IABA DC

Dr. M.L. Jaime, Ph. D.

Consultant

 

What is the Trade in Services Agreement (TiSA)?

TiSA is a proposed international trade agreement being negotiated since 2012. Twenty-three Parties, including the European Union (E.U.), participate in its negotiation. Participants account for 70% of the global services economy and half of global GDP. For most of these countries, services comprise 70% or above of their economic output. That is the case of the United States and the E.U., but also of some of the Latin American participants like Panama and Costa Rica.

The initiative, originally proposed by the so called “Really Good Friends of Services”, was born as a response to the lack of progress in the services’ negotiations under the World Trade Organization (WTO) structure. As a result, TiSA’s negotiations have taken place in Geneva but outside the WTO system. The lack of public access to trade negotiations, in particular TiSA negotiations, which some claim has been conducted in “secrecy”, has raised strong criticism from civil society and non-governmental organizations (NGOs).

 

What could be included in TiSA?

Unlike other free trade agreements that cover different trade areas, such as investments, regulatory coherence, procurement, goods and intellectual property, among others, TiSA focuses in the liberalization of trade in services, such as banking, ICT, professional services and transport. In this sense, TiSA would cover any measure (laws, regulations, government policies) that affects trade in services. It potentially includes all services sector, public and private, in each of four modes of supply: (1) cross-border supply; (2) consumption abroad; (3) commercial presence (i.e. establishment or foreign direct investment); and (4) movement of natural persons.

TiSA’s structure is based on the WTO’s General Agreement on Trade in Services (GATS) and composed of three main parts: (i) a core of trade rules, including Market Access, National Treatment and Most-Favoured Treatment rules, and institutional arrangements (dispute resolution, treaty administration, etc.); (ii) a schedule of commitments according to which each participant agrees to (a) provide market access in selected services (positive list approach), and (b) declare all existing reservations to the National Treatment rule (standstill clause) without the possibility of adopting future restrictions or reintroducing trade barriers that would contradict current commitments (ratchet clause applied in a negative list approach); and (iii) annexes that create new rules for certain sectors like financial services, telecommunication, air transport, electronic commerce, energy-related services, maritime transport, professional services, as well as new rules for governing (domestic regulation, government procurement, movement of natural persons and transparency.) The ultimate goal of the proponents would be the “multilarization” of the agreement by its formal integration to the WTO system.

On July 2016, Inside Trade (http://insidetrade.com/daily-news/eu-ahead-new-round-floats-text-tisa-dispute-settlement-without-appeal) reported that the E.U. has dropped its proposal regarding the establishment of an appellate review body in the State-State dispute resolution proposal. The proposal does not create a private right of action for the benefit of affected service providers analogous to investor-State dispute resolution.

 

What are the possible impacts in and risks for Latin American countries?

By June 2016, 18 negotiation rounds have taken place. To date, six Latin-American countries are a party to the negotiations: Chile, Colombia, Costa Rica, Mexico, Panama and Peru. Except for Costa Rica and Panama, these countries are part of the Pacific Alliance initiative (established in 2011 with the objective to foster integration and move progressively towards the free movement of goods, services, resources and natural persons), and the Trans Pacific Partnership (signed on February 2016 but not yet in force.)

In September 2015, after 3 years of negotiations, Uruguay withdrew from TiSA negotiations. This decision was taken by the government following opposition of national trade and labor unions. The main concern seems to be the apparently irreversible trade ratchet effect. Months later, Paraguay decided to follow the same course of action and drop out of TiSA.

More precisely, the main concern in relation to TiSA is the risk of having rampant expanded market access without limiting safeguards for public services and insufficient policy space. In particular, TiSA has raised doubts among civil society and NGOs on government’s power to exercise its ability to regulate in furtherance of human and labor protection rights. The reason is simple, trade commitments limit governments by “blocking” their domestic commitments. Consequently, governments could be forced to end existing public monopolies and/or subsidies or exceptions for public sector providers; on the other hand, failed experiments to privatize public services would be very hard, even impossible, to reverse. The most vulnerable economies are indeed those in development and transition such as those in Latin America.

Adding to the complexity is the recently leaked joint “interpretative declaration” of the European Union and Canada regarding the execution of the Comprehensive Economic and Trade Agreement (CETA). (http://www.cbc.ca/news/politics/ceta-canada-eu-trade-leak-interpretative-declaration-1.3794013). Under this interpretation, CETA would preserve the ability of the parties to adopt and apply their own laws and regulations that regulate economic activity in the public interest, and provide public services previously supplied by private sector or nationalize services that had been previously privatized.

While these statements seem to suggest that TiSA would not preclude market access for publicly funded services, legitimate doubts remain regarding the liberalization of sectors like education, water, healthcare and social services, for which public-private collaboration may exist notwithstanding the ratchet clause. Moreover, there is a risk associated with labor market openness that comes with deregulation of the professional services and increased access to the market for foreign independent contractors or service providers. This liberalization would be enhanced by stronger and harmonized domestic regulation that is expected to be adopted in conjunction with TiSA. In this sense, countries might lose some autonomy in how they develop and oversee rules on non-discrimination, professional qualifications, licensing procedures and technical standards.

Trade liberalization, including in the service sector, can be considered a key tool to boost foreign investments and achieve economic development; however, liberalization should be done in a way that preserves the state’s right to regulate in sensitive areas such as health, water, education, and environmental matters. In other words, the sustainability of public services should be guaranteed