Juan A. Marchetti

What are the Main Challenges for the GATS Framework? Don't Talk About Revolution

Our analysis focuses on whether future changes in the GATS regulatory framework might eventually provide better outcomes in terms of trade liberalisation. We start our analysis by providing a succinct overview of the GATS framework of rules and principles, focusing in particular on the implementation of that framework so far. Then, we focus on three issues — public services, safeguards and domestic regulation — that may have important implications for the GATS regulatory framework. In doing so, we do not call into question the negotiating agenda as it has been established by negotiators and instead provide an evaluation on its merits. In two cases — safeguards and domestic regulation — the negotiating mandates are well established, while in the third case — public services — although no formal negotiation has been envisaged, the issue as such has the potential to influence negotiating outcomes in key sectors, such as education, health, postal, energy and environmental services.In our view, the best solution to the ‘public services’ conundrum is not a drastic reduction of the scope of GATS by excluding specific sectors from its provisions. Instead, increased awareness of the stakes involved in the liberalisation of socially sensitive service sectors may help WTO Members shape their commitments in light of their political, social and economic interests in those sectors. In the case of safeguards, after providing an analysis of the main arguments for such a mechanism, we show that the existing framework can adequately take care of concerns arguing in favour of temporary protection. Unlike the negotiations on safeguards, no WTO Member seems to question the desirability of developing further disciplines on domestic regulation as they are understood by the GATS. After analysing the case for horizontal disciplines, we conclude that such a horizontal approach should be complemented without delay with a sectoral approach that could cater for specific regulatory problems not being addressed in the Article VIA work programme. In our view, there are good reasons to try to complement the horizontal approach with a sectoral focus that would likely take the form of additional commitments under Article XVIII GATS

Trade Imbalances and Multilateral Trade Cooperation

Rising current account and merchandise trade imbalances marked the years before the global financial and economic crisis. These imbalances either contributed to or precipitated the crisis and to the extent that they create systemic risks, it is desirable that they be reduced. There are many factors related to macroeconomic, structural, exchange rate and financial policies that contributed to the imbalances. The inability to manage these issues at the international level reflects the “coherence gap” in global governance. This paper examines the contribution that the WTO can make in its three areas of activities — negotiations, rule-making and dispute settlement — to deal with trade imbalances and with the main factors leading to them, including exchange rate misalignments. First, market opening efforts in services, including in the area of financial services, can reduce policy-related distortions and market imperfections in surplus countries that lead to the build-up of unsustainable imbalances. Second, in the context of a broad international effort to coordinate macroeconomic, exchange rate and structural policies to deal with the roots of imbalances (the first-best solution), there is a general efficiency argument that could be made for the use of WTO-triggered trade actions to enforce cooperative behaviour towards rebalancing. Absent this first-best response, trade rules alone would not provide an efficient instrument to compensate for the weaknesses in international co-operation in macroeconomic, exchange rate and structural policies.