Endnotes

1The agreement's broad scope is reflected in many of its definitions, including the following:

2The important public service sector does not rate an exclusion or exemption comparable to those provided for the maintenance of public order (Article XIV) or for national security (Article XIVbis).

3There is no differentiation in obligations in the agreement between "public" and "private" services or providers. For example, there is no "public" mode of delivery distinct from a "private" mode of delivery within the four defined "modes" (Article I:2). Similarly, "supply of a service" includes "the production, distribution, marketing, sale and delivery of a service" (Article XXVIII(b)) without reference to the nature of the entities involved. Indeed, where a distinction is made between the two, it is to ensure that they are treated in a similar manner. Hence, "monopoly supplier of a service" (Article XXVIII(h)) is defined as either "public or private" sole supplier, and "juridical person" (Article XXVIII(l); see (d)) means "any legal entity … whether privately-owned or governmentally-owned".

4For the purpose of establishing "commercial presence" for the delivery of a service, this is defined as "the constitution, acquisition or maintenance of a juridical person" (Article XXVIII(d)(i)). "Juridical person" is, in turn, defined as "any legal entity duly constituted … whether for profit or otherwise…" (Article XXVIII(l)) In sectors where specific market-access commitments are made, Members are prohibited from taking "measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service"( Article XVI:2(e)).

5The Oxford English Dictionary, 1989, (Oxford, Clarendon Press), p. 552.

6Ibid.

7The Canadian Oxford Dictionary, (Don Mills, Oxford University Press Canada), p. 285.

8Webster's Encyclopedic Dictionary, 1988, (New York, Lexicon), p. 196.

9Canadian Oxford Dictionary, (op. cit., p. 285).

10Webster's Encyclopedic Dictionary, (op. cit., p. 196).

11"Exchange between men of the products of nature or art; buying and selling together; trading; exchange of merchandise, esp. as conducted on a large scale between different countries or districts; including the whole of the transactions, arrangements, etc., therein involved." Oxford English Dictionary, (op. cit., p. 552).

12Webster's Encyclopedic Dictionary, (op. cit., p. 1046).

13Canadian Oxford Dictionary, (op. cit., p. 1538).

14Oxford English Dictionary, (op. cit., p. 348).

15Oxford English Dictionary, (op. cit., p. 604).

16Canadian Oxford Dictionary, (op. cit., p. 290).

17Webster's Encyclopedic Dictionary, (op. cit., p. 200).

18Based on those references that do exist in WTO documents, this assessment appears to be shared by the WTO Secretariat (please refer to the text for consideration of WTO explanations).

19Significantly, the Council for Trade in Services has highlighted the "need" for a narrow interpretation; this is considered later in the text.

20There appears to be some confusion amongst governments about the scope of the "governmental authority" exclusion. For example, the Right Honourable Richard Caborn, MP, the UK Minister for Trade, reportedly asserted in a letter to James Plaskitt, MP, dated 30 November 2000, that "[w]e are clear that GATS does not apply to services provided by central and local governments, or to services supplied in the exercise of governmental authority" (emphasis added). Similarly, the Minister of Post-Secondary Education and Skills Training in the provincial Government of Saskatchewan, Canada, recently stated to University of Saskatchewan Professors Tim Quigley and Larry Haiven that "I am advised that the current GATS excludes public services from its scope" (emphasis added).

European Communities officials have also considered the issue at the WTO. In an April 1998 meeting of the Committee on Regional Trade Agreements, EC representatives reportedly asserted that the rules of European integration contains an exclusion, for service activities connected with the exercise of "official authority", which is -- quoting from the WTO note on the meeting -- "practically identical" to the GATS "governmental authority" exclusion. (WT/REG39/1, 24 April 1998). Six months later, an EC representative reportedly asserted that the European exclusion was -- again quoting from the WTO note -- "presumably narrower than what was in the GATS" (WT/REG39/M/4, 13 October 1998, II.1.; emphasis added in both cases). More significantly perhaps, and despite the apparent conflict, the same representative went on to suggest that the EC itself interprets the exclusion narrowly. According to the latter WTO report, the representative asserted that both the European exclusion for "official authority" and the GATS exclusion for "governmental authority" applied to "the same type of activity" and that "[t]here were very few activities covered by that exception" (emphasis added; ibid., para. 15.) Subsequently, in May 1999, the European Communities issued a Joint Communication indicating the EC exclusion was "similar" to the GATS exclusion, that it has received a "restrictive interpretation", and that in fact "there are no examples … where the [European] Court [of Justice] found that an activity would fall under the scope [of the EC treaty exclusion]". (See Section 4 of the text.)

21The principle that exclusions are generally to be interpreted narrowly is formalized in the 1969 Vienna Convention on the Law of Treaties.

22The report of the WTO Appellate Body in the EC Bananas case, while not definitive on the subject, also appears to support this view. In its examination of measures affecting the competitive relations between domestic and foreign services and suppliers, the AB specifically considers the "governmental authority" exclusion, stating that "[t]here is nothing at all in these provisions to suggest a limited scope of application for the GATS". (World Trade Organization, European Communities -- Regime for the Importation, Sale and Distribution of Bananas, Appellate Body Report, WT/DS27/AB/R, 9 September 1997, paras 219-220.)

The relevant excerpt is reproduced here:

"219. In contrast, the Complaining Parties argue that the scope of the GATS, by its terms, is sufficiently broad to encompass Regulation 404/93 and the other related regulations as measures affecting the competitive relations between domestic and foreign services and service suppliers. This conclusion, they argue, is not affected by the fact that the same measures are also subject to scrutiny under the GATT 1994, as the two agreements are not mutually exclusive.

220. In addressing this issue, we note that Article I:1 of the GATS provides that "[t]his Agreement applies to measures by Members affecting trade in services". In our view, the use of the term "affecting" reflects the intent of the drafters to give a broad reach to the GATS. The ordinary meaning of the word "affecting" implies a measure that has "an effect on", which indicates a broad scope of application. This interpretation is further reinforced by the conclusions of previous panels that the term "affecting" in the context of Article III of the GATT is wider in scope than such terms as "regulating" or "governing". We also note that Article I:3(b) of the GATS provides that "‘services' includes any service in any sector except services supplied in the exercise of governmental authority" (emphasis added), and that Article XXVIII(b) of the GATS provides that the "‘supply of a service' includes the production, distribution, marketing, sale and delivery of a service". There is nothing at all in these provisions to suggest a limited scope of application for the GATS…"

It should also be noted that a similar exclusion, contained in the EC treaty, has without exception been interpreted restrictively by the European Court of Justice (see Section 4).

23According to the WTO, the most-favoured-nation obligation "is one of the most important principles of the GATS. [It] requires Members to grant services and service suppliers of any other Member the best treatment granted to services and services suppliers of any other country…" (World Trade Organization, "Services: GATS", Training Package, op. cit., p. 13.)

GATS Article II "Most-Favoured-Nation Treatment" states:

"1. With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country."

24The GATS provisions on Transparency (Article III) require governments to publish "all relevant measures … which … affect the operation of the Agreement".

25It should be noted that GATS Domestic Regulation (Article VI) obligations are acknowledged to have a potentially broad impact and could have a significant effect on the regulation of public service systems. These controversial provisions apply to non-discriminatory regulatory measures; that is, they apply to those measures that treat local and foreign services -- and local and foreign service providers -- equally. The provisions thus apply to those measures that do not violate GATS non-discrimination rules -- Articles II (MFN) and XVII (National Treatment). The Domestic Regulation provisions of the GATS are currently under active negotiation. Article VI(4) states:

"With a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Council for Trade in Services shall, through appropriate bodies it may establish, develop any necessary disciplines. Such disciplines shall aim to ensure that such requirements are, inter alia:

(a) based on objective and transparent criteria, such as competence and the ability to supply the services;

(b) not more burdensome than necessary to ensure the quality of the services;

(c) in the case of licensing procedures, not in themselves a restriction on the supply of a service."

The scope of these intended "disciplines" is very broad and at least some of the provisions are intended in future to apply 'across-the-board' to all services even where specific commitments have not been made.

26This core obligation commits governments to extend the best treatment that is given domestically to its treaty partners. The national treatment obligation is broader than generally recognized, extending in the GATS to measures that are capable of altering the conditions of competition in favour of domestic services and service providers. (For a critical discussion of the principles involved, drawn from recent GATS cases, see Sinclair, Scott (2000) "GATS: How the World Trade Organization's new 'services' negotiations threaten democracy", Canadian Centre for Policy Alternatives, pp. 41-47.)

27The GATS Market Access provisions prohibit, in specified area, numerical limitations on service suppliers, transactions and operations in the form of quotas, monopolies, exclusive service suppliers or economic needs tests. In specified sectors, it also prohibits "measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service". This requirement may conflict with longstanding practices in the health and social service sectors in a number of countries which restrict funding, for example, to non-profit societies or to community-based service providers (See Sinclair, 2000, op. cit., p. 66-67.)

28"The original proposal to make it clear that governmental services were not covered [in the Uruguay Round GATS] came from the EU and it was not controversial." Hartridge, David, Conference on GATS 2000 Negotiations, European Services Forum, Brussels, 27 November 2000, p. 2.

29European Communities, Joint Communication from the Parties, Committee on Regional Trade Agreements, WT/REG50/2/Add.3; WT/REG51/2/Add.3; WT/REG52/2/Add.3 19 May 1999, Item 3, para. 3.

30Ibid., para. 4.

31Ibid., para 5.

32Ibid., para. 6.

33Ibid. Other activities listed that were ruled to fall outside the exclusion include:

34It is understood that the WTO Secretariat is not authorized to provide legal interpretations of the agreement.

35Hartridge, David, "GATS and Public Services", letter to Mike Waghorne, Public Services International, reference: 65-let 31 May 2000, circulated by e-mail in June 2000. This letter is considered in some detail here as it is one of the few sources of information on what governments and the WTO Secretariat understand to be the meaning of the "governmental authority" exclusion. It was also widely circulated and is the only known document that responds directly to specific questions about the potential impact of the GATS on public service systems.

None of the 39 WTO documents containing reference to "services provided in the exercise of governmental authority" provide substantive discussion of the issue. However, a few do consider particular aspects, the most important of which are considered here.

36GATS-- Fact and Fiction, World Trade Organization, 2001.

37Hartridge, op. cit., item 2, paragraph 1

38Ibid., item 3, paragraph 1.

39In a 26 October 2000 article in l'Humanité, the director of the WTO Services Division states the public services are not covered in the existing agreement and are not included in WTO negotiations. "[L]es service publics ne sont pas inclus dans négociations. Ils ne sont même pas couverts par les accords de l'OMC." (Hartridge, David, AGCS: non, il n'y a pas de complot!, l'Humanité, 26 Octobre 2000. The director juxtaposes this statement with a recitation of the text of the exclusion, adding that the exclusion is important to members because they hope to protect their public services. ("Cette exclusion est un principe cher à tous les membres de l'OMC, qui souhaitent tous guarder le droit de maintenir leurs services publics -- des services sans but lucratif et avec obligation de couverture universelle." It should be noted that here the director is not asserting that the existing 'governmental authority' exclusion applies to those services that are "sans but lucrative" and that have universal coverage obligations -- merely that these are the services that members may hope to protect.

40World Trade Organization, "Services: GATS", Training Package, December 15, 1998, p. 58.

41As no other similar WTO references appear to exist in the public domain, it seems likely that these examples are drawn from the GATS Annex on Financial Services. However, the definition of the exclusion in this Annex is distinct from that found in Article I and cannot properly be applied to the agreement itself.

Indeed, by contrast with the main text, the Annex defines "services supplied in the exercise of governmental authority" in terms of specific examples. The Annex states:

1. (b) "For the purposes of subparagraph 3(b) of Article I of the Agreement [the governmental authority exclusion], "services supplied in the exercise of governmental authority" means the following:

(i) activities conducted by a central bank or monetary authority or by any other public entity in pursuit of monetary or exchange rate policies;

(ii) activities forming part of a statutory system of social security or public retirement plans; and

(iii) other activities conducted by a public entity for the account or with the guarantee or using the financial resources of the Government." (emphasis added)

Even in the annex, however, additional conditions may apply. "[A]ctivities forming part of a statutory system of social security or public retirement plans; and activities conducted by a public entity for the account[,] or with the guarantee[,] or using the financial resources[,] of the Government" (Annex Article 1(b)(ii) and (iii)) are excluded only to the extent that they are not supplied in competition with other service providers. Annex Article I(c) indicates "if a Member allows any of [these] activities … to be conducted by its financial service suppliers in competition with a public entity or a financial service supplier" they fall outside the "governmental authority" exclusion for the purposes of the annex. (emphasis added)

More fundamentally, the specified examples apply only to the definition contained in the financial services annex. As a result, they do not appear to be of direct relevance to the scope of the exclusion in GATS Article I and cannot appropriately be considered illustrative examples of services that are excluded from the main agreement. Indeed, the examples specified in the annex would be excluded from the main agreement only if those services meet the conditions set out in Article I:3(c) -- namely that the services are "supplied neither on a commercial basis, nor in competition with one or more service suppliers."

The contrast between the GATS and the financial services annex in the governmental authority exclusion go farther. As previously indicated, the GATS Article I exclusion contains a two-prong test -- excluded services must not be supplied (a) "on a commercial basis" and they must not be supplied (b) "in competition with one or more service suppliers". The 'commercial basis' test does not apply to any of the activities specified in the annex; neither test applies to the activities of "a central bank or monetary authority" or to activities "by any other public entity in pursuit of monetary or exchange rate policies"; and only the 'competition' test is applied to the other specified activities (c.f. Annex Articles 1(c) and (d).

For ease of reference, Article 1 of the Annex of Financial Services is reproduced here:

"1. Scope and Definition

(a) This Annex applies to measures affecting the supply of financial services. Reference to the supply of a financial service in this Annex shall mean the supply of a service as defined in paragraph 2 of Article I of the Agreement.

(b) For the purposes of subparagraph 3(b) of Article I of the Agreement, "services supplied in the exercise of governmental authority" means the following:

(i) activities conducted by a central bank or monetary authority or by any other public entity in pursuit of monetary or exchange rate policies;

(ii) activities forming part of a statutory system of social security or public retirement plans; and

(iii) other activities conducted by a public entity for the account or with the guarantee or using the financial resources of the Government.

(c) for the purposes of subparagraph 3(b) of Article I of the Agreement, if a Member allows any of the activities referred to in subparagraphs (b)(ii) or (b)(iii) of this paragraph to be conducted by its financial service suppliers in competition with a public entity or a financial service supplier, "services" shall include such activities.

(d) Subparagraph 3(c) of Article I of the Agreement shall not apply to services covered by this Annex."

42It is not clear how each of these examples falls completely and unequivocally within the ordinary meaning of the text of the "governmental authority" exclusion contained in Article I of the main GATS text (see preceding footnote).

43Some WTO statements may give the impression that the governmental authority exclusion is broad. For example, the WTO pamphlet "GATS -- Fact and Fiction", published in March, 2001, states that:

"Many public services are not provided on a commercial or competitive basis and are not subject to the GATS." (emphasis added, p. 8).

Similarly, the same pamphlet states that

"Whatever disciplines [on subsidies] are developed will not apply to governmental services, because these are simply outside the scope of the GATS" (p. 7).

Such statements, which could be interpreted as suggesting a broad exclusion, are rare and appear to conflict with the predominant WTO view that the governmental authority exclusion is narrow.

44"Liberalisation? Don't reject it just yet", Mike Moore, Guardian, 26 February 2001.

45Working Party on GATS Rules, Report of the Meeting of 6 October 1998, Note by the Secretariat, S/WPGR/M/18, 13 November 1998, p. 4.

46Working Party on GATS Rules, Report of the Meeting of 19 February 1999, Note by the Secretariat, S/WPGR/M/20, 17 March 1999, p. 7.

47Environmental Services, Background Note by the Secretariat, Council for Trade in Services, 6 July 1998, S/C/S/46, p. 14.

48The WTO Services Division Director reinforced this point in a recent address to the European Services Forum, stating: "we in the Secretariat often have to explain the exclusion of governmental services and we have come up against the difficulty that these terms are not further defined. We need to be clear on what is meant by 'not on a commercial basis' (Hartridge, David, Conference on GATS 2000 Negotiations, European Services Forum, Brussels, 27 November 2000)."

49Environmental Services, Background Note by the Secretariat, op. cit., p. 15

50Ibid.

51Ibid., p. 16.

52Ibid., p. 14-15.

53Council for Trade in Services, Report of the Meeting Held on 14 October 1998, Note by the Secretariat, S/C/M/30, 12 November 1998, p. 4.

54Hartridge, op. cit., item 1, paragraph 3.

55Health and Social Services, Background Note by the Secretariat, Council for Trade in Services, 18 September 1998, S/C.W/50, pp. 10-11.

56Ibid., p. 18.

57Ibid., p. 11.

58Education Services, Background Note by the Secretariat, Council for Trade in Services, 29 September 1998, S/C/W/49, p. 4.

59Health and Social Services, Background Note by the Secretariat, op. cit., p. 11.

60Hartridge, op. cit., item 3, paragraph 1.

61Ibid., item 1, paragraph 2. Mr. Hartridge was responding to the question "What GATS protection is there for a government which wishes to declare the whole of one service a public service and/or a public monopoly?"

62Note that GATS constraints also apply to monopolies that operate in competition with other service suppliers -- whether or not they are "commercial". The second of the two conditions necessary for exclusion under Article I (namely, to be excluded, a service must not be supplied "in competition with one or more service suppliers") also apply to monopolies. There are few 'pure' monopolies in public service systems and it is difficult to conceive of many monopolies that a dispute settlement panel would rule not to be competing with other service suppliers. And, where competition was deemed to occur, the activities of these monopolies would not be excluded from the GATS under Article I:3.

63GATS -- Fact and Fiction, World Trade Organization, op. cit., p. 8.

64The WTO's Trade in Services Division has acknowledged, for example, that "trade in medical and social services is strongly influenced by measures not normally considered to be 'trade measures'. These may include (i) licensing and qualification requirements designed to ascertain the quality of the services provided and the integrity of professionals; (ii) restrictions on the range of goods and services professionals and hospitals are allowed to provide; (iii) controls or incentives intended to ensure the adequate provision of services in all regions and for all population groups; and (iv) the direct provision, on social policy grounds, of minimum services to economically disadvantaged groups." (WTO Council for Trade in Services, Health and Social Services, Background Note by the Secretariat, S/C/W/50, 18 September 1998, paragraph 61.)


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