The Dance between GATS & TiSA : Balancing the Interests of BIC in Relation to Modern Trade in Services

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UNIVERSITEIT VAN AMSTERDAM

The Dance between GATS & TiSA:

Balancing the Interests of BIC in Relation to Modern

Trade in Services

Written by Jonathan Cho (11097272)

Supervised by Dr. James Mathis

Thesis Submission for the Degree of a Masters of Laws (LL.M.) in International Trade & Investment Law Track on 14 July 2016.

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2 ABSTRACT

The GATS has served as the sole global trade in services agreement for several decades, but the sorry truth is that it is becoming outdated very quickly with the rapid advancement in technology and ideas. Originally, the WTO Doha Round was meant to address this problem, but due to severe differences between developed and developing countries, negotiations have come to a deafening halt. 23 WTO members are now negotiating a new international services agreement known as the Trade in Services Agreement (‘TiSA’) which may either cause the GATS to become irrelevant or be integrated into the GATS. However, three of the most influential developing countries are noticeably absent in the TiSA negotiations: Brazil, India and China (‘BIC’). This paper attempts to gauge whether BIC should stay with the old GATS system or join the TiSA initiative. To answer this, research is conducted by analysing the available texts of the GATS and TiSA provisions, as well as weighing the possibilities of how the TiSA may evolve. By imposing the current economic situation and negotiating strategies of BIC to the aforementioned research, this paper will conclude that BIC needs to move away from the old GATS and either join the TiSA or change the current GATS to an updated and modernised agreement.

KEYWORDS: trade, services, GATS, WTO, BRICS, Brazil, China, India, developing, TiSA, Doha, agreement.

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Trade has been proliferating at an exponential rate in recent times due to globalisation and economic progress made in many developing countries. The World Trade Organisation (‘WTO’) was formed in an effort to consolidate and streamline the forthcoming international trade treaties and agreements, and has successfully developed the General Agreement on Tariffs and Trade 1994 (‘GATT’) and the General Agreement on Trade in Services (‘GATS’) that act as both a foundation and a starting reference for all trade agreements. Such Agreements are constantly updated through a series of Rounds taking place every few years, with the ninth Round, known as the Doha Round, still yet to be completed after 15 years. Mounting frustration and growing doubt towards the possibility of successful negotiation has spurred a number of WTO Members to seek their interests in the Trade in Services Agreement (‘TiSA’) which currently holds 23 potential signatories with over half being developed countries.

The TiSA will undoubtedly be a crucial step forward in the world of trade; but being an Agreement that seems to cater mostly towards developed countries’ interests with high standard levels, there will be ramifications for developing countries that are currently not party to the Agreement. This thesis has chosen to discuss and analyse the TiSA from the viewing perspective of three large developing countries: Brazil, India and China (‘BIC’). These particular countries have been chosen because firstly, they are the largest in the new emerging economies of the world; secondly, they are all categorised as developing countries; and thirdly, they are all non-participants to the current TiSA negotiations.

With regard to the above, the key research question of this paper is whether the BIC nations should remain with GATS or take a leap of faith and join the TiSA. This research is conducted from an external perspective, by critically assessing the aforementioned agreements: GATS and TiSA. Critical assessment is conducted through an analysis of the agreement text or proposed text, and will consider whether these are beneficial to BIC’s services trade as well as future negotiating power. The main research sources will be from government and institutional documents and academic journal articles.

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In pursuit of such research, the thesis will be structured as follows: Chapter I will be descriptive and will focus on the current WTO GATS Agreement, noting its outdated and contentious provisions. The chapter will then move to discussing the attempted negotiations in the Doha Round, discussing the specific issues negotiated and will posit possible reasons for its indefinite stalemate.

Chapter II will detail the inception of the TiSA, including its composition, its participating members, and objectives. It will also analyse the architecture of the Agreement and illustrate where negotiations are going currently.

Chapter III will look specifically at the BIC nations and explain their current stances towards the TiSA. The chapter will then discuss how the trading opportunities, economy and negotiating power of these countries will be affected in the contrasting situations of staying as non-signatories to and stepping in as non-signatories. The effects will be based on how each of the BIC nations will fare in relation to the currently available leaked TiSA texts, as well as known market trends and negotiating behaviour gathered from various international trade reports.

Following this, Chapter IV will look at TiSA as a possible instrument for BIC and will discuss four possible avenues the TiSA may eventuate as. These include being a WTO Annex 4 Agreement, a Critical Mass Agreement, a GATS V Agreement, or a modification of the GATS through a protocol. For each of these possibilities, the thesis will attempt to gauge the available trading benefits to BIC. Ultimately, by weighing the trading, economic and negotiating potentials this paper concludes that the BIC nations should enter the TiSA negotiations as remaining in the current GATS system will leave them behind in a rapidly evolving trade system.

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7 CHAPTER I

THE GATS & THE DOHA ROUND

There currently exists only one true global services agreement which, under the auspices of the World Trade Organization (‘WTO’), is known as the General Agreement on Trade in Services (‘GATS’). Yet despite being ‘global’ with 162 members as of 30 November 2015,1

the GATS is an outdated system from the 1990s with shallow commitment levels. This, coupled with the failure of the Doha Round and the proliferation of Free Trade Agreements and other preferential trade agreements, has caused the significance of the GATS to be questioned.

1. Brief Summary of the GATS

The GATS was originally negotiated in 1994 and came into force in 1995 as part of the Uruguay Round2 which coincided with the establishment of WTO. The main objective for forming GATS was to eliminate trade barriers in international services, and negotiators left much room for discretion and regulatory precaution negotiating a complex set of regulations on the services sector had not been accomplished beforehand.3 It is therefore of no surprise that the most difficult and contentious issues such as the reduction for barriers to trade and modifying government regulations were left to be handled in future rounds.4 Unfortunately, such future rounds have not improved the structure of the GATS substantially, and the general consensus is that the GATS is a weaker agreement architecturally than,5 and has yet to reach the liberalising level of,6 its goods counterpart: the General Agreement on Tariffs and Trade 1994 (‘GATT’).7

1

WTO, ‘Members and Observers’ <https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm> accessed 13 June 2016

2_{General Agreement on Trade in Services, 15 April 1994, Marrakesh Agreement Establishing the World Trade}

Organisation, Annex 1B, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations 284 (1999), 1869 U.N.T.S. 183, 33 I.L.M. 1167 (1994), preamble [‘GATS’]

3_{Rupa Chanda, ‘GATS and its implications for developing countries: Key issues and concerns’ (2002) United Nations}

DESA Discussion Paper No. 25 ST/ESA/2002/DP.25, 3.

4

Ibid, 3.

5_{Ibid, 5.} 6

RH Weber, ‘Information Technology Markets – Asia’s Opportunity to Revitalise the WTO’ (2007) 37 Hong Kong L.J. 185, 201.

7_{General Agreement on Tariffs and Trade 1994, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade}

Organization, Annex 1A, The Legal Texts: The Results of the Uruguay Round of Multilateral Trade Negotiations 17 (1999), 1867 U.N.T.S. 187, 33 I.L.M. 1153 (1994)

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8 1.1 GATS Structure

The GATS defines services through four modes:

1) Cross Border Supply which is the service supply from one Member State’s territory to another;

2) Consumption Abroad which is the service supply in one Member State’s territory to a consumer of another Member State;

3) Commercial Presence which is the service supply of a business inside another Member State’s market

4) Movement of Natural Persons which is the temporary cross-border movement of a service provider to the territory of another Member State.

In addition to these four modes, it also contains three separate parts to its architecture: General obligations and principles; Specific commitments; and Sectoral Annexes. The general provisions are mandatory obligations also known as ‘top-down’ since they automatically apply to all services.8 These include provisions such as Most Favoured Nation (‘MFN’),9 Transparency,10 Domestic Regulation,11 Government Procurement12, and General Exemptions.13 Alternatively, the specific commitments are opt-in provisions, often called ‘bottom-up’ obligations, and contain provisions for Market Access,14 National Treatment,15 and Additional Commitments16 for sectoral (applying to specific sectors) and horizontal (applying to all sectors) schedules of commitments. In addition to this, there is a schedule for commitments with four columns: Sector or Sub-sector; Limitations on Market Access; Limitations on National Treatment; and Additional Commitments. States have the flexibility to decide which service sectors they wish to grant market access and, or national treatment to by positively listing the sectors and types of service

8

Rachel Block, ‘Market Access and National Treatment in China-Electronic Payment Services: An Illustration of the Structural and Interpretive Problems in GATS’ (2013) 14 Chi. J. Int’l L. 652, 663.

9

GATS art II

10

GATS art III

11_{GATS art VI} 12

GATS art XIII

13

GATS art XIV

14_{GATS art XVI} 15

GATS art XVII

16

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they want in the Sector column. But at the same time, these may be conditioned on reservations and exemptions listed in the other three columns.

2. Problems with the GATS

In spite of being able to provide flexibility through customisable schedules and a broad coverage of services, the GATS has in reality had minimal impact on services liberalisation17 and has not produced any significant accomplishments beyond outlining some pre-existent liberalisations.18 Some of the core issues are discussed below.

2.1. Classification List W/120

A method of classifying the many existing services was only formed during the Uruguay Round by the GATT Secretariat, named the ‘Services Sectoral Classification List’ or also known as MTN/GNS/W/120 (‘W/120’). This classification method was based on the Provisional Central Product Classification of the United Nations of 199119 (‘CPC’) and contains 12 broad sectors20 with 160 sub-sectors. The system is in fact optional but the majority of schedules made are done under this in practice.21

The CPC has currently been updated four times22 since the Uruguay Round; on the other hand, the W/120 is yet to be updated even once. This has been a growing problem as much technological advancement have been made since the 1990s with new and different types of services having emerged such as Cloud technology services, online social media and smart

17

JA Marchetti and PC Mavroidis, ‘What are the Main Challenges for the GATS Framework? Don’t Talk About Revolution’ (2004) EBOR 511, 523.

18_{Ibid, 524.} 19

United Nations Provisional Central Product Classification, Department of International Economic and Social Affairs, Statistical Office of the United Nations, ST/ESA/STAT/SER.M/77.

20_{12 services sectors are 1) Business 2) Communication 3) Construction and Engineering 4) Distribution 5)}

Education 6) Environmental 7) Financial 8) Health and Social 9) Tourism and Travel 10) Recreational, Cultural and Sporting 11) Transport and 12) Other.

21_{Pietro Poretti and Roberto Rios-Herran, ‘A Reference Paper on Energy Services: The Best Way Forward?’ (2006) 3}

Manchester J. Int’l Econ. L. 2, 23.

22

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phone application services. The current W/120 cannot classify23 such services properly and is unable to reflect the current levels of barriers to service trade.24

2.2. Scheduling Commitments

Aside from the flawed classification, the actual scheduling methodology is complex with a lack of transparency regarding scheduled commitments.25 For instance, inasmuch as the positive listing approach requires proactive action from Member States to update their commitments, there less liberalisation and States end up scheduling fewer commitments than the actual competitive opportunities they afford to foreign service providers.26 Moreover, positive listing under the schedule fails to reveal what domestic regulatory restrictions the State has in place when it is unbound in a given sector (i.e. when no commitments are undertaken).27

It can also be easily confusing as to what sectors Members are exactly choosing to include in their schedule,28 as demonstrated by US-Gambling case.29 In that case, the US scheduled a sub-sector titled “Other Recreational Services (except sporting)” and claimed that ‘sporting’ included gambling services, whereas the WTO Panel and Appellate Body ruled that ‘sporting’ excludes gambling services and that the US actually included gambling services in its commitments.30

2.3. Market Access and National Treatment Overlap

Market access and national treatment hold two columns in the aforementioned schedules, and are governed by Articles XVI and XVII respectively. Though they may seem separate, they are

23_{RH Weber and Rainer Baisch, ‘Tensions Between Developing and Traditional GATS Classifications in IT Markets’}

(2013) 43 Hong Kong L.J. 77, 79.

24

HL Makiyama, ‘The International Services Agreement (ISA) – From the European Vantage Point’ (ECIPE, 2012) <http://www.ecipe.org/app/uploads/2014/12/ISA-revised30mar.pdf> accessed 13 June 2016

25_{Marchetti (n 17) 518.} 26

Apostolos Gkoutzinis, ‘International Trade in Banking Services and the Role of the WTO: Discussing the Legal Framework and Policy Objectives of the General Agreement on Trade in Services and the Current State of Play in the Doha Round of Trade Negotiations’ (2005) 39 Int’l Law. 877, 906.

27

Ibid, 893.

28

Henry Gao, ‘Can WTO Law Keep Up with the Internet?’ (2014) 108 Am. Soc’y Int’l L. Proc. 350, 351.

29_{Appellate Body Report, United States-Measures Affecting the Cross-Border Supply of Gambling and Betting}

Services, WT/DS285/AB/R. [‘US-Gambling’]

30

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interlinked through Article XX.231 which provides “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.”32

This creates an overlap that is logical, since some market access limitations on modes will undoubtedly violate national treatment.33 But this is also problematic as the GATS is unclear on exactly which measures qualify under this overlap.

Furthermore, although Article XVI.2 lays out six limitations34 possible under market access, Article XVII only states “all measures affecting the supply of services”35

with no list. Article XX adds to this confusion as it distinguishes the two Articles by using “terms, limitations and conditions” for market access and “conditions and qualifications” for national treatment.36

The difference between these expressions is ambiguous37 and requires clarification.

2.4. Mode 4 Services

Of the four modes, Mode 4 makes up the least amount of trade. There are no sector-specific commitments and the existing horizontal commitments tend to skew towards higher level service providers such as executives and managers that are more closely linked to commercial presence.38 As such, there is an absence of commitments on individual service providers working on a contractual basis39 and horizontal commitments are subject to market access and national treatment conditions relating to quantitative restrictions, specification of duration, terms of

31_{Wei Wang, ‘On the Relationship Between Market Access and National Treatment Under the GATS’ (2012) 46 Int’l}

Lawyer 1045, 1052.

32_{GATS art XX(2)}

33_{HE Haralambides, M Westeneng and S Zou, ‘GATT and Its Effect on Shipping and Ports’ (KMI/IAME Conf. on Int’l}

Trade Relations and World Shipping, Seoul, 8-10 June 1994)

<http://www.maritimeeconomics.com/sites/maritimeeconomics.com/files/downloads/papers/HH_GATT%Seoul.p df> accessed 13 June 2016

34

Number of service suppliers, total service transaction or assets value, total quantity of service operations or output, total number of natural persons, types of legal entities, and maximum percentage or total value of foreign shareholding or investment.

35

GATS art XVII(1)

36

GATS arts XX(1)(a), (b).

37_{Wang (n 31) 1054.} 38

Chanda (n 3) 18.

39

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employment, licensing, and certification.40 Such impediments are most felt with developing countries that consider Mode 4 as crucial and perceive GATS as favouring the interests of developed nations more by not catering to developing country export potentials in labour-based services.41 Collectively these reasons prevent further liberalisation in an ever globalising world.

3. The Doha Round

The aforementioned flaws in the GATS are only problematic insofar as they are left alone. The WTO has been spending the last fifteen years attempting to enhance the GATS by further liberalise services through the now infamous Doha Round. As it is the collapse of this Round which eventually led to the formation of the TiSA, it is important to highlight its history and its shortcomings.

3.1 History of the Infamous Round

In November 2001, the Declaration of the Fourth Ministerial Conference in Doha, Qatar formed the Doha Development Agenda (‘DDA’)42 which providing a political mandate on services and a view to enhance market access for developing and least developed countries (‘DLDC’) through a single undertaking.43 Though initial progress seemed promising, the 2003 Cancun Ministerial Conference produced a critical deadlock regarding the four ‘Singapore issues’.44 As negotiations stagnated and differences grew, the WTO had no choice but to suspend the Round in June 2006.45 Though the silence was broken with renegotiations starting in February 2007,46 progress was slow, with a Signalling Conference held in July 2008 where governments exchanged indications of their own services commitment improvements and expectations of other States, and a stocktaking exercise in 2010.47 It was not until December 2011 that a waiver granting LDC

40

Chanda (n 3) 18.

41

Ibid.

42_{Ministerial Declaration of 14 November 2001, WT/MIN(01)/DEC/1,41 I.L.M.746 (2002) [‘Doha Declaration’]} 43

Ibid.

44

Investment; Competition policy; Government procurement transparency; and Trade facilitation.

45_{WTO, ‘Talks suspended. ‘Today there are only losers.’’ (24 Jul 2006)}

<https://www.wto.org/english/news_e/news06_e/mod06_summary_24july_e.htm> accessed 13 June 2016

46

Report by Pascal Lamy to the General Council (7 Feb 2007)

<https://www.wto.org/english/news_e/news07_e/gc_dg_stat_7feb07_e.htm> accessed 13 June 2016

47

WTO, Services negotiation timeline <https://www.wto.org/english/tratop_e/serv_e/s_negs_e.htm> accessed 13 July 2016

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services preferential treatment was adopted and later, subsidies for agricultural exports were eliminated as part of the December 2015 Nairobi package.48 Despite these small victories, taken as a whole, the Doha Round is losing the war, and compared to the multitude of FTAs formed since 2001, it may be safe to say Doha is still a failure.

3.2 Reasons for Failure: North vs South

The main cause associated with the collapse in negotiations has been attributed to differences in developed countries’ and DLDC’s ambitions. Firstly, there has been a loss in focus: the Doha Round was created as a development round to promote economic development and alleviate poverty by helping DLDCs boost trade;49 but developed countries have shifted the focus to commercial negotiation whereby they have attempted to force larger developing countries such as Brazil, India and China (‘BIC’) to open their markets instead.50 For instance, Schwab has claimed that BIC was uncooperative in opening markets and was demanding market openings in developed countries.51 On the other hand, Bhagwati commented that the US refused to reduce trade-distorting farm subsidies while demanding enhanced safeguards for its own farmers52 So basically developed countries have urged for greater market access and national treatment commitments while developing countries have refused to do so until developed countries have made commitments to disarm agricultural protection53 Such tensions have caused Members to be reluctant to liberalise trade.

But there are also other factors which have played a role: for the vast majority of the Doha Round, the domestic political and economic situations have been unfavourable54 with several economic recessions in the 2000s. This lack of political momentum coupled with a high cost of

48

WTO, ‘WTO members secure “historic” Nairobi Package for Africa and the world’ (19 Dec 2015) <https://www.wto.org/english/news_e/news15_e/mc10_19dec15_e.htm> accessed 13 June 2016

49_{Doha Declaration, para 2} 50

Bridges, ‘Political Positioning Dominates Opening Day of WTO Talks’ (ICTSD, 22 July 2008)

<http://www.ictsd.org/bridges-news/bridges/news/bridges-daily-update-2-political-positioning-dominates-opening-day-of-wto> accessed 13 June 2016

51

SC Schwab, ‘After Doha: Why the Negotiators are Doomed and What We Should Do about It’ (2011) 90 Foreign Aff. 104.

52_{Jagdish Bhagwati, ‘The Selfish Hegemon Must Offer a New Deal on Trade’ (Fin. Times, 20 Aug 2008) 11.} 53

Gkoutzinis (n 26) 911.

54

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market reforms has limited the options for negotiators.55 As Wallenberg put it, “the lack of political will on the part of WTO members to resolve differences on agricultural subsidies and market access has put the entire round and the multilateral trading system in peril”56

It remains to be seen whether the Doha Round can pick up pace and arrive at some substantial compromise. However, for now, it would appear that the ‘North’ and the ‘South’ have parted ways, with the majority of the ‘North’ moving quickly to finalise its own services agreement in the TiSA.

55

Rudolf Adlung, ‘Services Liberalization from a WTO/GATS Perspective: in Search of Volunteers’ (2009) WTO Working Paper, ERSD-2009-05, 7 <https://www.wto.org/english/res_e/reser_e/ersd200905_e.pdf> accessed 13 June 2016

56

BBC News, ‘The Doha deadlock’ (BBC, 26 July 2006) <http://news.bbc.co.uk/2/hi/business/5216080.stm> accessed 13 June 2016

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15 CHAPTER II

TiSA

The Trade in Services Agreement (‘TiSA’) is a highly secretive international services agreement negotiated by a group of WTO members with like minded goals for liberalising trade in services. It is, however, not under the auspices of the WTO, and is strictly being operated as a ‘closed club’.57

The EU Commission and the US Chamber of Commerce have been calling it a plurilateral agreement58 that is essentially the embodiment of developed countries’ discontent with the combination of a stifled Doha Round and the weaker commitments under the GATS.59 Much controversy currently surrounds the TiSA, the majority of which concern the high level of secrecy which exceeds that of the TTP and goes against the WTO objective for transparency.60 This is emphasised by the fact that leaked documents indicate that the TiSA is to be declassified 5 years after entry into force or end of negotiations.61 It is thus the aim of this chapter to determine the character of the TiSA with the available contents, through a dialogue of how the TiSA came to be, and its purported objectives and goals, followed by an analysis of it current structure, with a summary of its drafting process over the three years.

1. Formation of the TiSA

Back in 2011, the Doha Round was still locked in a bitter stalemate; during the eighth Ministerial Conference in Geneva, WTO ministers finally acknowledged the critical lack of progress and discussed the possibility of negotiating selected issues from the Doha Round as “provisional or definitive agreements based on consensus earlier than the full conclusion of the single

57_{Pierre Sauve, ‘A Plurilateral Agenda for Services? Assessing the Case for a Trade in Services Agreement (TISA)’}

(May 2013) NCCR Working Paper No. 2013/29, 7 <http://www.nccr-trade.org/fileadmin/user_upload/nccr-trade.ch/wp2/publications/TISA_P_Sauve.pdf> accessed 13 June 2016

58_{Commission, ‘Negotiations for a Plurilateral Agreement on Trade in services’ MEMO/13/107}

<http://europa.eu/rapid/press-release_MEMO-13-107_en.htm> accessed 13 June 2016 [‘Memo’]; US Chamber of Commerce, Trade in Services Agreement (16 Apr 2015) <https://www.uschamber.com/issue-brief/trade-services-agreement> accessed 13 June 2016

59

Sauve (n 57) 5.

60

Jane Kelsey, Memorandum on Leaked TiSA Financial Services Text (Wikileaks, 19 Jun 2014) <https://wikileaks.org/tisa-financial/analysis.html> accessed 13 June 2016

61

Annex on Financial Services (Wikileaks, 14 Apr 2014) <https://wikileaks.org/tisa/document/20140414_Annex-on-Financial-Services/> accessed 13 June 2016

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16 undertaking”.62

With this small impetus, the US and Australia began to entertain the idea of a standalone services agreement that may be negotiated with willing members63 and indeed came to form the 16 member ad hoc coalition called the ‘Really Good Friends of Services’ (‘RGF’) that was willing to go beyond the Doha Round.64

On the 5th of July 2012, the RGFs agreed to prepare a negotiation on the TiSA (then called International Services Agreement)65 and released a joint statement announcing its goals to further liberalise trade in services.66 Interestingly, this statement reiterates part of GATS V requirements for an economic integration agreement, which shows early intent on the Agreement’s direction. Informal negotiations began in March 2013 and by June the same year, its membership had grown from the original 16 to 2367 (though it later reached 25 at one point),68 with the majority being high or middle income developed countries.

The aforementioned joint statement, and especially the EU, has welcomed any interested WTO member to join the TiSA69 especially with a keen intent on bringing China onboard.70 Nevertheless, this is conditioned with compliance on the level of ambition on par with current TiSA members with a pledge not to reopen any settled matters in negotiations.71 This strictness mirrors how the US Chamber of Commerce has adamantly stated that TiSA is not a WTO 62 Memo (n 58). 63 Ibid. 64_Ibid. 65

JA Marchetti and Martin Roy, ‘The TISA Initiative: An Overview of Market Access Issues’ (2013) WTO Staff Working Paper, ERSD-2013-11, 3 <https://www.wto.org/english/res_e/reser_e/ersd201311_e.pdf> accessed 13 June 2016

66_{New Zealand Foreign Affairs and Trade, ‘Joint Statement – Advancing Negotiations on Trade in Services’ (5 July}

2012) <https://www.mfat.govt.nz/en/trade/free-trade-agreements/agreements-under-negotiation/tisa/joint-statement-on-tisa/> accessed 13 June 2016 [‘Joint Statement’]

67_{Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the EU, Hong Kong, Iceland, Israel, Japan,}

Liechtenstein, Mauritius, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, South Korea, Switzerland, Turkey, and the US; USTR, ‘Trade in Services Agreement List if Participants’ <https://ustr.gov/tisa/participant-list> accessed 13 June 2016

68

Paraguay was a member from early on and Uruguay joined in February 2015. Both left negotiations in September 2015.

69_{Memo (n 58).} 70

Commission, ‘QUICK FACTS: 10th round of talks on trade in services (TiSA)’ (2 Dec 2014)

<http://trade.ec.europa.eu/doclib/docs/2014/december/tradoc_152928.pdf> accessed 13 June 2016

71_{Ignacio Iruarrizaga-Diez, Minutes of the CSD meeting on the Plurilateral Trade in Services Agreement (EU}

Commission, 26 Apr 2013) 2 <http://trade.ec.europa.eu/doclib/docs/2013/april/tradoc_151064.pdf> accessed 13 June 2016 [‘Iruarrizaga Apr 2013’]

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agreement whose benefits will be shared on an MFN basis but only to members willing to open their markets in the negotiations to avoid free riding.72 As of 2014, the TiSA represents a massive market of almost 1.6 billion people and a combined GDP of $51.1 trillion which accounts for almost 68% of the world’s economy.73

2. Objectives

Members hope to draft provisions that go well beyond the GATS and the Doha Development Agenda with each party bringing their best FTAs to the table at the start of negotiations.74 The aim is for improved and enhanced rules75 regarding government procurement of services, licensing procedures and access to communication networks,76 as well as reducing sectoral limitations on service investments, e-commerce, and mode 4,77 and nullifying regulatory inconsistencies.78 Furthermore, market access commitments must reflect actual practice as closely as possible.79

Despite US sentiments of prohibiting MFN to non-TiSA members as noted earlier, the long term plan is to eventually become part of the WTO system,80 most likely through integration into the GATS. In pursuit of this, TiSA parties will attempt to ensure compatibility with the GATS as much as possible to allow easy integration of other WTO members when the Agreement may become multilateralised at a future date.81

72

US Chamber of Commerce (n 58).

73

Department of Foreign Affairs and Trade, ‘Trade in Services Agreement (TISA)’ (Australian Government, 2016) <http://dfat.gov.au/trade/agreements/trade-in-services-agreement/pages/trade-in-services-agreement.aspx> accessed 13 June 2016

74

Ignacio Iruarrizaga-Diez, Presentation at CSD meeting on TiSA, 10/11/2014, slide 8

<http://trade.ec.europa.eu/doclib/docs/2014/november/tradoc_152867.pdf> accessed 13 June 2016 [‘Iruarrizaga presentation 2014’]

75

Memo (n 58).

76

Commission, ‘EU to chair plurilateral talks to open services markets’ (17 Feb 2014)

<http://trade.ec.europa.eu/doclib/press/index.cfm?id=1026&title=EU-to-chair-plurilateral-talks-to-open-services-markets> accessed 13 June 2016

77

New Zealand Foreign Affairs and Trade, ‘Trade in Services Agreement (TiSA)’

<https://www.mfat.govt.nz/en/trade/free-trade-agreements/agreements-under-negotiation/tisa/> accessed 13 June 2016 78 US Chamber of Commerce (n 58). 79_{Joint Statement (n 66).} 80 Memo (n 58). 81 Ibid.

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18 3. Structure

3.1 Overall Format

The main architecture of the TiSA is based on a skeleton structure of the GATS for ease of integration if the TiSA does become a part of the WTO.82 As the EU Commission has noted, the core text will replicate necessary GATS provisions with sectoral chapters and rules, combined with an Understanding of Commitments containing standstill, ratchet and transparency clauses and specific commitments listed in a modified GATS schedule83 which is reproduced in Table 1 below. The EU Commission surmised that the core text would be a transposition of several GATS provisions,84 and the actual leaked Core Text General Provisions of April 2015 (reproduced below) has confirmed this along with the presence of added provisions absent, modified, or to be modified from the GATS (shown in bold):85

PART I: GENERAL PROVISIONS Scope (Art I)

Most Favoured Nation (Art II)

GATS V Economic Integration (linked with MFN) Market Access (Art XVI)

National Treatment (Art XVII)

Disclosure of Confidential Information (Art III bis) Domestic Regulation

Additional Commitments

[Transparency] – not drafted yet Recognition (Art VII)

Payments and Transfers (Art XI)

Restrictions to Safeguards for Balance of Payments Monopolies and Exclusive Service Suppliers

General Exceptions (Art XIV)

82_{Memo (n 58).} 83

Commission, ‘A Modular approach to the architecture of a plurilateral agreement on services’ (23 July 2014) 1 <http://trade.ec.europa.eu/doclib/docs/2014/july/tradoc_152686.pdf> accessed 13 June 2016 [‘Commission’]

84_{Ibid, 2.} 85

Jane Kelsey, Analysis TiSA Core Text (24 Apr 2015) 6 <https://wikileaks.org/tisa/analysis/Analysis-of-20150424_Core-Text/page-6/#pagination> accessed 13 June 2016

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19 Security Exceptions (Art XIV bis)

Denial of Benefits (Art XXVIII) Government Procurement [Subsidies] – not drafted yet

Provisions of interest include the newly purposed GATS V Economic Integration, and altered Domestic Regulation and Government Procurement provisions. The former provision is a rule “linked to Article on MFN” (the exact mechanism of which is still unclear) and tentatively aims to limit MFN from TiSA members’ later FTAs in services which are notified to the WTO in compliance with its rules.86 As of April 2015, Switzerland, Norway and Turkey have been supporting this, with the EU leaning towards supporting on condition of protection, and the US adamantly against it.87. Also in relation to MFN, an MFN-Forward provision has been proposed by the US whereby any benefits gained from any future FTA with a third party will be shared with all TiSA members also. Currently the US is in support and the EU against, but this discussion has been currently put on hold for now.88

Domestic Regulation was originally set to be an Annex but has been included in the core text also.89 The US has proposed to keep the “reasonable, objective and impartial manner” wording from the GATS but is opposed by the majority, which points to a general desire to alter the scope and effect of this provision. In addition, there is a general paragraph recognising government’s right to regulate based on an undecided definition of either public or national policy grounds.90

For Government Procurement, members are contemplating the inclusion of disciplines complementing the WTO Government Procurement Agreement (‘GPA’), to which most of the members are either a party or observers. It is also however noted that the draft is currently using

86

Kelsey, (n 85) 4.

87

TiSA Core Text (Wikileaks, 24 Apr 2015) 4 <https://wikileaks.org/tisa/document/20150424_Core-Text/> accessed 13 June 2016

88

Bridges, ‘TISA Talks Continue in Geneva, Eyeing July Stocktaking Session’ (ICTSD, 19 Feb 2015)

<http://www.ictsd.org/bridges-news/bridges/news/tisa-talks-continue-in-geneva-eyeing-july-stocktaking-session> accessed 13 June 2016

89

TiSA Core Text (n 87) 4.

90

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less ambitious language than the actual GPA, whereby the US is attempting to push for a more literal transposition of the GPA text instead.91

3.2 Scheduling Commitments

Large changes are also made with respect to the scheduling commitments,92 whereby rules are no longer one provision as in Article XX GATS, but are split into four separate commitments: Market Access, National Treatment, Measures Inconsistent with both Market Access and National Treatment, and Additional Commitments. Here, a brief analysis of how the scheduling commitments work is required.

As Table 1 below exhibits, Market Access commitments are to be positively listed,93 akin to the GATS. This is despite the US wanting a complete negative listing approach for all scheduling,94 and would mean that future innovations and technological advancements will still be uncovered under the TiSA. On the other hand, the National Treatment commitments mark a significant departure from the GATS whereby they are to be applied horizontally across all sectors and modes (so more similar to GATT than GATS)95 as a negative listing. This means it will apply to all sectors by default96 if unlisted on the schedule.97 Though exemptions will still be permitted in the national schedule listing of commitments, 98 such negative listing may put future governmental regulatory capacity at a risk of unpredictability.99 A major improvement from the GATS which is sure to quell existing confusion is that the rules on scheduling detail that limitations applying to both Market Access and National Treatment will be listed in both Market

91

Rachel F Fefer, ‘Trade in Services Agreement (TiSA) Negotiations: Overview and Issues for Congress’ (28 Jan 2016) Congressional Research Service R44354, 9 <https://www.fas.org/sgp/crs/misc/R44354.pdf> accessed 13 June 2016

92_{Kelsey (n 85) 6.} 93

Commission, ‘How to read the TiSA initial offer of the European Union?’ (23 July 2014) 1

<http://trade.ec.europa.eu/doclib/docs/2014/july/tradoc_152691.pdf> accessed 13 June 2016 [‘Commission Initial Offer’]

94

Inside US Trade, ‘Compromise “Hybrid” Approach for Services Deal Largely Follows GATS’ (9 Oct 2012)

<http://insidetrade.com/daily-news/compromise-hybrid-approach-services-deal-largely-follows-gats> accessed 13 June 2016

95

Memo (n 58).

96

Commission Initial Offer (n 93) 1.

97_{Block (n 8) 697.} 98

Memo (n 58).

99

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Access and National Treatment columns.100 Lastly, reservations are split into those that confirm the continuance of existing limitations and those for new limitations.101

Table 1. Model Schedule of Commitments – adapted from EU Commission Model Schedule102

100

Commission Initial Offer (n 93) 1.

101_{Commission, ‘How to read the TiSA initial offer – model schedule’ (23 July 2014)}

<http://trade.ec.europa.eu/doclib/docs/2014/july/tradoc_152690.pdf> accessed 13 June 2016

102 Ibid. Sector or Subsector Limitations on Market Access Limitations on National Treatment Additional commitments Horizontal Commitments (All Sectors)

Reservations for Article (horizotal NT, standstill & ratchet)

Negative listing of

limitations here. Standstill or Ratchet may not apply Reservations for Article (specific paragraph on horizontal NT) Negative listing of continuance of existing limitations here. Standstill

and Ratchet still apply Positive listing of Market Access commitments applying to all Sectors Sector-Specific Commitments Positive listing of Market Access commitments applying to a Specific Sector Negative listing of continuance of existing limitations here. Standstill and Ratchet still apply

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22 3.3 Standstill and Ratchet Clauses

The standstill and ratchet clause inclusion are meant to provide a more commercially meaningful and economically balanced agreement.103 The standstill clause will lock members’ current levels of domestic liberalisation at the time TiSA enters into force104 in order to better reflect actual practice, and will not be part of the Financial Services Annex.105 The ratchet clause will lock in future elimination of discriminatory measures106 so old barriers and discriminatory measures cannot be resurrected. This will apply to some National Treatment commitments but not to any Market Access Commitments.107 Furthermore, to the delight of many protestors against the TiSA, public services such as health, water and education will not be subject to the ratchet clause,108 which allows governments to maintain control. Indeed, Australia, the US and the EU all stand beside allowing government regulation of public services, and public services provided by private contractors will not be categorised as commercial.109 These standstill and ratchet clauses will only apply if a service is not listed under the National Treatment column for new limitations. Still, as one cannot predict future situations that a government will face, such clauses may be worrisome since they will lock current government decisions in and limit their options if a financial crisis occurs in the future.110

103

Rudolf Adlung and Hamid Mamdouh, ‘How to Design Trade Agreements in Services: Top Down or Bottom Up?’ (2013) WTO Staff Working Paper, ERSD-2013-08, 7

<https://www.wto.org/english/res_e/reser_e/ersd201308_e.pdf> accessed 13 June 2016

104

Ibid, 8.

105_{Ignacio Iruarrizaga-Diez, Summary of CSD meeting on Update on TiSA talks (EU Commission, 15 Sep 2015) 3}

<http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153832.pdf> accessed 13 June 2016 [‘Iruarrizaga Sep 2015’]

106

Memo (n 58).

107_{Iruarrizaga presentation 2014 (n 74) slide 11.} 108

Ibid.

109

USTR, ‘EU-US Joint Statement on Public Services’ (March 2015) <https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/march/eu-us-joint-statement-public-services> accessed 13 June 2016; Department of Foreign Affairs and Trade, ‘TiSA negotiations: myths vs realities’ (Australian Government)

<http://dfat.gov.au/trade/agreements/trade-in-services-agreement/Pages/trade-in-services-agreement-negotiations-myths-versus-realities.aspx> accessed 13 June 2016

110

PM Goff, ‘The Trade in Services Agreement: Plurilateral Progress or Game-Changing Gamble?’ (Jan 2015) CIGI papers No 53, 6

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23 3.4 Annexes

In addition to the stark change in scheduling, new chapters will be added as Annexes. Currently the leaked Annexes111 being negotiated confirm the following chapters: Financial Services; Competitive Delivery Services; Professional Services; Domestic Regulation; Electronic Commerce; Mode 4 Movement of Natural Persons; Maritime Transport Services; Air Transport Services; Telecommunication Services; Government Procurement; Road Transport Services; Environmental Services; and State-Owned Enterprises. Other confirmed chapters that have yet to be leaked include E-Commerce, Environmental services, Audiovisual services, Patient Mobility, Direct Selling, Energy Services and Localisation.112 Healthcare services are confirmed to be

excluded.113

The Financial Services Annex was the first TiSA document to be leaked, which spurred Members to hastily publish their own proposals online,114 and has been controversial for its preferential treatment of corporations.115 Furthermore, it is a hybrid of commitments made under the GATS Financial Services Annex, the 1997 Understanding on Commitments in Financial Services (‘Understandings’), and other regional trade agreements such as NAFTA.116 This is peculiar since the Understandings is an optional alternative mechanism for specific commitments which many WTO members have not utilised.117 However, a prudential carve-out provision is

111

Wikileaks, Leaked TiSA Annexes <https://wikileaks.org/tisa/document/> accessed 13 June 2016

112_{Commission, ‘Report of the TiSA negotiation round taking place 6-13 October 2015’ (29 Oct 2015) 2}

<http://trade.ec.europa.eu/doclib/docs/2015/october/tradoc_153917.15.pdf> accessed 13 June 2016; Department of Foreign Affairs and Trade, ‘Trade in Services Agreement News’ (Australian Government) <http://dfat.gov.au/trade/agreements/trade-in-services-agreement/news/Pages/news.aspx> accessed 13 June 2016 [‘DFAT News’]

113

Ibid.

114_{Annex on Financial Services (Wikileaks, 25 Sep 2015)}

<https://wikileaks.org/tisa/document/20150925_Annex-on-Financial-Services/> accessed 13 June 2016

115

Jane Kelsey, ‘Memorandum on Leaked TiSA Financial Services Text’ (Wikileaks, 15 Apr 2015)

<https://wikileaks.org/tisa/analysis/Analysis-of-20140414_Annex-on-Financial-Services/> accessed 13 June 2016

116

Malcolm Bosworth, ‘The Proposed Non-MFN Trade in Services Agreement: Bad for Unilateralism, the WTO and the Multilateral Trading System’ (2014) NCCR Working Paper No. 2014/05, 20

<http://www.nccr-trade.org/fileadmin/user_upload/nccr-trade.ch/wp2/Bosworth_The_Proposed_Non-MFN_Trade_in_Service_Agreement.pdf> accessed 13 June 2016

117

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also included to allow derogation from commitments if necessary to preserve the stability of the financial system.118

Negotiations on data protection and data flows are reported to be on a similar level to TTIP,119 with discussion on the need for a strong exception for public policy objectives regarding e-commerce.120

Regarding Mode 4, the EU has proposed a complementary protocol with necessary safeguards; this is in the form of two provisions whereby one regards procedure and another forms bilateral agreements for return and readmission.121 The US has opened itself to taking on visa commitments for mode 4 but not market access.122 The possibility of including key personnel, contractual service suppliers and independent professionals was discussed on condition of a university degree,123 which would be a major improvement from the GATS equivalent. That being said, it was also reported that if this happens, only citizens and permanent residents of members would benefit,124 placing non-members at a major disadvantage.

3.5 Institutional Provisions

The final part of the TiSA will be provisions detailing an interstate dispute mechanism125 that is

not an Investor-State Dispute Settlement,126 as well as mechanisms for accession for new

118

Ignacio Iruarrizaga-Diez, Minutes of the CSD meeting on TiSA (EU Commission, 10 Nov 2014) 2

<http://trade.ec.europa.eu/doclib/docs/2014/november/tradoc_152871.pdf> accessed 13 June 2016 [‘Iruarrizaga Nov 2014’]

119_{Ibid, 4.} 120

Commission, ‘Report on the 16th TiSA negotiation round’ (19 Feb 2016) 2

<http://trade.ec.europa.eu/doclib/docs/2016/february/tradoc_154306.doc.pdf> accessed 13 June 2016 [‘Feb 2016 Report’]

121

Commission, ‘Complementary protocol on movement of natural persons for business purposes’ (21 Dec 2015) <http://trade.ec.europa.eu/doclib/docs/2015/december/tradoc_154125.pdf> accessed 13 June 2016

122_{Iruarrizaga Sep 2015 (n 115) 3.} 123

Ignacio Iruarrizaga-Diez, Minutes of the Civil Society Dialogue meeting on TiSA of 25 February 2015 (EU Commission, 2 Mar 2015) 3 <http://trade.ec.europa.eu/civilsoc/meetdetails.cfm?meet=11438> accessed 13 June 2016

124

Iruarrizaga Nov 2014 (n 118) 3.

125

Elina Viilup, ‘The Trade in Services Agreement (TISA): An end to negotiations in sight?’ (Oct 2015) DG EXPO/B/PolDep/Note/2015_311 PE570.448, 18

<http://www.europarl.europa.eu/RegData/etudes/IDAN/2015/570448/EXPO_IDA%282015%29570448_EN.pdf> accessed 13 June 2016

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members, temporary existence as an Article V economic integration agreement, and ultimately a provision on how the TiSA will be incorporated into the WTO if it ever comes to that. In 2013, the EU Commission Director-General for Trade, Ignacio Iruarrizaga-Diez stated that a “transitional dispute settlement mechanism”127

may be implemented and that Members are also considering a rotating secretariat system.128

4. The Drafting Process

Reports suggest that the TiSA core text has been stabilised since 2014129 and the Annexes and remaining texts are also scheduled to be stabilised by July and September 2016 respectively.130

The TiSA negotiations have been taking place approximately every one or two months for four to five days each time since March 2013.131 The members have been studiously sticking to five rounds per year and have recently completed the 18th round in June 2016 with three more rounds to be held later the same year132 as negotiators vie to conclude the TiSA before the end of 2016.133

126_{Commission Initial Offer (n 93) 1.}

127_{Iruarrizaga Apr 2013 (n 71) 3.} 128

Bryce Baschuk, ‘Services Negotiators Anxious to Move Forward’ (BNA Bloomberg, 13 Oct 2015).

129

Ignacio Iruarrizaga-Diez, Minutes of the CSD meeting on the Trade SIA on TiSA, 05/05/14 (EU Commission, 5 May 2014) 2 <http://trade.ec.europa.eu/doclib/docs/2014/june/tradoc_152629.pdf> accessed 13 June 2016

130

Commission, Presentation on Update on TiSA Talks (3 May 2016) slide 4

<http://trade.ec.europa.eu/doclib/docs/2016/may/tradoc_154569.pdf> accessed 13 June 2016 [‘EU Commission May 2016 Presentation’]

131

DFAT News (n 114); note: the site has incorrectly listed the round numbers.

132

EU Commission May 2016 Presentation (n 130) slide 4.

133_{Inside US Trade, ‘TISA Parties Plan Four Rounds By July 2016 to Advance Priority Annexes’ (30 Oct 2015)}

<http://insidetrade.com/inside-us-trade/tisa-parties-plan-four-rounds-july-2016-advance-priority-annexes> accessed 13 June 2016

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26 CHAPTER III

THE ‘BIC’ 3

One of the major issues concerning the TiSA is the notable absence of the three most influential developing countries: Brazil, India and China (‘BIC’). The significance of BIC is uncontested. In 2014, BIC collectively held a total world GDP percentage of 19.2%.134 China was the World’s third largest services exporter and importer; India was fifth whilst Brazil was 19th in exports and 11th in imports.135 Moreover, in 2015, China held 5.9% of world service trade; India held 3.2%, and Brazil held 0.7%.136 Collectively, this amounts to 9.8% of world service trade, which is an impressing number to be held by just three nations. This chapter will firstly focus on the current stances of these nations to the TiSA, and then attempt to weigh what their positions may be like in the two situations that they abstain from or participate in the negotiations.

1. Current stances on TiSA

Opinion in BIC is divided over TiSA. On one hand, India and Brazil have been doubtful about its purported efforts to multilateralise services trade. Mussi described the TiSA as a north-north agreement being concluded between countries considered ‘developed’ that fear developing nations’ agendas being imposed upon them. It is a mechanism where rich countries meet to decide the fate of the international economy and its provision imposed onto other nations.137 India and Brazil would agree that the WTO’s single undertaking maximises their negotiating leverage instead.138 On the other hand, China has cautiously opted to join the negotiations in fear of missing out, though it has yet to be accepted. China is also in a different position from Brazil and India as it has a higher level of GATS commitments already due to its accession agreement.

134

UNCTADstat, Data Center on International Trade

<http://unctadstat.unctad.org/wds/TableViewer/tableView.aspx?ReportId=87010> accessed 13 June 2016

135_{WTO, International Trade Statistics 2015 (2015) 49}

<https://www.wto.org/english/res_e/statis_e/its2015_e/its2015_e.pdf> accessed 13 June 2016

136

UNCTADstat (n 134).

137_{Confederação Nacional das Instituições Financeiras, ‘Simbracs: Governo e OMC debatem os desafios para o}

Comércio Internacional de Serviços’ (14 Nov 2013) <http://www.cnf.org.br/noticia/-/blogs/simbracs-governo-e-omc-debatem-os-desafios-para-o-comercio-internacional-de-servicos> accessed 13 June 2016

138_{Gary Clyde Hufbauer, J Bradford Jensen and Sherry Stephenson, ‘Framework for the International Services}

Agreement’ (Apr 2012) Peterson Institute for International Economics Policy Brief PB12-10, 34

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The following are the opinions enunciated in the WTO Council for trade in services (‘Council’) as TiSA has progressed.

A. Brazil

In November 2012, Brazil feared that the higher ambition level of the TiSA would cause the Doha Development Agenda (‘DDA’) to become irrelevant and would effectively cut services out of the DDA;139 it also clarified preferring to focus efforts on this DDA.140 Brazil’s stance grew increasingly aggressive the following year, where it warned that TiSA “had the potential to ultimately undercut the intrinsic balance contained in the GATS” by ignoring development guidelines such as “progressive liberalisation and the right to regulate. This raised the costs of participation for developing countries to unrealistic levels, and those costs could hardly be matched by whatever concessions were made”.141

It further hoped the TiSA would not encourage other similar standalone plurilateral agreements to arise.142 These concerns were maintained in October, along with an added doubt that TiSA would ever be multilateralised given that trade-offs in other areas were not offered.143 Later in June 2014, Brazil refuted China’s earlier allegation that TiSA and the DDA were complementary, replying that “the TiSA had no formal linkages with the WTO negotiations”.144

Brazil currently maintains the aforementioned allegations and has shown no interest in participating in the TiSA. This is mainly inasmuch as the services sector does not seem to be a priority for the Brazilian government as it is mainly used as a bargaining chip in negotiations.145

139_{Council for Trade in Services, Report of the Meeting Held on 6 December 2012 (WTO, 21 Jan 2013) S/C/M/112}

[‘Council Meeting Dec 2012’].

140

Council for Trade in Services, Report of the Meeting Held on 21 March 2013 (WTO, 17 May 2013) S/C/M/113 [‘Council Meeting Mar 2013’]

141_{Council for Trade in Services, Report of the Meeting Held on 20 June 2013 (WTO, 26 Aug 2013) S/C/M/114}

[‘Council Meeting Jun 2013’]

142

Ibid.

143_{Council for Trade in Services, Report of the Meeting Held on 29 October 2013 (WTO, 27 Nov 2013) S/C/M/115}

[‘Council Meeting Oct 2013’]

144

Council for Trade in Services, Report of the Meeting Held on 20 June 2014 (WTO, 15 Aug 2014) S/C/M/118 [‘Council Meeting Jun 2014’]

145

Fernanda Manzano Sayeg, ‘O Brasil e o stor de serviços’ (Ricardo Alfosin Advaogados, 24 Nov 2014) <http://alfonsin.com.br/o-brasil-e-o-setor-de-servios/> accessed 13 June 2016

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Indeed, it has constantly stressed prioritising agreements under the Doha Round to keep its bargaining power to negotiate in agriculture.146

Despite this overall stance, the Foreign Affairs Director, Ronaldo Costa Filho actually felt that Brazil needed to liberalise agriculture because it is a strategic sector;147 The International Negotiations Director, Márcio Lima Naves echoed this sentiment, stating that the services sector is young compared to trade in goods and as Brazil is yet lacking in know-how, the services sector needs to be opened up.148 Such internal divergences indicate that Brazil may yet change its mind and possibly join negotiations in the near future.

B. India

India has been sceptical about the TiSA from the very beginning in October 2012: it noted that “having a small group of Members working in isolation, developing a set of principles and asking others to adopt them was against the fundamental principles of multilateralism and inclusiveness, which were the cornerstone of the WTO” and would “detract from the goal of a successful multilateral conclusion of the DDA”.149

Later in November, it criticised that Australia’s claim of TiSA being pursuant to the political guidance by Ministers at the 8th

WTO Ministerial Council was “a very creative way of reading that guidance”.150

In June the following year, India was more forward-looking, urging that the TiSA be negotiated inside the WTO in a transparent and inclusive manner,151 but in May 2014, felt that focusing on the DDA was of higher priority.152 Moreover, it realised that if the TiSA was concluded before the DDA, there would be less incentive for a meaningful dialogue in the DDA.153 With continued reports and efforts from TiSA members at the Council, India’s frustration was heard in September, as it

146

Instituto de Estudos para o Desenvolvimento Industrial, ‘Uma Nova Agenda para a Política de Comércio Exterior do Brasil’ (Jun 2015) 8 <http://retaguarda.iedi.org.br/midias/artigos/557b97922ae546bb.pdf> accessed 13 June 2016

147

Confederação Nacional das Instituições Financeiras (n 137).

148

Ibid.

149_{Council for Trade in Services, Report of the Meeting Held on 5 October 2012 (WTO, 21 Nov 2012) S/C/M/111}

[‘Council Meeting Oct 2012’]

150

Council Meeting Dec 2012 (n 139).

151_{Council Meeting Jun 2013 (n 141).} 152

Council for Trade in Services, Report of the Meeting Held on 8 May 2014 (WTO, 27 May 2014) S/C/M/117

153

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warned that Council meetings couldn’t be used to push the TiSA initiative into the WTO,154

and felt that such reports were pointless unless amendments to TiSA texts were shared with the Council in writing.155 India maintains its deference to the WTO framework as in January 2016, it was reported that India wished to discuss service liberalisation of Mode 4 and market access inside the WTO,156 which may indicate it is beginning to feel the pressure of TiSA’s nearing conclusion.

C. China

China initially welcomed the idea of TiSA157 but carefully shared India’s concerns in the following meetings.158 Nevertheless, it applied for membership159 in September 2013 and requested participation in the December 2013 round. It further met with US officials repeatedly in September for discussions, but the US has been hesitant to accept as China may lower ambitions of current negotiations,160 despite China claiming that it shares objectives of the TiSA negotiations and would respect the negotiations achieved.161 In October 2013, China shared its decision to join the TiSA with the Council, believing it was “in line with the overall direction of [China’s] services policy” and that it was “complementary to the efforts under the [WTO] multilateral framework” but still urged proof that all WTO members would be able to join in a compatible manner in the future.162

154

Council for Trade in Services, Report of the Meeting Held on 10 October 2014 (WTO, 10 Oct 2014) S/C/M/119 [‘Council Meeting Oct 2014’]

155

Council for Trade in Services, Report of the Meeting Held on 28 November 2014 (WTO, 28 Jan 2015) S/C/M/120

156_{Kritika Suneja, ‘India set to push for liberalisation of services trade at WTO Geneva talks’ (The Economic Times,}

8 Jan 2016) <http://articles.economictimes.indiatimes.com/2016-01-08/news/69615549_1_services-agreement-services-negotiations-government-procurement> accessed 13 June 2016

157

Council Meeting Oct 2012 (n 149).

158_{Council Meeting Dec 2012 (n 139); Council Meeting Mar 2013 (n 140).} 159

European Services Forum, ‘What is TiSA (Trade in Services Agreement’ <http://www.esf.be/new/tisa/what-is-tisa-trade-in-services-agreement/> accessed 13 June 2016

160_{Bridges, ‘Services Talks Advance as TISA Members Prepare to Exchange Offers’ (ICTSD, 26 Sep 2013)}

<http://www.ictsd.org/bridges-news/bridges/news/services-talks-advance-as-tisa-members-prepare-to-exchange-offers> accessed 13 June 2016

161_{Commission, ‘EU backs China joining talks on Trade in Services Agreement (TiSA)’ (31 Mar 2014)}

<http://europa.eu/rapid/press-release_IP-14-352_en.htm> accessed 13 June 2016

162

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The reason for China’s swift change in direction may be due to a need to rebalance its economy away from the current commodity export model to one focusing on more effective services.163 It has been three years since China first made its application and as of yet, it is reported that the US and other TiSA members are currently reviewing China’s level of compliance and implementation of other relevant trade agreements.164

2. Effect of TiSA on BIC

The TiSA is still being negotiated with at least three more rounds scheduled later in 2016. This means there is yet time for Brazil and India to change minds and negotiate, and for China to be accepted into the rounds. This section will focus on the impact on BIC as non-signatories and signatories to the TiSA.

2.1 As Non-signatories

Given the position Brazil and India has held over the past three years, it is in fact unlikely that these two nations will join TiSA late in the coming months as extensive restructuring and extended negotiations would be required.165 It is also doubtful that they will join after the TiSA is successfully implemented as they have not placed any input to push negotiations in their favour.166 The response to China’s 2013 application is taking a suspiciously long time, considering that Mauritius and Uruguay’s applications were accepted in less than a year. With this in mind, China’s prospects of entering negotiations may seem bleak.

A. Brazil

Many Brazilian service companies and institutions have decried the government’s decision to stay away from the TiSA for political strategy. The major concern is that isolation from the TiSA may damage its social, political and economic market.167 For instance, it may reduce Brazil’s

163

Jennifer Freedman, ‘EU’s backing for China to join TiSA talks ups ante at next week’s negotiating round’ (Borderlex, 24 Apr 2014) <http://www.borderlex.eu/eus-backing-china/> accessed 13 June 2016

164_{Fefer (n 91).} 165

Boswoth (n 116) 28.

166

Ibid.

167_{Guilherme de França Teixeira, ‘JOTA Inside – Trade in Services Agreement (TiSA) e seu impacto no Sistema}

Financeiro Nacional’ (JOTA, 25 May 2016) <http://jota.uol.com.br/jota-inside-trade-services-agreement-tisa-e-seu-impacto-no-sistema-financeiro-nacional> accessed 13 June 2016

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participation in future trade flows and create a critical disadvantage in global exports.168 This may be in the form of decreased exports due to preferential trading mechanisms established by TiSA members, exclusion from international production chains and loss of competition in the international services market169 which is crucial for Brazilian industry and agriculture. This would effectively lead to a potential loss of millions of jobs since opportunity to expand the economy by increasing exports will be waived.170 It is also possible that TiSA members may prefer their own rules when trading in the future, which will push Brazil to abide by rules that it did not negotiate in.171 Moreover, if Brazil remains a non-signatory, its option will be limited to accession.172

B. India

India’s trade has been slowing down in recent years with exports plummeting and an exclusion from the TiSA would only make matters worse for India as it will be increasingly left behind the global trade between developed countries.173 This is especially true in relation to the US and the EU, which are India’s largest service export destinations that would harm India’s economy if it misses out on any preferential market access.174 Furthermore, businesses will prefer to invest in TiSA markets for competitive gain over a stagnating Indian market, a situation that would run contrary to India’s need for investments for enhanced manufacturing and service sector development.175 Bergsten surmises that India could even lose up to $USD 50 billion in exports as a result of the isolation from mega agreements like TiSA.176 Indeed, if left alone, India would have to boost its own competitiveness through following the Modi government initiative on 168_{França Teixeira (n 167).} 169 Ibid. 170_Ibid. 171_{Sayeg (n 145).} 172

FIESP, ‘Documento de Posicao: Propostas de Integracao Externa da Industria – 2014’ (2014) 23

<http://www.fiesp.com.br/indices-pesquisas-e-publicacoes/propostas-de-integracao-externa-da-industria/> accessed 13 June 2016

173

C Fred Bergsten, ‘Trade-Led Growth for India’ (Peterson Institute for International Economics, 22 Sep 2015) <https://piie.com/blogs/trade-investment-policy-watch/trade-led-growth-india> accessed 13 June 2016

174_{Joshua P Meltzer, ‘For Modi’s India, a New Trade Policy’ (Brookings India, 13 May 2015)}

<http://www.brookings.in/in-focus/for-modis-india-a-new-trade-policy/> accessed 13 June 2016

175

Ibid.

176_{C Fred Bergsten, ‘India’s Rise: A strategy for Trade-Led Growth’ (Peterson Institute for International Economics,}

Sep 2015) <https://piie.com/publications/piie-briefings/indias-rise-strategy-trade-led-growth> accessed 13 June 2016. [‘Bergsten India’s Rise’]

The Dance between GATS & TiSA : Balancing the Interests of BIC in Relation to Modern Trade in Services