercosur is of a preliminary nature, and is subject to potential changes, as internal talks, and debates and proposals developed in the NGSV unfold. The purpose of this presentation is to contribute elements for an analysis of the topic.
Evidence contained in different documents compiled by international organizations indicates that a range in subsidy practices is evident in major service sectors, such as: audiovisual, air and sea transport, tourism, and financial services. The presence of subsidies in insurance, postal services, construction, research and development, and advertising has also been confirmed.
The effect of these policies can not be accurately assessed, but there is empirical evidence indicating that these practices
with potentially distorting effects are concentrated in certain specific sectors.
Some regional integration agreements on goods and services contain specific provisions for establishing certain disciplines on subsidies.
Mercosur considers that the FTAA’s future chapter on services should contain specific disciplines related to eliminating and prohibiting subsidies that have distorting effects on the market or that cause shifts in normal trade flows.
Thus, the NGSV should consider the following questions:
1. Factors to consider in the preparation of disciplines on subsidies:
- aspects of MFN and national treatment
- specificity by type of delivery
- territorial application
- is the concept of “necessity” important?
- importance of the “least trade restrictiveness” concept
- neutralizing measures
- terms for eliminating subsidies
- flexibility for certain countries
2. Approach for the establishment of disciplines:
a) general disciplines and b) potential development of specific disciplines by sector (for example, WTO “Reference Paper” on Basic Telecommunications, which contains provisions on cross-subsidies capable of altering competitive conditions).
By way of summary, Mercosur considers that the disciplines on subsidies in services must, in principle, give clear consideration to the following aspects:
a) Prohibition on export subsidies (an illustrative list of measures could, for example, be prepared).
b) Prohibition on causing harm to, or shifts in third markets, with compliance subject to a case by case resolution by the FTAA’s Dispute Settlement System.
c) Subsidies that are permitted or non-actionable, among which could be considered, for example, subsidies earmarked for services with social benefits.
1. In the light of the forthcoming discussions in the Negotiating Group on Services on Market Access and National Treatment, the delegation of Chile considers that this is an appropriate juncture for sharing some ideas on the differences between those quantitative restrictions that are discriminatory and those that are not. In this regard, the following is worth noting:
2. Articles XVI (Market Access) and XVII (National Treatment) of the General Agreement on Trade in Services (GATS) fall under the section on specific commitments (Part III). Thus, the GATS deals in like fashion with National Treatment restrictions and Market Access restrictions, (whether or not they are discriminatory). However, in the case of Article XVI, six types of measures affecting trade in services are identified, and they may not be applied in the sectors stipulated in their schedule of specific commitments, to a specific service provider of a WTO member country, unless, they are clearly specified in the respective schedules. As a result of the foregoing, one may conclude that under the current GATS structure, the countries are free to choose the sectors in which they are going to undertake National Treatment or Market Access commitments. However, should they undertake any Market Access commitments, they shall not maintain or adopt any of the six measures set forth in Art. XVI. 2 unless their own Schedules specify
3. Likewise, GATS Article XX.2 stipulates that “measures inconsistent with both articles XVI and XVII shall be inscribed in the column relating to Article XVI. In this case, the inscription will be considered to provide a condition or qualification to article XVII as well.” What this means is that many countries, when inscribing their National Treatment Restrictions, also list them in the Market Access column. In this way, in the example described below, there is clearly a measure which restricts Market Access, but which is also patently discriminatory (i.e., it is a limitation on National Treatment). However, given the wording of Art. XX.2 of GATS, this restriction may be listed only in the Market Access column without it being necessary (only optional) to list it in the National Treatment column. Furthermore, under the current structure of GATS the country concerned may state expressly that it has “no” restriction on National Treatment. This situation makes for confusion and lack of transparency, since, as one can appreciate from the example mentioned, if a service provider of any WTO member country wanted to supply services in country X, it would think that in the sector listed, there were no restrictions on National Treatment. Yet, upon arrival in the country, the supplier would be faced with the fact that there were indeed such restrictions but that they were mixed up with the restrictions on Market Access.
Specific Sector Commitments (Country X)
Sector or Subsector
Market Access Limitations
| Restrictions on National Treatment
|| Additional Commitments.
Other educational services (92390)
|| 4) For foreigners who wish to supply such services, the laws require membership of the Professional Teaching Corps. For mandatory membership, one must meet the nationality and residency requirements. In some cases, State institutions may recruit foreign professionals if there are no nationals willing to provide the service under the stipulated conditions.
5. Bearing in mind the confusion caused by the situation described, and based on current regional agreements, Chile’s proposal (February 10, 2000) draws a perfectly clear distinction between discriminatory quantitative restrictions (i.e. restrictions contrary to the principles of National Treatment and Most Favored Nation) and those that are
non-discriminatory. Thus, for example, a measure that stipulates that “
a license from the relevant Ministry is required to operate a cable television system and such a license may be granted only to nationals of a given country”, may constitute on the one hand a market-access restriction, and on the other hand, - which in the opinion of Chile is the most important, - it may be a measure that discriminates between nationals and foreigners (by keeping foreigners out of the market). By the same token, there are non-discriminatory quantitative restrictions (i.e. those measures that are not contrary to National Treatment or the Most Favored Nation Clause although they restrict transborder trade in services). For example, a measure that stipulates that
“the Postal company of a given country has been appointed to supply national and international mail dispatch services”, only restricts Market Access (and, therefore, transborder trade in services), but does not stipulate any discrimination between nationals and foreigners, since pursuant to the rule, neither the nationals of the given country nor foreigners will be able to provide domestic and international mail dispatch services.
6. In this respect, Article 8 of the Chilean proposal sets forth that existing (and, in general, any existing measure inconsistent with the obligations of National Treatment, Most Favored Nation and the non requirement of Local Presence)
discriminatory quantitative restrictions shall be listed in “section A”(which refers to existing nonconforming measures) of the Annex on “Nonconforming and Future Measures”. Should the case be otherwise, those measures shall not be enforceable on service providers of member countries of the Agreement. Furthermore, it is important to note that new discriminatory measures shall not be imposed on service suppliers of Members, and the existing measures may only be modified in a manner that further liberalizes transborder trade in services (except those measures listed in “section B” – that refer to future measures – in the Annex mentioned above). Likewise, Article 7 states that
non-discriminatory quantitative restrictions shall be indicated in a specific Annex for this type of measures. However, in principle, there would be no obligation to bind the existing measures; rather, there would be an obligation to list them with a view to ensuring due transparency. In this way, though non-discriminatory, they may be modified, or new ones may even be adopted, with the obligation to notify the other Members, and to, “…at least every two years, endeavor to negotiate the liberalization of the quantitative restrictions…” (Art. 7.3 Proposal of Chile).
7. Moreover, and with a view to facilitating Market Access in the services sector, Art. 5 of the Chilean proposal prevents requiring a service provider to establish or maintain a representative office or other type of company, or to reside in the territory of any Member State as a condition for the transborder supply of a service.
8. Finally, it must be remembered that there is further room for duplication within the limitations on access, since among the six measures listed in Art. XVI.2, of GATS there are measures such as “e” and “f” that apply to the third mode of supply (commercial presence). In this regard, the position of Chile is that the issue of “commercial presence” should be addressed by the FTAA Negotiating Group on Investment and that such limitations should be analyzed by the Group.
|| Some countries believe that the FTAA Chapter on Services should include an article or articles on payments and transfers, as well as safeguards, in the field of balance of payments and will submit a draft proposal for said article(s) at the appropriate time.
|| Some countries consider it advisable for the Negotiating Group on Services to examine the issue of safeguards in services.
|| Some countries indicated that the main elements of these disciplines are envisaged in document FTAA.ngsv/w/44.