Professional Documents
Culture Documents
UPDATED ANALYSIS OF THE LEAKED ‘CORE TEXT’ FROM JULY 2016 *
The Trade in Services Agreement (TISA) is being negotiated by a selfselected 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 mostfavourednation (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 11
(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’. 3
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
1 This list is illustrative and not an extensive analysis of all the GATS rules carried through to TiSA.
2 Article I2(g)
3 Article I2(g) and (i)
4 Article I1.2 (a) and (b)
5 Article I1.2(d)
6 Article I1.2(c) and Article I2 (d)
1
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. 7
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.8
The restrictions apply at central and local government level, and nongovernment bodies
like professional bodies. 9
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. 10
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. 12
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. 13
The pretend ‘carveout for public services’ only applies to the very rare situations where a
service is provided through a public monopoly for free. 14
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. 16
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!17
7 Article I4
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
16 https://www.citizen.org/documents/general exception.pdf
17 Article I9(ii). See the discussion of the leaked TiSA ecommerce text. For reasons that are not clear, the text
2
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. 19
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 decisionmaking 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
the schedules.20
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. 21
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, sub
sector or activity by listing it in Section A of Part 1 of its schedule. 22
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.
3
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. 25
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
onerous rules.
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
4
Where have they not agreed …
The ratchet effect of other agreements into TISA by the mostfavourednation’ (MFN) rule :
Under the ‘mostfavourednation’ 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 MostFavouredNation 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 crossreferences MFN to economic integration agreements. 31
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,
30 Article […] MostFavouredNation Treatment
31 [Article […] Economic Integration – GATS Article V] [Linked to Article on MFN]
5
provided they are notified to the WTO as complying with the GATS rules.
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 investorstate 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.32
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 coproduction 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 nondiscrimination 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 . 34
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
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]
6
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.
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.
36 February 2014 text (https://wikileaks.org/tisa/domestic/) and analysis
Regulation/
38 [Article […] Domestic Regulation]
7
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.39 )40
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.
TECHNICAL NOTES
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 green italics. The corresponding GATS
provision is in brackets.
PREAMBLE
PART 1: GENERAL PROVISIONS
Scope (Art 1 and Art 28)
MostFavouredNation Treatment (Art 2)
Economic Integration (Art 5)
Market access (Art 16)
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]
8
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
PROPOSED ANNEXES
Distribution services
Domestic Regulation
ECommerce
Energy
Environmental
Financial Services
Government Procurement
Localisation
Movement of natural persons
Postal
Professional Services
Telecommunications
Transparency
Transport:
Air
Maritime
Road
PART IV: INSTITUTIONAL PROVISIONS (as proposed by EU)
Establishment of TiSA Committee
Chair of TiSA Committee
Functions of TiSA Committee
Decision making
9
Notification of the intent to modify or withdraw commitments
Compensatory adjustments
Openness [to accession]
Procedures and requirements [for accession]
Objective of multilateralization
Process leading to multilateralization
Annexes, Protocols and footnotes
Authentic texts
Depositary
Entry into Force
Amendments
Withdrawal
Relation to other Agreements
Reservations
Private Rights
Dispute settlement [as proposed by EU]
General provisions
Adjudication procedure
Panels
Panel proceedings
Compliance
Suspension and termination procedures
Mediation
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:
definitions
measures
supply of services
‘modes’ of supplying services;
sector
commercial presence
application to local government
services supplied in exercise of government authority
monopoly
10