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

Key concepts of Trade in Services and S tate of play in the SADC services negotiations. Workshop on Scheduling Specific Commitments for Construction and related engineering services and energy-related services Happy Valley Hotel, 18 October 2012 mjelitto@sadc.int.

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

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  1. Key concepts of Trade in Services and State of play in the SADC services negotiations Workshop on Scheduling Specific Commitments for Construction and related engineering services and energy-related services Happy Valley Hotel, 18 October 2012 mjelitto@sadc.int

  2. 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.

  3. Scope and Definition Include Exclude Measures affecting air transport traffic rights Services supplied in the exercise of government authority Government Procurement • All measures by state parties (at all government levels) affecting trade in services • All services and suppliers in any service sector 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 Cross border supply - Mode 1 Service supplied into the territory of another Member State Service Consumer Service Supplier Service Supplier supplies service from territory of one Member State Service Consumer receives service in territory of any other Member State

  5. The 4 Modes of Supply Consumption abroad - Mode 2 Service supplied in territory of one Member to the service consumer of another Member State Service Supplier supplies service in territory of one Member State Service Consumer Service Supplier Service Consumer Service Consumer receives service in territory of supplier

  6. The 4 Modes of Supply Commercial Presence - Mode 3 Any type of business or professional establishment Service supplier establishes a commercial presence in the territory of another Member State Service Supplier Service Consumer Service supplied through commercial presence

  7. The 4 Modes of Supply Natural Persons - Mode 4 Service supplied through presence of natural persons in the territory of another Member State Service Consumer

  8. In what mode are the following services supplied? • A professional accountant from Swaziland travels to Malawi to provide accounting services to a medium-sized company. • An insurance company from Zambia establishes a subsidiary in Swaziland. • A truck registered in Swaziland is repaired in South Africa. • Download of music over the internet • Student from Swaziland takes a long-distance degree course offered by the London School of Economics • Car insurance bought from company established abroad • Does ownership of company matter?

  9. Typical Services sector coverage • Business Services • Communication • Construction • Distribution • Education • Environmental Services • Health Related Services • Financial Services • Tourism • Recreation, Culture, Sports • Transport • Other Services Plus Energy-related services (elements of Business, Distribution, transport services)

  10. 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)

  11. 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)

  12. SADC MFN Review QuestionsWhat are the consequences of the following scenarios? • … Swazilandwants 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.

  13. Schedules of Specific Commitments: Basic design

  14. 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) 14

  15. 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. 15

  16. 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 16

  17. 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 17

  18. 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. 18

  19. 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 19

  20. To schedule or not to schedule? • Foreign companies must provide training to local workers. • The board of Directors of any company must be composed to 50% of nationals. • Foreign companies must invest at least 500’000 E. • Foreign employees are only permitted if no suitable local person is available. • Foreign companies must be registered and adhere to local labour laws. • Only qualified foreign engineers are granted a work permit

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

  22. WTO GATS Commitments of SADC Member States

  23. SADC Member States

  24. Swaziland’s commitments by sector* *Denotes incidence of commitments, by sub-sector, without assessment of depth/quality

  25. 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.)

  26. 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(?))

  27. Timelines for first round of Negotiations First phase: requests and offers Sector focus in the first phase: Communication Services Financial Services Transport Services Tourism Services Beginning of Negotiations Requests in at least 2 sectors Requests in at least 2 sectors Offers in at least 2 sectors Offers in at least 2 sectors end November 2012 end March 2013 end June 2013 end August 2012 April 2012

  28. Timelines for first round of negotiations (ctd) -> Thereafter: Energy-related and Construction Services Requests: end August 2013 Offers: 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

  29. 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

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