WORLD TRADE  
ORGANIZATION  RESTRICTED 
S/WPDR/W/48 
13 June 2012  
 
(12-3116) 
Working Party on Domestic Regulation  
 
 
REGULATORY ISSUES IN SECTORS AND MODES OF SUPPLY 
 
Note by the Secretariat1 
 
1. At the request of the Working Party on Domestic  Regulation, this Secretariat Note draws and 
builds upon the discussion of regulatory issues contained in the Background Notes on services sectors 
and modes of supply prepared for the Council for Trade in Services, and should be read in 
conjunction with them.2  The basic purpose of the Note is to provide background information on 
regulatory practices and issues in various sectors and modes.  It is thus envisaged that Members will 
use this Note to bring their own specific experiences, or contribute additional re gulatory issues, to the 
discussions, as appropriate.    
2. The issues discussed in this Note include, but are not restricted to, those under consideration 
in the negotiations on domestic regulation disciplines  under Article VI:4.  Consideration is also given 
to matters that may be the subject of schedulin g under Article XVIII (Additional Commitments).  By 
the same token, it should be noted that the follo wing sections do not address regulations falling under 
Article XVI or XVII, or that may be incompatible  with Article II of the GATS.  In some cases, 
nevertheless, descriptions of the regulatory framewo rk may include measures that could be addressed 
as market access limitations.  These have been a dded for the purpose of completeness and do not 
suggest that they are under the scope of Article VI:4  or that they may be treated under Article XVIII.   
3. It is not the intent of this Note to address in detail all regulatory issues that may arise in 
individual sectors and modes of supply.  Rather, in keeping with the request from Members, the aim is 
to generally discuss the regulator y environment and trends affecting sectors and modes, and to 
highlight, where relevant, issues that may have a par ticular bearing on trade in services.  Given that 
the focus, purpose and extent of regulation may differ between sectors, treatment of issues is specific 
to the sectors concerned.   
4. The Note is divided into four sections.  The firs t, by way of introduction, recalls the role of 
regulation in services and the importance of the domes tic regulatory environment for trade in services.  
It also provides some general questions for consider ation by Members.  This is followed in the second 
section by a discussion of regulatory issues by sector .  The third section on modes of supply deals 
with horizontal issues which are not specific to any particular sector.  Where relevant, prominent examples or initiatives of regulatory co-operation in  sectors or modes, which can help minimize the 
impact on trade in services, are highlighted.  The fourth section provides some concluding 
observations. 
5. It should be noted that no judgement is in tended on what might constitute restrictions, 
problems or barriers that are incompatible with the provisions of the GATS.  Nor does the discussion 
in this Note imply any judgement, direct or indirect , on the need for, or content of, any particular  
regulation, rule, procedure or administrative action. 
                                                      
1 This document has been prepared under the Secret ariat's own responsibility and without prejudice to 
the positions of Members and to their rights and obligations under the WTO. 
2 The Background Notes are listed in Annex I of this Note.  S/WPDR/W/48 
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TABLE OF CONTENTS 
 I.  ROLE OF REGULATION  IN SERVICES ............................................................................ 3  
A.  T
HE GATS  CONTEXT  .................................................................................................................. 5  
B.  GENERAL QUESTIONS  .................................................................................................................. 6  
 
II.  SECTORS ....................................................................................................................... ........... 7 
A.  LEGAL SERVICES  ......................................................................................................................... 7  
B.  ACCOUNTANCY  ......................................................................................................................... 10  
C.  ARCHITECTURE  ......................................................................................................................... 13  
D.  ENGINEERING SERVICES  ........................................................................................................... 16  
E.  COMPUTER AND RELATED SERVICES  ....................................................................................... 18  
F.  POSTAL AND COURIER SERVICES  .............................................................................................. 19  
G.  TELECOMMUNICATIONS  ............................................................................................................ 23  
H.  AUDIOVISUAL SERVICES  ........................................................................................................... 27  
I.  CONSTRUCTION AND RELATED ENGINEERING SERVICES  ......................................................... 30  
J.  DISTRIBUTION SERVICES  .......................................................................................................... 35  
K.  EDUCATION SERVICES  .............................................................................................................. 38  
L.  ENERGY SERVICES  .................................................................................................................... 42  
M.  ENVIRONMENTAL SERVICES  ..................................................................................................... 43  
N.  FINANCIAL SERVICES  ................................................................................................................ 45  
O.  TOURISM  .............................................................................................................................. ..... 49 
P.  MARITIME TRANSPORT  ............................................................................................................. 53  
Q.  ROAD TRANSPORT SERVICES  .................................................................................................... 58  
R.  LOGISTICS SERVICES  ................................................................................................................. 62  
 
III. MODES OF SUPPLY ............................................................................................................. 6 5 
A.  CROSS -BORDER SUPPLY (MODES 1 & 2) .................................................................................. 65  
B.  COMMERCIAL PRESENCE (MODE 3) .......................................................................................... 66  
C.  PRESENCE OF NATURAL PERSONS (MODE 4) ............................................................................ 69  
 IV.  CONCLUDING OBSERVATIONS ...................................................................................... 73  
 
ANNEX I:  SECTORAL BACKGROUND NO TES BY THE WTO SECRETARIAT ................ 76  
  S/WPDR/W/48 
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I. ROLE OF REGULATION IN SERVICES 
6. The Preamble to the GATS, while affirming the role of progressive liberalization as a means 
of promoting the economic growth of all tradi ng partners and the deve lopment of developing 
countries, at the same time recognises the right of  Members to regulate the supply of services within 
their territories in order to meet national policy objectives.  Specific characteristics of services 
markets make the use of regulation particularly im portant.  Services are generally considered to be 
intangible and non-storable, and their supply often requires an interaction between the supplier and 
consumer.  This implies that users frequently can not easily assess the quality of the service until they 
have consumed it.  Thro ugh regulation, governments seek to avoi d that service suppliers exploit such 
information asymmetries.  For instance, regulati on may impose information requirements to inform 
consumers in advance, or impose qualification requirements for professionals, or licensing requirements that seek to ensure the competence of the service supplier and, thus, the quality of the 
services provided.  
7. A government may want to ensure that certain services, even if provided by private 
commercial entities, like in the case of education or h ealth, are available to all citizens at equitable 
conditions, no matter their location or income.  Regulati on may, in some cases, also be used to further 
certain policy objectives such as job creation in particular regions or to promote the access of disadvantaged persons to the labour market.  In other cases, governments adopt regulation to tackle 
fraud and tax evasion or prevent service suppliers from indulging in anti-competitive practices in 
order, for example, to exploit a dominant market position.  
8. The provision of certain services may create ne gative externalities the costs of which are 
insufficiently borne by the parties themselves.  For instance, heavy road transp ort or intensive tourism 
could strongly affect the environment.  Furtherm ore, as abundantly shown by the recent financial 
crisis, excessive risk-tak ing by financial institutions can undermine the financial stability of countries 
and create macroeconomic tensions around the world.   
9. Effective regulation – or re-regulation – is of ten needed for liberalization to produce the 
expected efficiency gains without compromising on quality and other policy objectives.  Often, addressing regulatory capacity constraints and weak in stitutional frameworks is part of the process of 
liberalization.  The opening of a hitherto restrict ed market may also need to be accompanied by the 
introduction of licensing mechanisms and public servi ce obligations for social policy reasons.  Since 
many services contracts involve customized products (medical intervention, legal advice, financial 
products etc.), the need for regulatory protection is particularly evident.   
10. Many developed and developi ng countries have undergone broa d reform programs to open 
their services markets.  These reforms have involve d updating their legal frameworks, in particular 
through administrative regulatory instruments to in crease transparency, implementing best practices to 
improve efficiency and reducing administrative burde ns by streamlining procedures.  Box 1 provides 
examples of situations where specific regulations ar e used to achieve certain  policy objectives.  It 
should be noted that these examples are given solely  to illustrate the range of measures that are 
typically found in service sectors.  They have no t been listed with the intent of suggesting or 
recommending any particular policy or measure, nor in terms of their compatibility with the GATS or 
otherwise.   
 
 
 S/WPDR/W/48 
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Box 1: Examples of services-specific regul ation to pursue public policy objectives 
 
Equitable access 
Sectors:  In the transport or telecommunication sectors, governments often want remote regions to be served 
regardless of profitability.  Basic equity objectives may prompt governments to ensure that all citizens have 
access to education and essential hea lth care at low or zero costs.  
 
Measures:  Cross-subsidization schemes to ensure that revenues in profitabl e areas are reinvested in favor of 
underdeveloped regions or persons in financial need; licensing conditions which include 'universal service 
obligations' (for example, commercial hospitals are require d to treat a certain percentage patients free of charge, 
or postal, telecommunication services must be provided at equal conditions across the country, regardless of 
profitability considerations). 
 
Consumer protection 
Sectors:  With regard to professional, financial or health  services, the complexity of the service that is provided 
makes it very difficult for consumers to appreciate quality or safety prior to consumption.  Service suppliers 
may exploit such information asymmetries. 
 
Measures:  Prudential and other technical standards to be complied with by service suppliers; transparency-
related publication requirements on costs, risks, side-effect s, etc, so as to enable th e consumer to make informed 
decisions;  education and training requirements to ensure competence; mandatory professional liability 
insurance.   
 
Reduction of environmental impacts and other negative externalities 
Sectors:  Road and air transport cause pollution and noise; tourism could put the environment under stress and 
disturb natural habitats.   
 
Measures:  Traffic restrictions over w eekends, during night hours or in sensitive areas; zoning laws and building 
codes; tax/subsidy-schemes to mobilize fu nds for preservation of cultural heritage. 
 
Macroeconomic stability  
Sectors:  Financial institutions may engage in imprudent lending or design complex financial instruments that 
are insufficiently understood.  As a consequence, depo sitors may lose confidence and withdraw their money, 
inter-bank lending may suffer, credit supply to the real economy be hampered, and so forth. 
 
Measures:  To ensure stability, financial institutions must comply with measures such as minimum capital 
requirements; higher capital reserves when new financia l instruments are provided; diversify assets to limit 
exposure to individual clients; and report regularly on their activities.  
 
Avoidance of market dominance and anti-competitive conduct 
Sectors:  Concerns about anti-competitive conduct aris e in sectors prone to market concentration including 
services with network effects and interconnection need s (e.g. transport, telecom), and liberalized former 
monopolies (e.g. postal and courier, education and energy). 
 
Measures:  Limitations on market shares, introduction of price surveillance or mandatory price caps, 
interconnection guarantees, government-mandated technical standards to replace company-specific 
requirements.  
 
 
11. It is thus widely understood that regulatory  measures are necessary to increase welfare by 
correcting market distortions, minimising externa lities, ensuring appropriate supply and access to 
services, or addressing income-related inequalities.  Na tional differences in regulation and procedural 
complexities in their implementation can, however, hamper trade.  Irrespective of the substantive requirements, national and foreign service suppliers often need to follow administrative procedures to 
obtain authorizations and permits to enter and operate in the market.  Domestic regulations in the form 
of cumbersome, and/or opaque licensing and qualif ication procedures, non-transparent criteria,  S/WPDR/W/48 
 Page 5 
 
 
  excessively burdensome and redundant requirements, a nd administrative "red-tape" can obstruct trade 
in services, even if this was not their intention.  Administrative efficiency improvements, through the 
reduction of administrative barriers, simplification and coordination of procedures, can help improve 
the domestic business environment and, in turn, promote trade in services.  
12. The sheer diversity of regulatory systems and standards in markets internationally can also 
significantly raise the costs of compliance for the servi ce supplier and hamper trade, even in situations 
where there are no market access restrictions or di scriminatory measures in force.  Long and complex 
procedures for assessing an application for authori zation to supply a service may also discourage 
suppliers from seeking access to a host member.  Procedural complexity might also serve to hide protectionist intentions and give rise to good g overnance issues.  Questions may also arise as to 
whether a regulation serves to protect public or pr ivate interest, or whether there may be more 
effective and efficient means of achieving a particular policy objective.  
A. T
HE GATS  CONTEXT  
13. Apart from recognizing that measures affecting trad e in services can take the form of a law, 
regulation, rule, procedure, decision, administra tive action, or any other form, the GATS does not 
prescribe any particular regulatory approaches or standards.  The Agreement is concerned with 
regulations only to the extent that they might have an impact on trade.  Thus, due to the importance of 
the domestic regulatory environment as a context fo r trade, Members have a particular negotiating 
mandate in Article VI:4 of the GATS and the Deci sion on Domestic Regulation (S/L/70).  According 
to this mandate, the Working Party shall develop generally applicable disciplines, including for 
professional services, and consider disciplines for indi vidual sectors or groups thereof.  It is important 
to note that disciplines on domestic regulation would not apply to all possible regulations affecting 
trade in services, but to a subset of particular me asures.  These are identified in Article VI:4 of the 
GATS and the subsequent Decision on Domestic Regul ation as five types of measures, namely those 
relating to: licensing requirements; licensing proce dures; qualification requirements; qualification 
procedures; and technical standards.   
14. Article VI:4 states that the disciplines are inte nded to ensure that domestic regulations are, 
inter alia : 
(a) based on objective and transparent criteria, such as competence and the ability to 
supply the service; 
(b) not more burdensome than necessary to ensure the quality of the service; 
(c) in the case of licensing procedures, not in th emselves a restriction on the supply of 
the service. 
15. Pending the entry into force of such disciplin es, pursuant to Article VI:5, Members are 
required not to apply their domestic regulation in  a way that would: nullify or impair specific 
commitments; be incompatible with the three a bove criteria; and could not have reasonably been 
expected at the time when the relevant commitments were made.   
16. As a general obligation under Ar ticle VI:2, Members are required to maintain or institute 
judicial, arbitral or administrative tribunals or procedures where affected services supplies may seek 
review of administrative decisions and where justif ied, appropriate remedies.  Where such procedures 
are not independent of the agency entrusted with the administrative decision concerned, the Member 
shall ensure that the procedures provide for an objective and impartial review. S/WPDR/W/48 
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  17. Members also have to observe a number of existing disciplines on sectors where specific 
commitments are undertaken.  Article VI:1 requires al l measures of general app lication affecting trade 
in services to be administered in a reasonable, obj ective and impartial manner.  Article VI:3 requires 
that information be provided without delay on the status  of applications for the authorization to supply 
a service upon request by the applicant.  It also  requires the competent authority to, within a 
reasonable period of time, inform the applicant of  the decision concerning the application.  Under 
Article VI:6 adequate procedures to verify the co mpetence of professionals of another Member must 
be provided in sectors where specific commitments regarding professional services have been undertaken.  
18. In addition to Article VI obligations, the GAT S already has certain rules on transparency.  
Under Article III, each Member is required to pub lish promptly all relevant measures of general 
application that affect the operation of the Agre ement.  Members must also notify the Council for 
Trade in Services of new or changed laws, regulati ons or administrative guidelines that significantly 
affect trade in sectors subject to specific commitme nts.  Members also have a general obligation to 
establish an enquiry point to respond to request s from other Members.  Moreover, pursuant to 
Article IV:2, developed countries (and other Members to the extent possible) are to establish contact 
points to which developing country service supplie rs can turn for relevant information.   
19. It should be kept in mind that Members may also undertake Article XVIII (Additional 
Commitments) with respect to measures affecting trade in services not subject scheduling under Articles XVI or XVII, including those regarding quali fications, standards or lic ensing.  Article XVIII 
has a larger scope than Article VI:4 as it pr ovides the possibility for undertaking commitments on 
matters other than those listed.  Since Article XVI II does not contain any legal obligation in itself, 
commitments inscribed in the additional commitment s column of schedules, must take the form of 
undertakings, with a full description of the obligatio ns assumed.  These obligations are to be applied 
on an MFN basis.  The Reference Paper for telecommunication services is the most prominent example of how additional commitments have been used to secure adherence to certain regulatory 
principles.  These principles concern issues such as competitive safeguards, interconnection, public 
availability of licensing criteria, universal service , independent regulator, and allocation and use of 
scarce resources.   
B. 
GENERAL QUESTIONS  
20. In reviewing the information provided in this Note, Members may wish to keep the following 
general questions, which apply to all sectors and modes, in mind:  
(a) Are there any other regulatory issues in sectors and modes of supply, apart from those 
discussed, which may also have impact on trade in services? 
(b) To what extent might trade-related regul atory concerns in sectors and modes of 
supply fall under the scope of domestic regulation disciplines and be addressed 
through the envisaged Article VI:4 disciplines? 
(c) Would the scheduling of Article XVIII a dditional commitments be an effective 
complementary or alternative way to address any of these concerns? In this context, 
would a "Reference Paper" approach be useful? 
21. In addition to these general questions, for certain sectors and modes, a number of specific 
questions have also been identified.  These are listed at the end of the relevant  sections.  Both general 
and specific questions should not be considered to be exhaustive, nor are they intended to limit the 
consideration to just these issues.  Rather, they ha ve been provided to help stimulate any further 
discussion which Members may wish to pursue.    S/WPDR/W/48 
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  II. SECTORS 
A. LEGAL SERVICES  
22. Over the last two decades, the legal services sect or has experienced rapid growth.  This has 
been linked to the rise of international trade, and the consequent demand by exporters for legal advice 
on foreign markets.  Abetting this growth has been  the lowering of barriers by Members in various 
markets to services offered by foreign lawyers and la w firms.  In turn, this trend has drawn attention 
to the implications of domestic re gulations on trade in legal services. 
1. Regulatory Context 
23. The nature of legal services gives rise to several  regulatory objectives.  First, and common to 
other professional services, is the need to ensure  that the consumer receives a service of high technical 
quality .  Because a client is usually not in a positio n to assess the quality of a legal service before (or 
even after) it has been delivered, regulations typica lly seek to protect a client by ensuring that the 
lawyer possesses the requisite skills and training.  In  order to meet qualification requirements imposed 
by the regulatory body, lawyers must have complete d courses of study in the relevant law, passed 
pertinent examinations, and accumulated sufficient practical legal experience. 
24.  A second common regulatory objective is the need to ensure a high level of ethical conduct  
of the lawyer with respect to the client.  Lega l services deal with the creation, modification and 
interpretation of rights and obligations, and thei r enforcement against individuals, firms and 
governments.  Often these services are contentious – asserting a client's right amounts to invoking the 
obligation of another person, of ten leading to disagreement or litigation.  Given these opposing 
interests, clients require from their lawyers,  who advise and represent them, not only technical 
expertise in the law, but also a very high degree of trust and integrity.  Regulations aim therefore to 
ensure that lawyers maintain high ethical standard s by respecting client confidentiality, avoiding 
conflicts of interest, and remain fully independent  from any outside influence, whether professional, 
political or economic.3  This type of regulation is typically enshrined in binding codes of ethics or 
'deontology', which also serve to enhance the overall functioning of the justice system. 
25. The importance of a certain independence of the lawyer and the legal profession from 
government influence has been cited as an important el ement that underpins the rule of law.  It has led 
in many cases to the granting of regulatory powers to professional associations of lawyers.  More broadly, the independence of lawyers has been invoked to justify rules requiring lawyers not to share fees with non-lawyers, or that the firm be established as a partnership or other type of legal entity.  It should be noted that certain requirements such as t hose on a particular legal form are already subject 
to the obligations contained in Article XVI (Market Access) of the GATS.   
26. A third regulatory objective, which is commonly f ound in legal services, is the need to ensure 
that the public interest  is served through the effective administration of justice and the rule of law.
4  
Detailed codes of ethics protecting the client, includi ng the client's right to access the judicial system 
at reasonable cost, derive in part from this concern.5  The public interest in legal services can, 
however, be broader than this and can also justif y the need for laws and practices in a particular 
                                                      
3 International Bar Association (1998), Reso lution on Deregulating the Legal Profession. 
4 Basic Principles on Roles of Lawyers, adopted by the UN Congress on the Prevention of Crime and 
the Treatment of Offenders, Havana, 1990.  See also the views expressed by the International Bar Association in its Resolution on Deregulating the Legal Profession, 1998; and Standards and Criteria for Recognition of the 
Professional Qualifications of Lawyers, 2001. 
5 See for example: Council of Bars and Law Societies of Europe (CCBE),  Charter of Core Principles of 
the European Legal Profession (2006) and Code of Conduct for European Lawyers (1988). For a national 
example, see American Bar Asso ciation (ABA) Model Rules of Professional Conduct (2002). S/WPDR/W/48 
Page 8  
 
  jurisdiction – which range widely from family law to  contracts, property and basic civil liberties – to 
take into account local customs and values.  This 'localism' arises since legal services, unlike some 
other professional services such as medicine or engineering, are not primarily based on a technology or science that transfers easily across national boundari es.  This jurisdictional focus can lead to many 
different sets of laws, regulations and practices, which, in turn can complicate trade in legal services. 
2. Regulatory developments and issues 
27. Over the past few years, barriers to trade in legal services have been lowered in a number of 
countries.  In many instances, blanket prohibitions  on the practice of law by foreign lawyers have 
given way to new or better access.  However, the re moval of explicit barriers has served to highlight 
the trade generating, or impeding, role of domestic  regulations.  A key issue has become whether the 
objectives underlying these regulations can be achieve d in a less burdensome manner.  Some domestic 
approaches to regulatory reform in legal services are c onsidered below, before turning to international 
approaches that can help reinforce reform. 
(a) Domestic approaches to regulatory reform in legal services 
28. Whether reform of regulations affecting trade in  legal services is spurred by international co-
operation or through an international agreement, it u ltimately needs to be reflected in a Member's own 
regulatory framework.  Several domes tic approaches can be envisaged. 
29. First, once some, or all, legal services ar e opened to foreign la wyers, qualification 
requirements might need to be examined and ad apted to the regulatory objectives pursued.  For 
example, a new set of qualification requirements may more closely focus on the quality  of the service 
in order to serve the client better, and to contri bute to the wider public interest of the efficient 
administration of justice.  Thus prohibitions on th e supply of legal services have increasingly given 
way to access based on an objective, non-discriminat ory assessment of the legal qualifications of the 
foreign lawyer. 
30. In establishing these requirements, authoriti es have increasingly distinguished between 
different types of law  underlying legal services, recognizing that some may need more or different 
regulation than others.  In particular, many jurisd ictions accept that they have a greater interest in 
regulating the practice of their own (host country) law than they do the practice of foreign (home or third country) law, or international law.  This idea underlies proposals for redefining the classification 
of legal services.
6  Thus in some jurisdictions a categor y of 'foreign legal consultant' has been 
established, under which foreign lawyers may advi se on or practice non-home country law under less 
onerous conditions.7  Even in the case where the foreign lawy er seeks to practice host-country law, re-
qualification requirements can be refocused to take  into account any relevant training and practical 
experience already acquired. 
31. Proposals have also been made to adjust the level of regulation of legal services to the degree 
of expertise of the client .  Where the client can be assumed to  have special lega l knowledge and skills 
(e.g. a large firm with in-house counsel), the po ssibility of information asymmetry between lawyer 
and client would be diminished.  In such cases, th e expert client would be better able to assess and 
assume responsibility for the quality of the service, and the credentials of the lawyer.  The regulations 
governing the practice of law in such situati on could therefore be somewhat less onerous. 
                                                      
6 Communication from Australia, Negotiating Pr oposal:  Legal Services Classification 
(S/CSS/W/67Suppl.2);  see also International Bar Association Council Resolution, 2003.  
7 ABA Model Rule, 1993.  S/WPDR/W/48 
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  32. Although well qualified in technical  knowledge and skills, a foreign lawyer will often need to 
satisfy the client and public interest by adhering to local codes of ethics.  Since codes differ or even 
conflict between jurisdictions, reformed regulations may attempt to resolve the  issues arising from a 
lawyer's requirement to adhere to both home and host country codes.  Serious differences between 
codes can arise with respect to the right to adver tise, approved forms of business structure, and fees.  
Although adherence to the local code will normally  take precedence, account can be taken of the 
home country code. 
33. Domestic regulatory reform of legal services have sometimes attempted to use competition 
principles .  This approach looks at the economic f unction of legal services, particularly as an 
important input to other businesses, and its role  in improving the overall competitiveness of the 
economy.8  Areas of concern from this perspective include price-fixing, recommended prices, 
advertising regulations, entry re quirements and reserved rights, na me restrictions, regulations on 
business structure, and multi-disciplinary practices.  Under this approach, it has been proposed that 
the restrictive effect of the regulation be asse ssed in relation to its public interest objective.9  In the 
context of the GATS, some of the measures underp inned by competition principles, if they set 
quantitative limits or are discriminatory, would alr eady be subject to market access (Article XVI) and 
national treatment (Article XVII) obligations. 
34. Finally, greater transparency for licensing and qualification requirements and procedures is 
an elementary, but effective, way to improve the domestic regulation of legal services.  A first but 
important step in the supply of a legal service is to  clearly know what are the applicable rules and 
procedures. 
(b) International approaches supporting or requiring domestic regulatory reform 
35. Reform of regulations on legal services can be stimulated by international regulatory co-
operation, or eventually be required under an intern ational agreement.  As mentioned in section 1 of 
this Note, the GATS provides basic rules on certa in aspects of domestic regulation, such as 
transparency (Article III), and the reasonable, objective and impartial administration of measures 
(Article VI).  The GATS also provides, for purposes of authorizing service suppliers, for the 
recognition  of education or experiences obtained, requirements met, or licenses or certifications 
granted in a particular country.  Importantly, this can take the form of a mutual recognition agreement 
(MRA), which allows Members to accord recognition to suppliers from certain jurisdictions without 
necessarily excluding those from a third country (Article VII).10  This reciprocal element can provide 
an incentive to recognize legal education, training or other credentials obtained in another jurisdiction.  
Many countries do have recognition agreements on  legal services, but the coverage of these 
agreements is very patchy a nd applied on a reciprocal basis.11  On the other hand, the European Union 
provides an example of a fully-developed system of mutual recognition in legal services between its constituent States.
12 
36. Regional trade agreements can also provide fo r rules governing trade in legal services.  For 
example, in the North American Free Trade Agre ement (NAFTA) the parties are required to allow 
                                                      
8 See for example the EC "Report on Competition in Professional Services", COM(2004) 83 final. 
9 Ibid. See also Terry, L (2008), "The Future Regulation of the Legal Profession:  The Impact of 
Treating the Legal Profession as 'Service Providers'", Journal of the Professional Lawyer, p 209. 
10 For views of what suitable recogn ition criteria might be, see International Bar Association, Standards 
and Critieria for the Recognition of the Professiona l Qualifications of Lawyers (adopted 2001). 
11 OECD (2007a), "Sectoral Study on the Impact of  Domestic Regulation on Trade in Legal Services" 
Paris.  
12 OECD (2003), "Managing Request-Offer Negotiations under the GATS: The Case of Legal 
Services" (TD/TC/WP(2003)40/FINAL). S/WPDR/W/48 
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  foreign legal consultations (FLCs) to pr actice or advise on their home country law.
13  The agreement 
also provides for mandatory consultations be tween professional bodies on matters affecting the 
practice of law. 
37. International professional associations have also  been active in suggesting new approaches to 
regulation in legal services.  The International Ba r Association (IBA), for example, has adopted a 
Statement on General Principles for the Establishmen t and Regulation of Foreign Lawyers, which sets 
out principles for the admission of foreign lawyers,  based on whether they wish to practice home law 
(as an FLC under a limited licence), or host-count ry law (under a full licence, subject to local 
qualification requirements).14 
B. ACCOUNTANCY  
38. Accountancy is an essential professional servi ce input in the production of both physical 
goods and other services.  Accountancy regulations often have as their main objective the protection 
of the public and the promotion of the quality of th e service.  Perhaps most important is accountancy's 
contribution to the implementation and enforcemen t of prudential requireme nts and other financial 
regulatory measures.  Despite the extensive interna tional networks of the biggest firms, geographic 
markets for accountancy are still considered to be national, or even sub-national, due to pervasive 
entry and conduct regulation that varies significantly between jurisdictions.   
1. Regulatory context 
39. Regulation of accountancy involves certain restri ctions on entry and professional conduct.  
While some restrictions may remedy market failures, others may be based on distributional or paternalistic motives, which may serve private rather th an public interests.  With respect to correcting 
information asymmetries between accountants and th eir clients, and preventing negative externalities 
to investors, banks and creditors, regulation of a uditor entry and educational requirements is needed, 
together with more general prohibitions, e.g. on false and misleading advertising.
15   
40. Overall, the regulatory spectrum for accountan cy services ranges from virtually no oversight 
to self-regulation to multiple regulators.  Although sel f-regulation can be a useful tool, together with 
public regulation, there is a risk of rent-seeking be haviour.  Regulations differ from country to country 
and even within a country (due to sub-federal ju risdictions).  Consequently, the structure of the 
remaining "Big 4" accountancy firms, unlike most of their multinational clients, more closely resembles those of franchising networks.  In addition,  clients are regulated according to the types of 
services they are required to have or can select.  Significant differences between countries may hinder 
the tradability of services and the mobility of professi onals across borders.  Solutions for cross-border 
inconsistencies often include the a doption of international standards to improve mobility, as well as 
mutual recognition (and co-operation) between regulatory bodies.   
41. The most common forms of accountancy regulatio n include quality standards and exclusive 
rights, quantitative restrictions, advertising rest rictions, price regulation, and rules on inter-
professional co-operation and business structure.  In the context of the GATS, some of these 
measures, if they set quantitative limits or are discriminatory, would already be subject to market 
access (Article XVI) and national treatment (Article XVII) obligations.    
                                                      
13 NAFTA, Annex 1210 (Chapter 12). 
14 International Bar Association (1998), op.cit. 
15 Competition law may be necessary to control cartel-like behaviour and abuse of market dominance.  
Nonetheless, the OECD advises that regulation should not extend beyond what is necessary to address the prevailing market failures.  OECD (2009a), "Policy Ro undtables: Competition and Regulation in Auditing and 
Related Professions", Paris, is the main source  for this and the following three paragraphs.  S/WPDR/W/48 
 Page 11 
 
 
  42.  In all EU Member States, for example, statutor y audit is an exclusive right of one or more 
professional groups, but market entry regulation fo r other types of accounting services differ from 
country to country.  In several EU Members, excl usive rights of accountants are much wider than in 
others.  In the US, all jurisdictions have laws  governing the licensing of certified public accountants, 
including requirements for education, examination and experience.  However, while the use of the 
title "certified public accountant" in each jurisdiction is  restricted to individuals registered with the 
State regulatory authority, other licensure requirement s are not uniform.  In addition, under all States' 
laws, certified public accountants must be the major ity owners of accounting firms, and other owners 
must be active participants in the firms.  The goal of these rules is to limit the potential for conflicts of 
interest.  However, prohibiting certain types of business structures by making entry into the 
accounting market more difficult, benefits the in cumbent firms, including the "Big 4" accounting 
networks.   
43. Although often necessary to ensure quality, regul ations may have the unintended effects of 
restricting economic competition and trade.  A balan ce may need to be struck between the interests 
served by regulation and competition.  Quantitative rest rictions to entry, advertising bans and price 
regulation (including recommended fee scales), exclusive rights for tax advice and representation are 
examples of regulatory issues, which may, restrict  competition more than necessary.  The complexity 
of accounting standards; the need for additional gu idance on practical implementation (e.g. valuation 
of financial instruments); suitability of internati onal accounting standards for small and medium-sized 
enterprises; and technical matters such as fair va lue measurement are other regulatory issues that 
could also impact on trade.  
44. Nonetheless, as stated by the OECD, "the need for ethical standards or codes of behaviour, 
and the desirability of high standards of professional competence to ensure integrity and public confidence, is unquestionable.  But the twin obj ectives of promoting competition and maintaining 
professional standards are not necessarily contradictory".
16 
2. Regulatory developments and issues 
45. WTO Members in 1997 adopted the Guidelines for Mutual Recognition Agreements or 
Arrangements in the Accountancy Sector, followed by the Disciplines on Domestic Regulation in the 
Accountancy Sector in 1998.17  The Accountancy Disciplines seek to  ensure that measures relating to 
licensing, which are not subject to scheduling unde r Articles XVI or XVII, are not prepared, adopted 
or applied with a view to or with the effect of  creating unnecessary barriers to trade in services.  It 
also contain a requirement that such measures shal l not be more trade restrictive than necessary to 
fulfil a legitimate objective.  These Disciplines are, however, not yet legally in effect and are to be 
integrated into the GATS no later than the conclusi on of the current round of services negotiations.  
46. Since the adoption of both GATS instruments, the regulatory framework for accountancy has 
continued to evolve worldwide.  The financial cris es since the year 2000, in particular, have further 
highlighted the need for strengthening the in stitutional framework and governance of global 
accounting standard-setting, and improving the qualit y of international financial reporting.  In 
addition, there has been a further shift in the governance of international accounting standard-setting, 
including the emergence of independent external oversight bodies.  The international audit firm 
networks have also further evolved their busin ess models and structures.  Some of the main 
developments that have affected the regulator y environment for accountancy services are summarised 
in Box 2. 
                                                      
16 OECD (1999a), "Policy Roundtables: Competition in Professional Services", Paris, p. 17; and OECD 
(2007b), "Policy Roundtable: Trade Associations" , Paris. 
17 WTO documents S/L/38 and S/L/64. S/WPDR/W/48 
Page 12  
 
  Box 2: Some key developments affecting the reg ulatory environment for the accountancy sector 
 
Reports on the Observance of Standards and Codes (ROSC) initiative  
The World Bank and the International Monetary Fund (IMF) in 1999 initiated the joint ROSC initiative, 
covering data dissemination, fiscal transparency, tran sparency in monetary and financial policies, banking 
supervision, securities market regulation, insuran ce supervision, payments and settlements, anti-money 
laundering and the combating of financing of terrorism, corporate governance, accounting and auditing, and 
insolvency and creditor rights.  Objectives of the ROSC programme include: analysing the comparability of national accounting and auditing standards with international standards; determining the degree to which 
applicable accounting and auditing st andards are followed; and assessing the strengths and weaknesses of the 
institutional framework in supporting high-quality financial reporting.  Another major aspect of the ROSC initiative is to assist countries in developing and implementing an action plan for improving institutional 
capacity, with the aim of strengthening th e corporate financial reporting regime.  
Sarbanes-Oxley Act (SOX) 
SOX, enacted in the US in July 2002, significantly re vised the oversight and regulation of the US accounting 
profession, most notably by strengthening corporate governance requirements and improving transparency and 
accountability.  SOX required the US  Securities and Exchange Commission (SEC) to implement a number of 
new rules, including on independence, to address areas such as prohibited non-audit services, audit partner 
rotation, and conflicts of interest.  SOX also esta blished the Public Company Accounting Oversight Board 
(PCAOB) to oversee the audit of public companies.  Although SOX rules are considered necessary and 
important, they might limit the number of accounting fi rm choices in case a large public company wants to 
switch auditors.  With respect to multi-disciplinary prac tices (MDPs), SOX to some extent limited possibilities 
for conflicts of interest, as did the 2006 Directive on St atutory Audits in the EU.  In some countries there are 
prohibitions on MDPs which are composed of accountants and other professionals such as lawyers.  Among the 
potential conflicts of interests could be the obligation of lawyers to protect client interests, which may conflict 
with the transparency requ irements for accountancy. 
 
Group of Twenty 
The G-20, in its declaration of April 2009, stated that accounting standard-s etters should take action by the end 
of 2009 to:  (a) reduce the complexity of accounting sta ndards for financial instru ments;  (b) strengthen 
accounting recognition of loan-loss provisions by incorp orating a broader range of credit information; (c) 
improve accounting standards for provisioning, off-bala nce sheet exposures and valuation uncertainty;  (d) 
achieve clarity and consistency in the application of  valuation standards, internationally, working with 
supervisors;  (e) make significant progress towards a singl e set of high quality global accounting standards;  and 
(f) within the framework of the independent accounting standard-setting process, im prove the involvement of 
stakeholders, including prudential regulators and emerging markets, through the International Accounting 
Standards Board's constitutional review.  
International Financial Reporting Standards (IFRS) 
Since 2001, almost 120 countries have required or permitted the use of IFRS.  They are firmly established in 
Australasia, and, Europe as well as in Canada, South Africa, South Korea, Russia and Turkey, and are set to be adopted soon in Japan and other jurisdictions.  The US is reducing the differences between the US Generally 
Accepted Accounting Principles (GAAP) and IFRS, with the expectation of reaching convergence in the near 
future.  The current economic and financial crisis added additional issues to the already wide-ranging debates on the implementation of IFRS, especially those related to fi nancial reporting in a distressed economic situation.  
They include such challenges as measurement in illiquid markets, the pro-cyclicality of IFRS, provisioning 
aspects, and risk management and related disclosures and audit considerations.  One of most important new 
issues is how to ensure that the financial reporting system not only provides a fair and objective reflection of 
company's financial status and performance, but also provides early warning signals which can help to avert 
major financial disasters.  The new issues are particul arly challenging for those countries with less developed 
financial markets and account ancy infrastructure.   
 
International Standards on Auditing (ISA) 
Over 100 countries are either using ISA, or are in the process of adopting or incorporating them into national auditing standards, or using them as a basis for preparin g national auditing standards.  ISA are intended for use 
in all audits - publicly traded companies, private busine ss of all sizes and government entities at all levels.  ISA 
are issued by the International Auditing and Assurance Standards Board (IAASB), which is a standard-setting  S/WPDR/W/48 
 Page 13 
 
 
  body operating independently under th e auspices of IFAC.  The IAASB' s goals include the setting of high 
quality auditing, assurance, quality control and related se rvices standards, and to facilitate the convergence of 
international and national standards, thereby enhanci ng the quality and uniformity of practice throughout the 
world and strengthening public confidence in the global auditing and assurance profession. 
 
Sources:  Information compiled from Hegarty, J and Gielen, F. et. al (2004), "Implementation of International 
Accounting and Auditing Standards: Lessons Learned from the World Bank's Accounting and Auditing ROSC 
Program; IFRS website available at www.ifrs.org  ( accessed 7 March 2012); and OECD (2009a), "Policy 
Roundtables: Competition and Regulation in Auditing and Related Professions", Paris.  
 
47. Whilst the regulatory environment for the accountancy sector has evolved since the 
Accountancy Disciplines were nego tiated back in 1998, the sector is still primarily regulated at the 
national level with the professional bodies playing an important role.  With the global integration of 
financial markets, there is a tendency to c onverge more on ethical, technical and professional 
standards and practices, so as to en sure efficiency and international consistency.  Greater convergence 
has also required greater collaborative effort between professional bodies and government regulators 
across jurisdictions.    
C. ARCHITECTURE  
48. Architectural services belong to the group of "accredited" professional services, as opposed to 
non-accredited business services such as marketing, advertising and consultancy.18  Compared to 
other accredited professional services, such as account ancy and legal services, architectural services 
appear to be subject to fewer restrictive regulations. 
1. Regulatory context 
49. As with other professional services, regulations on architectural services are typically 
intended to ensure and maintain the quality of the service, and hence to protect consumers.  Since 
1998, the Collegi d'Arquitectes de Catalunya (COAC), publisher of Architectural Practice around the World, has been conducting research into archit ectural regulation, under the auspices of the 
Professional Practice Commission of the International Union of Architects (UIA).
19  The information 
is organized according to the main sections of a questionnaire sent out to all UIA member sections.  
The issues addressed in the questionnaire include: adm ittance to the profession, dealing with training 
and internships;  professional practice, including details about various aspects of the profession in each country;  and transnational practice, regardi ng exercise of the profession in other countries.   
50. With respect to architectural regulation, it app ears that practice of the profession is regulated 
in most countries, barring certain exceptions.
20  Reportedly most countries do allow foreign architects 
to practise independently, provided certain pre-re quisites are met, such as proof of professional 
qualifications.  For countries not allowing foreign architects to practise independently, collaboration 
with a local architect is often stipulated.  In approximately one-third of the countries where this 
requirement exists, the association between the local and the foreign architect is established by mutual 
agreement between the parties, with no further conditions;  for the rest, there are established 
                                                      
18 The distinction between accredited and non-accredited professional services was discussed in the 
Uruguay Round Working Group on Professional Services.  See WTO document MTN.GNS/PROF/ W/1. 
19 The UIA, created in 19 48, is the worldwide professional bod y for architecture. It encompasses 
architectural organisations in 124 co untries and territories and represen ts more than 1.3 million architects 
worldwide. 
20 According to COAC, these include Belgium, Fi nland, Ireland, Macedonia, Netherlands, Sweden, 
Switzerland and the United Kingdom.  Belgian law, for example, regulates admittance to the profession (i.e. 
who may or may not practise), but not the profession as such; in the United Kingdom, the use of the title of 
architect is protected, but not its function. S/WPDR/W/48 
Page 14  
 
  requirements that must be met.  In jurisdictions where architecture is not regulated, there are often no 
specific requisites for practice on the part of foreign architects. 
51. It has been stated that the "[o]ver-riding rest rictiveness issue for arch itects is the ability to 
secure a license to practice arch itecture in a foreign country".
21  The most important related issues 
include the increasing significance of having a degree in architecture granted by an accredited school 
of architecture, and the proper documentation of po st-degree internship experience in order to qualify 
for licensing examinations.   
52. It is common practice for a foreign architectural firm to contractually affiliate with a domestic 
registered firm to complete a commission in anothe r country.  This avoids the need for the foreign 
architect to become licensed in th e country in which a project is lo cated.  The process is intended to 
provide the foreign architect with a partner who is experienced and well versed in the broad scope of 
the country's building codes, regulations, bidding pr actices and construction supervision.  However, 
there may be situations where the professional and regulatory bodies in the host country have a legitimate concern whether the domestic architect is  fully engaged in the process, and not merely 
serving as a "plan-stamper" on behalf of the foreign architect in order to get the project accepted and 
approved by local governing authorities.
22 
53. While solutions, such as collaboration with a lo cal architect, may help to overcome certain 
regulatory constraints, time-consuming procedures a nd difficulties associated with the recognition of 
foreign qualifications continue to impede international trade in this sector.  The expansion of mutual 
recognition agreements (MRAs) might seem the appropriate solution; however, these can prove 
onerous, time-consuming and resource-intensive to negotiate.  Hence, the profession is increasingly 
requiring greater cooperation between regulators and academic institutions, as well as greater reliance 
on international standards.  
2. Regulatory developments and issues  
54. Increased environmental concerns have resulte d in greater focus on architectural designs 
incorporating energy conservation, sustainability and green building technologies.  In the process of 
expanding architectural practices in to foreign markets, architects are responding to a rapidly changing 
set of building codes and standards related to envi ronment, sustainability, and disability access that 
are often much different from what exists in their home countries.  In a number of countries, national (and where relevant, State-level) regulatory bodi es have come under pressure from architects and 
professional associations within their jurisdictions to revise laws and regula tions and to accommodate 
changing global practices in order to  remain internationally competitive.
23   
55. Among the most significant changes in the rules and regulations of a number of domestic 
professional bodies has been the elimination of mandat ory fee schedules, prohibitions on advertising, 
and  prohibitions on offering alternative typ es of professional services, e.g. design-build.24  On the 
other hand, there are new regulatory requirements providing for continuing professional education to 
retain membership in a professional body and, in creasingly, to maintain a professional licence to 
practice.  Some regional examples of regulator y co-operation to facilitate the recognition and 
registration of architects are provided in Box 3. 
                                                      
21 Presentation by Russell Keune at the OECD-STRI meeting, July 2009. Available online at 
http://www.oecd.org/dataoecd/57/54/43231867.ppt  (accessed 5 March 2012). 
22 Russell Keune (2009), op. cit., pp. 6-11. 
23 Russell Keune (2009), op. cit., p.14. 
24 Design-build is a project delivery system in which a party other than the arch itect signs a contract for 
a comprehensive service to both design and construct a building for a fixed fee.    S/WPDR/W/48 
 Page 15 
 
 
  Box 3: Some examples of regional initiatives to fa cilitate the recognition and registration of architects 
 
European Union  
Within the context of regional economic integration, the European Union and the European Economic Area 
introduced the principle of free movement of professionals and the mutual recognition of diplomas.  Under 
Directive 85/384/EC of 10 June 1985, the "Architects Directive", as subsequently amended, each EU Member 
State recognised the diplomas, certificat es and other evidence of formal qualif ications awarded in the field of 
architecture by other Member States to nationals of Me mber States.  The "Architect s Directive" was repealed 
and replaced by Directive 2005/36/EC, as of 20 October 20 07.  The new Directive is a response to the 2001 
Stockholm European Council's recommendations calling on the Commission to design a more uniform, 
transparent and flexible system with the aim of achieving the Li sbon strategy objectives.  The Directive brought 
together in a single text the three Directives on the general system for the recognition of professional 
qualifications (recognition of diplomas, certificates and other evidence of higher education of long duration; 
recognition of other diplomas, certificates and other evidence of other professional education and training; and the mechanism for the recognition of qualifications  for crafts, trades and certain services).  
 
NAFTA 
The North American Free Trad e Agreement (NAFTA) contains certain di sciplines, such as objectivity and 
transparency, pertaining to the licen sing and certification of professional s, and a commitment to eliminate any 
citizenship or permanent residency requirement that a party maintains for the licensing or certification of 
professional service providers of another party.  If a party does not comply with this obligation, any other party 
may maintain an equivalent requirement.  The NAFTA al so encourages the relevant bodies in their respective 
countries to develop mutually acceptable standards and cr iteria for licensing and cer tification of professional 
service providers.  Back in 1994, based on the Unite d States – Canada Free Trade Agreement, the US 
architectural profession had already concluded an agreem ent with their Canadian counterparts on a series of 
requirements for certification applicable to US and Ca nadian architects.  It was an agreement between the 
National Council of Architectural Registration Boards (NCARB – a non-governmental, national federation of 
the official registration boards in 55 US jurisdictions) and the Committee of Canadian Architectural Councils 
(CCAC – a committee comprising all of the Canadian Provinci al Architectural Associations).  It is implemented 
by those States and Provinces that ratif ied the agreement, and this has meanwh ile been achieved by a majority of 
them.  
APEC 
Work in the Asia Pacific Economic Cooperation (APEC) context has advanced in the preparation of directories 
on the requirements for provision of  professional services, with priori ty on accountancy, engineering, and 
architecture.  Within the APEC Arch itect Framework, participating economies are able to negotiate bilateral 
arrangements which fast track registration of "APEC Architects" wishing to be registered in other APEC economies.  An example of this is the recently concluded agreement between New Zealand and Japan, which 
entitles New Zealand's APEC-registered ar chitects to registration in Japan, subject only to a test that examines 
their knowledge of aspects of the arch itectural process that are exclusive to  that economy.  The same situation 
applies to Japanese APEC-registered architects wishing to be  registered in New Zealand.  As stated in the APEC 
architect's manual, candidates for regi stration as an APEC Architect must be currently registered/licensed or 
otherwise professionally recognized as an architect in the economy that maintains the section of the APEC 
Architect Register to which application for admission is made.  Architects must submit documents to the 
appropriate Monitoring Committee th at show that they have comple ted an accredited programme of 
architectural education, fulfilled pre-re gistration experience requirements, have  practiced for at least seven years 
as a registered/licensed architect and satisfied any ad ditional requirements, all in accordance with criteria 
determined by the Central Council.  Architects may only be enrolled in the section of the APEC Architect 
Register in their home economy.  APEC Architect Registration applies only to individual persons, not to 
architectural practices or firms. 
 Source: Websites of NAFTA; APEC; EU and th e New Zealand Registered Architects Board
 
  
56. In light of the above, the following are some specific questions that Members might like to 
consider: S/WPDR/W/48 
Page 16  
 
  (a) How might co-operation between regulatory authorities in architecture, both at the 
inter- and intra- national levels, including with regard to time-consuming procedures 
and difficulties associated with the r ecognition of foreign qualifications, be 
improved? 
(b) To what extent would issues such as mandatory fee schedules, prohibitions on 
advertising, and prohibition s on offering alternative types of professional services, 
e.g.  design-build, fall under the scope of Article VI:4? 
D. E
NGINEERING SERVICES  
57. Asymmetric information between service s uppliers and service consumers provides an 
important rationale for the economic regulation of professional services, and hence of engineering.  
Engineering services, as professional services in general,  are considered by the economic literature as 
"credence" products, the quality of which can be ascertained only at some cost after purchase and 
consumption, and eventually might never be full y assessed.  They basically feature high pre and post-
buying costs of quality assessment.  Ultimately, c onsumers must have confidence in the professionals 
that provide the service, or the process regulating the profession. 
1. Regulatory context 
58. Two aspects of information asymmetry are c onsidered as being potentially deleterious: 
adverse selection and moral hazard.25  On the one hand, adverse selec tion in engineering services may 
result in a declining quality of services.  Lack of information on produc t quality (which can be 
revealed only after purchase, if at all) could result in customers being prepared to pay only an average 
price for an unknown (hence presumed average) quality, prompting producers of higher-quality 
services to abandon the market, thus reducing the av erage quality supplied by those remaining.  On 
the other hand, professionals may be faced with mo ral hazard, in cases where their own income goals 
run counter to the objectives of the clients, a nd where the asymmetry of information on the price-
quality relationship stands in the way of fair bargaini ng.  In such a situation there is a risk that the 
professional over-prices the service to the client, or s upplies a higher quality than necessary to satisfy 
the client's needs.  
59. Regulatory action is thus often motivated by the information-related problems.  To ensure that 
engineering services are of a certain quality, qualif ication and licensing requirements are used as ex-
ante quality control mechanisms.  In most countri es, engineering is considered an "accredited" 
profession.  Suppliers are required by law or re gulation to have minimum qualification and be 
licensed before they can provide engineering se rvices or indeed use the title of "engineer".  
Qualification requirements usually include a uni versity or another highe r educational degree, 
additional practical training, and a professional exam ination.  In a number of countries, all three 
requirements are a precondition for obtaining a licence to practise.  In addition, licensing requirements 
typically include other conditions such as know ledge of the local langua ge, good reputation, and 
residency or nationality.  Membership in profession al associations is frequently voluntary in the case 
of engineering services. 
                                                      
25 Paterson, I., M. Fink, A. Ogus, et al. (2003), "Economic Impact of Regulation in the Field of Liberal 
Professions in Different Member States" (report commissioned by the European Commission – DG 
Competition), Institute for Advanced Studies, Vienna . 
  S/WPDR/W/48 
 Page 17 
 
 
  2. Regulatory developments and issues 
60. The problem of information asymmetry has trad itionally been used in engineering services as 
a justification for fee setting or price controls (fi xed or recommended), restrictions on advertising, 
indemnity insurance, and the requirement of specifi c forms of business establishment.  Some of these 
regulations, e.g., relating to specific types of legal entities, would be disciplined in the GATS by 
Article XVI.  Some additional regulations usually  apply to engineering firms, not just the 
professionals.  These include local presence requi rements to supply specific engineering work; 
limitations on foreign ownership; minimum number of local directors and/or staff; partnership, 
association or joint-venture requirements; and restrict ions on hiring local professionals.  Again, some 
of these requirements, if discriminatory, may be subject to scheduling unde r the GATS.  However, 
other regulations, though hampering trade, might be beyond the scope of scheduling.  
61. As mentioned, regulations on engineering ser vices are frequently intended to ensure the 
quality of the service, the integrity of service providers, and the protection of consumers.  For example, residency requirements may help ensure  familiarity with local rules, and facilitate 
consumers' redress in case of professional malpractic e.  They may also promote suppliers' adherence 
to professional disciplines and codes.  Restricti ons on incorporation may limit the use of company 
type structures for the purpose of reducing the personal liability of professionals.  Licensing and 
qualification requirements may be designed to en sure standards of competence, performance and 
accountability.  Fee and advertising restrictions, for in stance, are sometimes jus tified on the basis that 
competition on costs may lead to reduced service quality.
26  That being said, excessive regulation can 
also stifle markets and eventu ally have an adverse effect on the price and quality of services.27   
62. Replies to surveys conducted by the OECD  reveal interesting information on actual 
regulatory practices.28  Price, advertising and marketing regul ation seems to be rarely applied.  
Qualification requirements vary.  Licensed engi neers are generally required to have a minimum 
period of university or higher education (mostly f our to five years, but not exceeding eight or ten 
years), often coupled with additional years of compulsory professional experience (from half a year to 
a maximum of five) and/or a professional examination.  Some countries complement the initial 
education requirement (e.g. univers ity degree) with compulsory professional practice, some also make 
it mandatory for individuals to take a professiona l exam after obtaining the university or higher 
education degree, while other jurisdictions apply th e three requirements – initial education, practice, 
and exam – in conjunction. 
63. Various studies that seek to quantify the impact of regulations affecting engineering services 
tend to confirm that the sector is subject to a generally lower level of regulation, than other 
professions.29  
64. In light of the above, the following are some specific questions that Members might like to 
consider: 
                                                      
26 OECD (1996), "International trade in professional services: Assessing Barriers and Encouraging 
Reform", Paris. 
27 OECD (2000), "Competition in Professional Servi ces", Directorate for Financial, Fiscal and 
Enterprise Affairs, Committee on Competi tion Law and Policy, DAFFE/CLP(2000)2, Paris. 
28 Paterson et al (2003), op.cit.; and Conway and Nicoletti (2006) "Product Market Regulation in the 
Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights", OECD Economics Department 
Working Papers , No. 530. 
29 Golub, S.S. (2003), "Measures of Restrictions on Inward Foreign Direct Investment for OECD 
Countries", OECD Economics Department Working Paper, No. 357; Koyama, T., and S. S. Golub (1996), 
"OECD's FDI Regulatory Restrictiveness Index: Revision and Extension to More Economies", OECD 
Economics Department Working Paper,  No. 525.  S/WPDR/W/48 
Page 18  
 
  (a) Could cooperation between regulatory au thorities (including non-governmental 
bodies) complement the development of VI :4 disciplines?  If so, should disciplines 
take account of industry initiatives, particul arly with regard to the development of 
education and professional standards? 
(b) Do Members share the view that, compar ed to other professions, engineering is 
subject to a generally lower level of regulation? In any case, where are the most 
significant problems from a trade perspective and how might disciplines under VI:4 address them?  
E. C
OMPUTER AND RELATED SERVICES  
65. A variety of government regulatory measures have  an effect on the growth and development 
of computer and related services (CRS).  Key areas include labour policies (work permits/visas, 
education, training), research and development s upport, protection of intellectual property rights, 
technical standards, tariffs on computer e quipment, and government procurement.   
1. Regulatory context 
66. Many governments are designing policies and initia tives to encourage the spread of new and 
high-bandwidth telecommunication services.  The implications for businesses and the computer 
services industry are substantial.  As a result, th e industry is more sensitive today to a variety of 
regulations affecting telecommunica tions, cited in the telecommunications section of this Note.  Like 
other ICT-enabled business services, growth of trade in computer and related services relies on 
increased transnational investment, ease of globaliz ed sourcing, labour skills and productivity, as well 
as the availability of modern and affordable commu nications infrastructure.  Other key regulatory 
areas that have an effect on the sector include not only those cited earlier, but increasingly also those 
related to intellectual property, privacy, censorship,  national security and cyber-crime.  In a sector that 
in most countries has been subject to little direct  regulation in the past, the perceived need for 
adopting regulation in these areas has posed a challenge for govern ments and companies alike.   
2. Regulatory developments and issues 
67. Regulations promoting competiti on in broadband, leased lines, mobile and satellite services, 
i.e. the means of delivery for computer and related services, will be a key factor determining the competitiveness of economies with interests in the s ector.  The trend in on-line capabilities to deliver 
computer services and software will continue to expand as penetration of broadband technologies 
rises.  The trend also contributes to greater potential for the offshoring of computer and related services, a topic raised in the section of this Note on cross-border supply.  Therefore, emerging trends 
in Internet regulation and attempts by governments to improve oversight of cross-border activity may 
have an unavoidable impact on trade in CRS. 
68. Other areas of regulation have gained in rele vance to the supply of computer services and 
software as they move to an on-line environmen t.  These include intellectual property rules, 
regulatory intervention to enhance infrastructure investment, particularly in broadband and on-line 
security and privacy.  Greater bandwidth availabilit y has the potential, for example, to support an 
emerging commercial model referred to as "cloud computing", whereby a service supplier may host 
not only data but also softwa re applications and servers.
30  By supporting a trend in which consumers 
and companies no longer need to own and operate th eir own software and computing infrastructure, 
the provision of cloud-based software and computer  services increases the importance of regulations 
                                                      
30 Weber, Jonathan (5 May 2008), "Cloud Computing", Times Online .  S/WPDR/W/48 
 Page 19 
 
 
  related to data security and privacy.  At the same time, the trend towards great er regulation of Internet 
and Internet services may have important implications  for the supply of computer and related services. 
69. Regarding intellectual property, and as also discu ssed in the audio-visual section of this Note, 
Internet and other forms of on-line supply of services have made it more difficult than in the past to 
police the copyrights and patents that have helped  promote an innovative culture in the computer 
services and software industries.  Such concerns  have prompted industry associations to focus 
increasingly on cyber security, Internet governance and the enforcement of intellectual property 
rights.31   Also of note, as cited in the audio-visual section, are the difficulties confronting companies 
supplying global cross-border services, when copyri ghts and patents remain the domain of individual 
national jurisdictions.  
70. It is worth noting that regulations related to some broader areas have a bearing on trade and 
competitiveness in computer and related services.   These include equipment trade and tariffs, 
education (both generally and par ticularly in relation to IT skills), competition policy, and the 
liberalization of markets for IT-enabled services an d major IT user industries.  Regulations with 
respect to mergers and acquisitions, for example,  and other elements of competition law have 
increasing relevance as the industry and many of its key players emerge and mature from their early 
days as small, start-up companies.  Policies and regulations affecting research and development also 
remain important for the sector as employment in R&D-related computer services and software 
development activities is significant.  
71. Many of the newer regulatory trends in the CRS industry concern issues such as security, 
privacy and intellectual property rights.  Such issu es are not directly related to work under WPDR 
and, in some instances, may be related to broa der policy concerns covered by exemptions under 
Article XIV.  To some extent such issues have ar isen from time to time over the life of the electronic 
commerce Work Program of the WTO, but without conclusions.   
72. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) What may be an appropriate forum to discuss the trade effects on CRS of emerging 
regulations in these areas?  
(b) Are possible guidelines on the application of Article XIV to CRS and other affected 
service industries, such as telecommunications, audiovisual or other cross-border services, an avenue worth exploring? 
F. P
OSTAL AND COURIER SERVICES  
73. Postal and courier services form a key part of  the global communications infrastructure, with 
high economic and social importance.32   In recent decades, postal ser vices have undergone radical 
changes — from a regulatory, operational and tec hnological perspective — throughout the world.  
Traditionally, the postal sector has been characterized by state-owned monopolies providing basic mail services and privately-owned courier companies supplying expedited delivery services. 
74. Today, such a distinction is put into questi on by the radical changes that the sector has 
undergone and is still experiencing.  Traditional po stal operators and private delivery companies, 
including global express delivery firms, are competing in a new business environment, using new 
                                                      
31 See, for example, a White Paper of the Business Software Alliance (2008), "Necessary Elements for 
Technology Growth". 
32 For the purpose of this Note, postal and courier services include express delivery services. S/WPDR/W/48 
Page 20  
 
  technologies and expanding into new business segmen ts.  While many liberalization initiatives have 
succeeded, they have also highlighted the importa nce of properly addressing certain basic regulatory 
issues.   
1. Regulatory context 
75. Market-oriented postal reforms have been undertak en in most countries, to different degrees:  
public postal operators have been corporatized a nd/or privatized, and the scope of postal monopolies 
has been reduced or even abolished in some cases.  As a result, the traditional dividing line between 
private and public operators has become much less clear.  Key facets of market-oriented postal reform 
relate, on the one hand, to the corporatization and privatisation of postal operators and, on the other 
hand, to the liberalization of postal mark ets and related regulatory developments. 
76. While more and more countries have chosen to open postal and courier services, the key issue 
facing these countries is how to regulate this sector in the context of liberalization.  In fact, this is also 
the main concern of those countries that are hesitant  to pursue liberalization in this sector, especially 
given the fact that the experience of some countries did not always lead to better performance.   
2. Regulatory developments and issues 
77. In this regard, several specific, sometimes inte rrelated issues affecting trade in this sector, 
need to be addressed.  
(a) Universal Postal Service 
78. The first key regulatory issue to be addressed in this sector is related to the provision of a 
universal postal service.  This is a generally rec ognized concept as postal services are essential to a 
country's economic and social development.  It is also an obligation in international law for most 
countries, which requires governments to ensure that quality basic postal services are provided to all 
areas in their territory at affordable prices.
33  In a liberalized environment where competition exists, 
the way universal service is administered matters because it may have an impact on market access and 
competition.  In principle, each country needs to  clearly define the universal service it wishes to 
maintain, calculate the costs of the provision of universal service and secure the financing of these 
costs in a transparent, non-discriminatory and co mpetitively neutral manner.  However, it is not 
always easy to do so in practice.  To determin e the actual costs of providing universal service is 
considered to be one of the biggest and most problematic issues in postal regulation.  More 
specifically, the challenge is to determine the di fference between the costs of providing a universal 
service and the income generated from it.34   
79. While monopoly is no longer regarded as the only way to support universal service provision, 
most countries, particularly developing countries,  still choose to grant universal service providers, 
usually state-owned postal operators, certain exclusive rights, called the reserved area.  Perhaps this is 
because many governments find it difficult to otherwise finance universal services35 or because 
incumbent postal operators are unwilling to give up the exclusive rights and related privileges they 
enjoy.   
                                                      
33 See Article 1 of the Universal Postal Union (UPU) Convention.  The UPU now has 191 member 
countries. 
34 UPU (2004), "Postal Regulation: Principles and Orientation", Bern, p.18. 
35 Some studies show that the provision of universa l service in a liberalized postal markets cannot be 
taken for granted under all circumstances, even in developed countries.  See Vincenzo Visco Comandini (2002), 
"The Provision and Funding of Universal Service Obligation in a Liberalized Environment", in Damien Geradin (ed.), The Liberalization of Postal Services in the European Union, Kluwer Law International, Great Britain, 
pp. 221-234.  S/WPDR/W/48 
 Page 21 
 
 
  80. A World Bank study points out that postal sector policymakers in both developed and 
developing countries are continuously attempti ng to compromise between the objectives of 
introducing competition and dismantling barriers to entry, and ensuring the financial stability of traditional monopolies entrusted with the universal service mandate.
36  It should be noted that even if a 
reserved area is maintained, the regulator still needs to clearly define its scope so that a clear line 
could be drawn between competitive and non-competitive activities.  Lack of clarity in the reserved 
area leaves room for discretion.  For example, some  countries define the reserved area simply in terms 
of the activities of the public provider.  While in other cases there is a general reference to letters 
and/or parcels, but without indication of the wei ght, price or level of service contemplated (e.g., 
whether the monopoly relates to basic delivery or express services), with monopoly rights defined 
very broadly in relation to universal service objectives.  Since the purpose of the monopoly is to 
generate funds needed to cover additional costs of pr oviding universal service, it is desirable to define 
the reserved area based on such cost s so as to increase competition in postal markets.  Obviously, the 
narrower the reserved area, the more market acc ess possibilities for other operators, especially new 
entrants.  Nevertheless, in clarifying the scope of th e reserved area as part of their postal reform, some 
countries have actually reduced the scope of de facto  competition.37   
81. In the light of the experience in telecomm unications, some countries are considering a 
universal service fund as an alternative or complement  to the reserved area to support such services in 
liberalized markets.  However, it appears more difficu lt to define the tax base and the tax rate in postal 
services than in telecommunications.  Most posta l operators have engage d in non-postal businesses 
(e.g. banking, insurance, retail, etc.), and big posta l and delivery operators, called "integrators", have 
combined delivery services with transport, freight  forwarding, customs brokerage and logistics 
services.  This raises several questi ons such as the eligibility of companies for contributing to the fund 
and parameters for tax (e.g. mail volume or total re venue).  The concern is that the universal service 
fund may increase transaction costs of operators in delivery and other services and distort competition.
38 
(b) Competition 
82. Another key regulatory issue in this sector is  how to prevent anti-competitive practices in 
liberalized markets.  This beco mes an issue because incumbent postal operators, particularly those 
still holding a monopoly, may abuse their dominant pos ition when competing with other operators.  
Cross-subsidization is one of the main anti-competi tive practices in this sector.  Often linked to a 
postal monopoly, it refers to financing competitive services with resources gained in non-competitive 
services by incumbent postal operators.  Practices in this regard have already led to several litigations 
in the European Union and in the NAFTA.39   
83. For instance, many countries in Europe (fo llowing the EU Postal Directive) require 
accounting separation of the competitive and non-competitive activities of the incumbent's postal business as a mechanism for detecting cross-subsidi zation.  Some countries require that competitive 
                                                      
36 Boutheina Guermazi and Isabelle Segni (2005), "Postal Policy and Regulatory Reform in Developing 
Countries", in World Bank,  The Postal Sector in Develop ing and Transition Countries, p. 47. 
37 WTO (2010a), "Postal and Courier Services",  Background Note by Secretariat, document 
S/C/W/319, p. 69 and footnote 76. 
38 Vincenzo Visco Comandini (2002), op. cit., pp. 229-230.  One of the main concerns that China's 
draft Postal Law has generated is its provision on universal service fund.   See WTO (2007), "Communication 
from the United States – Transitional Review Mechanism Pursuant to Paragraph 18 of the Protocol of Accession of the People's Republic of China ("China") – Questions from the United States to China", document 
S/C/W/289, 5 November 2007. 
39 For example, UPS filed a complaint with the European Commission against Deustche Post in 1994, 
and a complaint against the Canadian Government in 2000 under the NAFTA with regard to the anti-
competitive practices of Canada Post.   S/WPDR/W/48 
Page 22  
 
  services be provided by a financially independent subsidiary of the incumbent postal operator.  
Privatization of state-owned postal operators or el imination of the reserved area is suggested as a 
structural approach to preventing anti-competitive cross-subsidization.
40  The third EU Postal 
Directive requires the majority of Member States (95 per cent of EU postal markets in terms of 
volume) to abolish exclusive rights by 1 January 2011 and by 1 January 2013 for the rest.  Germany 
(2008), Finland (1991), Sweden (1992), the United Kingdom (2006), Estonia (2009) and the 
Netherlands (2009) have already abolished the r eserved areas before the date foreseen in the 
Directive.  EU candidate countries are at diffe rent stages in the transposition of the postal acquis.  
(c) Licensing requirements and independent regulator 
84. There are concerns that licensing may be used to  restrict market entry after liberalization, 
particularly in some countries where, to date or not  long ago, no sectoral license has been needed for 
providing some services, notably express delivery se rvices.  According to a World Bank study, some 
countries have engaged in regulating the market th rough levying high license fees on competitors as a 
contribution against universal service costs borne by the universal service provider; in most cases the fees are calculated without detailed studies of the actual costs of the perceived universal service 
obligation.
41  Governments need to balance the necessary regulatory role a licensing system may play 
and the burden that it may impose on business.   
85. Lack of an independent regulator is raised as a concern in liberalized postal markets.  In many 
countries, public postal operators used to be entrus ted with administrative functions, including issuing 
licenses, setting prices, monitoring the market, et c.  Even when transformed into commercial 
corporations and deprived of administrative functio ns, they remain publicly owned and thus maintain 
a close relationship with governments.  To avoi d conflicts of interest and guarantee neutrality vis-à-vis  
all operators in the market, independence of the regul ator must be ensured.  There is no single model 
for postal regulators. Some countries have establis hed a separate postal regulatory body.  In some 
other countries, the regulatory authority is located within the Ministry of Communication or the telecommunication regulatory body.   
(d) Border procedures and shipment requirements 
86. Cumbersome and opaque border procedures for customs clearance and inspection may lead to 
undue delay at customs and, thus, have a negative im pact particularly on express delivery operators as 
they need to guarantee timely delivery.  In some  countries express operators are also affected by 
weight or value restrictions on their shipments, e.g.  limiting express items to those weighing less than a certain quantity, and barring them from expedite d processing at customs.  In response to these 
problems, some preferential trade agreements (PTAs) contain a specific provision on express 
shipment in the chapter on customs administrati on, which is aimed at facilitating customs clearance 
for express delivery services.  This provision usua lly requires parties to provide for pre-arrival 
processing of information, permit the submission of a single document, minimise required release documentation, and allow for an express shipment to be  released within six hours of the submission of 
necessary customs documentation.  In some PTAs, parties are additionally required to provide a 
separate and expedited customs procedure for express shipment, without regard to weight or customs 
value, and assess no customs duties or taxes and require no formal entry documents for express 
shipments of low value.   
87. As many countries undertake further postal re form to liberalize further and increase 
competition in their markets, more emphasis may need to be put on regulatory issues, both 
domestically and internationally.  At  the international level,  some PTAs contain additional disciplines 
                                                      
40 OECD (1999b), "Promoting Competition in the Postal Sector", Paris.   
41 Boutheina Guermazi and Isab elle Segni (2005), op.cit.  S/WPDR/W/48 
 Page 23 
 
 
  or regulatory commitments, particularly related to express delivery services; in the DDA negotiations, 
negotiating proposals as well as some Members' offers with respect to postal and courier services suggest that scheduling additional comments under th e GATS could be an instrument to deal with 
these issues.   
G. T
ELECOMMUNICATIONS  
88. The global environment in which telecommunication services are traded today is 
predominantly a competitive one, characterized by more open cross-border trade and foreign direct 
investment.  Cross-border trade increasingly encompass not only the traditional cross-border supply of services via termination, but also the uptake of ne w customers within foreign markets far from where 
the supplier is physically located.  The comb ination of rapidly growing and liberalized 
telecommunication markets has presented both cha llenges and opportunities for regulators.   
1. Regulatory context 
89. The Reference Paper on regulatory principles in  telecommunications has helped shape the 
regulatory environment in this sector over the past decade (see Box 4).  It has served as a blueprint for 
sector reform in WTO Members and in count ries wishing to accede.  Even WTO Member 
governments who have not yet committed to its provis ions have adopted similar principles, either by 
directly borrowing from it, or by adopting best pr actices consistent with the Reference Paper.   
Box 4: Reference Paper on Regulatory  Principles for Telecommunications 
 
The Reference Paper is a set of regulatory principles for trade in telecommunication services.  It is legally 
binding for those WTO governments which have committed to it by appending the document, in whole or in 
part, to their schedules of commitments as an additional commitment under the provisions of GATS Article XVIII.  
 
The Paper contains a series of definitions and principles for the prevention of anti-competitive practices.  It also 
provides principles for interconnection, universal se rvice, transparency, licensi ng criteria, independence of 
regulators, allocation and use of scarce resources. 
 More than 82 Member governments have attached the Reference Paper to their schedule of specific 
commitments.
42   About seven Members have made commitments to some, but not all, of the provisions, or have 
appended their own versions.  Every government  that has acceded to the WTO since the basic 
telecommunications negotiations has also taken on these disciplines.  In the Doha Development Agenda 
negotiations, some governments have made offers that would commit for the first time telecommunications 
services and that include the disc iplines in the Reference Paper.  
 
Source: WTO (2009a), "Telecommunica tion Services", Background Note by the Secretariat, S/C/W/299. 
 
90. Regulators nevertheless continue to face  many new challenges as the transition to 
competition, new technologies and the convergence of different services and industries with traditional telecommunications take hold.  Often, regulators find themselves in relatively uncharted 
territory, particularly for developing economies where regulatory solutions employed in industrialized 
country governments may be difficult to adapt or le ss well suited to their circ umstances.  In some 
cases, however, new regulators with a relatively blank slate can now pick and choose from a wide variety of best practice options that others have  developed, and avoid adopting outdated regulatory 
practices from the start.   
                                                      
42 Counts EC Member States individually. S/WPDR/W/48 
Page 24  
 
  2. Regulatory developments and issues 
91. Over the past decade regulatory practices have  evolved, mostly in a positive direction as 
regards the facilitation of trade in telecommunicat ions, as governments have reconsidered historic 
practices in favor of more flexible frameworks.  The regulation of traditional telecommunication 
services is experiencing a trend toward more light-h anded approaches.  However, despite a dramatic 
opening of markets over the past decade, incumbent operators (i.e. the former  monopolies) still retain 
a dominant position in most economies.  For this reason, the maintenance of competition safeguards 
such as those dealt with by the Annex on Telecomm unications and the Reference Paper has continued 
to be an important feature of telecom reforms.  At the same time, Internet services appear to be 
passing from a state of little or no regulation into the realm of greater regulatory intervention, often 
due to perceived needs to address a number of broader policy concerns.  
92. As regards convergence, it is increasingly clear that a fine distinction between telecom and 
computer services, and, in some respects, audio-visual services provided over telecommunication networks, is difficult to make.  Services across these sectors can now more frequently be provided over the same network platforms and by a single supp lier.  Problems can arise, however, due to the 
often very different regulatory traditions to whic h the services now converging were subject in the 
past.  Moreover, this means that the telecommuni cations, computer services and audio-visual sectors 
increasingly face some common regulatory concerns .  Some of the areas where cross-cutting 
regulatory issues may arise are briefly noted, below.  
(a) Licensing practices 
93. Licensing practices have evolved in recent years to include more flexible regimes as well as 
the reduction or elimination of licensing requirements for some services.  Some Members have 
introduced unified licenses which are service-neutral,  allowing suppliers to provide different services 
(e.g.  fix and mobile) under a single license.  Examples of governments offering unified licenses include Hong Kong, China;  India;  China;  Bots wana;  Nigeria;  and Saudi Arabia.  Other Members 
have introduced technology-neutral licenses which allow companies to choose the technology they 
will use to provide services or to transition to ne wer technologies without needing an additional or 
new license.  Some of the governments now issui ng technology-neutral licenses for certain services, 
typically wireless, include Chinese Taipei, Estonia,  Niger, Nigeria, Sweden, the United Kingdom, and 
the United States.  All licenses are technology-neutral in Bahrain, and Pakistan has announced plans to offer technology-neutral mobile licenses dur ing 2012.  Such licenses have involved a 
complementary shift to more flexible spectrum polic ies (see below), such as the award of frequencies 
on a technology neutral basis.  It is also becomi ng somewhat more common not to require licenses for 
many forms of value-added and non-facilities based telecommunication services. 
(b) Spectrum management 
94. Compared with other sector reforms, spectrum policies have been slower to  change, perhaps 
due to the complexity of the area.  More recently, however, there are signs of a rethinking of practices 
so as to better adapt technical, allocation and assignment decisions to competitive environments.
43  
Spectrum auctioning is already common in many markets and, in a few cases, experiments in spectrum trading have been initiated or are being contemplated.
44  In another form of enhanced 
flexibility, some governments now encourage sp ectrum sharing among operators and technology-
neutral frequency awards are becoming more common.  However, the challenges can be considerable.  
                                                      
43 See, for example, Wellenius, B and I. Neto ( 2008), "Managing the Radio Spectrum: Framework for 
Reform in Developing Countries", World Bank Policy Research Working Paper , No. 4549. 
44 See, for example, Ibarguen, Giancarlo (2003),  "Liberating the Radio Spectrum in Guatemala", 
Telecommunications Policy , Vol. 27, pp 543-664.    S/WPDR/W/48 
 Page 25 
 
 
  In some cases, existing holders must be migrated out  of certain frequency slots and technical harm or 
interference issues must be resolved.  Nevert heless, increasing demand on spectrum resources, as 
mobile technologies become a predominant form of  delivery and satellite services more affordable, 
requires innovative solutions.  Increased demands on spectrum are also brought to the fore as the 
audio-visual sector continues to expand and as high-bandwidth telecommunications technologies 
move into the delivery of video, Internet and te levision services.  In an era of global trade in 
telecommunications, there is also a need to ensure  that the solutions are competition-friendly.   
(c) Access pricing:  Interconnection, mob ile termination and mobile roaming 
95. Certainly, regulation of traditional interconn ection involving links to incumbent fixed 
networks remains critically important to competitiv e markets.  However, ne w issues are arising as 
technologies change and other operators  take on larger roles.  In some markets, operators of fixed 
telecommunications are transforming their facilities in to IP-based, so-called ne xt-generation networks 
(NGNs).  This prospect is attracting renewed regul atory debate.  Some observers argue that neither 
interconnection regimes developed for the Internet  (e.g. peering) nor those used for traditional 
telephony networks are most suitable in the NGN c ontext.  In addition, as it becomes more common 
for audio-visual content to be delivered over te lecommunication facilities, questions of access or 
interconnection rights for the last mile to the custom er premises can arise for audio-visual suppliers 
who find themselves in competition with operators for the same services.  However, as regards 
reasonable and non-discriminatory access obligations, audio-visual services are not covered by the Annex on Telecommunications. 
96. Questions about mobile interconnection or call te rmination rates in the domestic market have 
arisen over the past decade with the rise in popularit y of mobile phones.  Experts have questioned, and 
continue to explore, why presumably competitive ma rkets have been insufficient to lower mobile 
pricing.  During 2010-2011, governments striving to reduce mobile termination rates included 
Bahrain, Egypt, France, Italy, Kenya (for SMS), Me xico, Poland, Portugal, South Africa, Sweden and 
the United Kingdom.  In some cases, (e.g. Bahrain a nd Turkey), regulators have made determinations 
of dominance regarding mobile termination markets.   
97. International mobile roaming charges have also become an issue due to  the exceedingly high 
prices charged to customers who use their phones abro ad.  As with mobile interconnection, regulators 
are questioning why a presumably competitive market is  able to sustain such high price levels.  Most 
regulatory tools for dealing with market imperfecti ons, if this phenomenon can be considered as such, 
rely on control or dominance.  Some regulators f eel the problem is associated with the lack of 
transparent regulations, while others see it mo re as a failure of competitive conditions.   
98. Finally, so-called network neutrality debates that  have taken hold in the United States, and to 
some extent Europe, involve fa irness of access concerns.  Al though often seen primarily as a 
consumer issue, the debate also has implicati ons for businesses using or delivering their services over 
the Internet.  Most importantly, the debate cont ributes to shifting the perspective on how Internet 
service providers might be more actively regulated in the future.  
(d) Universal service in a new environment 
99. According to one observer, as mobile substitutio n occurs, the traditional paradigm of fixed 
line as the universal service obligation is no longer valid and the rules must be changed.
45  Already, 
some governments are supplementing universal service obligations with additional criteria, such as 
extending access to the Internet, in general, or broa dband services, in particular.  Many experts see 
                                                      
45 Chun-Mei, C., Hsiang-Chih, T and Chi-Kuo, M. (2008), "Income, affordable and threshold effects on 
FMS in the developed and developing economies", Telecommunications Policy,  Vol. 32, No. 9-10. S/WPDR/W/48 
Page 26  
 
  this as the best incentive for ensu ring that competition flourishes in  new technology environments.  
Affordable access for certain under-served or less well-off population groups is now seen by 
governments as not only a way to close the so-called di gital divide, but also as a means to provide for 
the livelihoods of these people and th e sustainability of  communities.  In efforts to seek additional 
revenue for network build out and ra ising penetration levels, in some markets a variety of new fees or 
taxes are being imposed on service suppliers, includi ng, for example, fees on international incoming 
traffic.  Where specific obligations or contributi ons placed on operators appear necessary to meet 
universal service goals, governments need to bear  in mind Reference Paper principles such as 
"transparent, non-discriminatory and competitively neut ral".  These principles remain as important for 
the implementation mechanisms in new environments as they were to universal service schemes 
linked to fixed telephony.   
(e) Subsidies and other incentives to broadband 
100. In what has become a race to adopt and spread the use of broadband technologies, a number 
of governments have experienced frustration with  the slow introduction by companies and limited 
uptake by customers.  Since broadband technologi es can deliver more and better telecommunication 
services as well as a wide variety of other information services, they are central to many e-
government and economic stimulus initiatives.  Broa dband services are also thought to be critical to 
the ability of an economy to remain competitive in gl obal markets for international trade in goods and 
services.  Some governments, as mentioned above, have folded broadband into universal service 
policies, while others have develope d dedicated funds to spur its grow th and development.  Yet others 
have taken a hands-off, market driven approach.
46  Some schemes recently instituted or under 
consideration hint more at outright subsidi es to operators selected to undertake commercial 
deployment of broadband offerings.  If not undert aken with prudence, such policies could risk 
upsetting the competitive balance between market players.  
(f) Security, privacy and piracy regulation vs. free flows of information and trade 
101. Increasing concerns about cybercrime, cybersecurity, individual privacy, copyright 
infringement and inappropriate content have come  to the fore as the Internet has matured as a 
ubiquitous global service.  While considered legitima te and important, tensions  have arisen regarding 
the manner in which different governments are moving to address these issues.  Of particular concern 
is the possible impact of regulations on the free flow of information.  It is not only telecommunications, but also computer and audio-vi sual services, which are potentially affected.  One 
of the key concerns of the telecommunications in dustry has been the liabi lity of Internet access 
suppliers, who must usually take the brunt of responsibility for implementing and enforcing new 
regulatory initiatives.  Some in the industry argue that certain emerging regulations may not achieve a 
desirable balance but overreach their objectives with onerous trade-inhibiting regulations on service 
suppliers.   
(g) Other regulatory issues 
102. Other regulatory issues that have emerged in recent years include local loop unbundling, co-
location of facilities, number portability and dia lling parity.  Looking at the telecommunications 
provisions of PTAs, there has also been a trend toward  the expansion of some of the benefits included 
in the WTO Reference Paper to value-added service s uppliers.  Finally, with th e growth and expansion 
of mobile companies, vigilance over mergers and ac quisitions in this sub-sector that might have anti-
competitive effects has become increasingly important. 
                                                      
46 See, for example, Huigen, J. and Cave, M. (2008), "Regulation and the promotion of investment in 
next generation networks—A European dilemma ".  Telecommunications Policy , Vol. 32, No. 11. Among other 
things, the authors suggest that the incentives to invest  are weaker in markets with only one fixed network.  S/WPDR/W/48 
 Page 27 
 
 
  103. To a considerable extent, the existing provisi ons of the Annex on Telecommunications and 
the Reference Paper on telecom regulatory principl es go a long way to addressing regulatory issues in 
the sector, both as regards Article VI:4-type measure s as well as competition policy.  Concerns related 
to interconnection, and mobile te rmination and international roaming are examples of issues that may 
be adequately addressed by these disciplines. 
104. Two areas where new regulatory trends are taking hold are spectrum management and 
Internet – areas which are dealt with only margina lly in the existing disciplines.  New universal 
service policies and mechanisms are also evolving as communication services are ever more important to achieving economic and social objectives.  However, in some instances, this has led to 
additional fees or charges on certain services or s uppliers, but not on others.  Also, in some cases 
subsidy programmes be yond the existing universal services mechanis ms have been instituted, e.g. to 
promote broadband development.    
105. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Is there a need to take a closer look at emerging Internet regulation or to take 
initiatives to help ensure that new spectrum policies will be both competition friendly 
and GATS consistent? 
(b) Could it be advantageous to exchange in formation on some of the new and emerging 
practices in this regard and review so me of the possible GATS implications? 
H. A
UDIOVISUAL SERVICES  
106. The audiovisual sector's importance stems from the fact that it has economic as well as social 
and cultural components.  The sector is skill-intensive.   It is also a leading user of new technologies 
and therefore a driver of investments in network infrastructure.  Government policies often play a 
significant role in the sector, whether to promote domestic cultural content or ensure diversity and 
pluralism, protect intellectual property rights, regu late advertising practices, or to proscribe illicit 
content.   
1. Regulatory context 
107. Audiovisual services are typically subject to a wide array of government regulations, due to 
the sector's social, cultural and economic importance.   Regulations may relate, for example, to the 
protection of intellectual property, competition, protection against illicit or offensive content, 
advertising, or language requi rements as regards subtitling and dubbing.  A number of issues 
discussed under the above section on telecommunication services (e.g. interconnection, spectrum 
management) can be of relevance for audiovisual services, though they are not mentioned here to 
avoid duplication.47  
2. Regulatory developments and issues 
108. The sector has undergone - and will continue to experience - significant change as a result of 
technological advances.  Among other things, these ma ke it easier, in terms of cost, quality and time, 
to transmit greater amount of content within and acr oss borders; allow content to be distributed on a 
variety of platforms and devices by diverse operato rs; and give greater control to consumers over 
                                                      
47 Audiovisual services in the Services Sectoral  Classification List (MTN.GNS/W/120) includes 
broadcasting as defined in CPC Prov. 7524.  A number of issues mentioned in this section may also be of 
relevance for telecommunications services.  S/WPDR/W/48 
Page 28  
 
  what they want to watch or listen, when, wher e, and how.  This naturally has consequences for 
economic operators as well as regulators.     
(a) Convergence-related regulatory issues 
109. Convergence confronts governments with the ch allenge of reconciling previously distinct 
regulatory frameworks.  In the past, each type of c ontent had a dedicated network.  Television content 
was delivered over one technology, but now, in additi on to traditional broadcasters, the same content 
can be transmitted by cable, mobile and fixed-line phone companies,  or Internet access providers.  
While broadcasters have traditionally been subject to more regulation, including with respect to 
content, telecommunication companies tended to be re gulated to a lesser extent, with a greater focus 
on carriage regulation and competition rather than cont ent.  Convergence and the arrival of such new 
systems as Internet Protocol Television (IPTV) or  mobile television challe nge regulatory frameworks 
based on traditional distinctions.  As a result, in r ecent years, many countries have adopted, or have 
plans to adopt, new policies to address the co nvergence of telecommunications, information 
technology and broadcasting.
48   
110. Emerging regulatory approaches tend to provide an enabling policy environment that aims to 
facilitate convergence.  Recent research suggests that failing to do so can create barriers to 
competition, and slow down the development of information communications technologies (ICT) to 
the detriment of users (e.g. expanded reach and vari ety of services, lower prices) and service suppliers 
(e.g. capacity to leverage existing infrastructure to  provide a wider range of services at lower cost).49 
111. One area where regulatory frameworks may need to  be revisited relates to authorizations and 
licensing.  For one, licensing regimes may have to be  adapted to reflect the fact that licensees can 
offer similar services using different networks.  Coun tries used to only permit the delivery of specific 
services over a given network − and many still have regulatory regi mes based on such an approach.  
Such traditional regulatory frameworks may preven t network owners from providing services that 
they are now capable of supplying (e.g. television programming over the phone line or, from a telecom point of view, cable companies being allowed to provide telephony services).  Various 
countries are now moving to an approach focusing on the services being supplied, and are less 
concerned with the technology used to supply them .  Still, if unclear or too complex, licensing 
procedures for such 'converged' servic es would raise suppliers' entry costs.
50   
112. Another important regulatory objective in the emerging environment is to ensure a level 
playing field.  Broadcasting, telecom and Internet service suppliers have in the past been subject to 
different regulatory frameworks, and hence different  rules and requirements.  Nowadays, to promote 
competition and avoid creating distortions, it will be necessary to reduce asymme try in the rules that 
apply to similar services.  For example, governme nts may need to evaluate whether differences 
between telecom operators and broadcasters as regards rules on content requirements, concentration limits, or mergers and acquisitions should remain.  At the same time, distinctions in the regulatory 
regime can be important, such as when stricter rule s are applied to dominant firms to ensure they do 
not abuse their market power. 
                                                      
48 World Bank (2007a), "Regulatory Trends in Service Convergence", World Bank Working Paper , 
Washington;  OECD (2007c), "Policy Considerations for Audio-Visual Content Distribution in a Multiplatform 
Environment", Paris. 
49 Singh, Rajendra and Siddhartha Raja (2010), "Convergence in Information and Communication 
Technology", World Bank, Washington D.C.  
50 Ibid; OECD (2004a), "The Implications of Convergence for Regulation of Electronic 
Communications", Paris.    S/WPDR/W/48 
 Page 29 
 
 
  113. Convergence has had an impact not only on regulations, but on regulatory agencies.  
Typically, different regulators or bodies oversaw diffe rent areas, for example one for broadcasting and 
another for telecommunications.  While converged regulators have emerged in some cases, what 
arguably matters to a greater extent is the coordination between different agencies − or within a 
converged agency − to reflect and implement a regulatory fra mework better adapted to convergence.  
Indeed, conflicts between regulators over compet encies can delay important decisions (e.g. the 
introduction of IPTV services in Korea).51 
114. In a related manner, technological advances, in  particular the growth of video on-demand, 
have led to modifications in regulatory approaches.  As noted in S/C/W/310, in the European Union, 
the recent Audiovisual Media Services Directive c overs all audiovisual media services, not only 
traditional broadcasting, but also online and on-dema nd audiovisual content.  It draws a distinction 
between linear (with a programme schedule such as  conventional television) and non-linear services 
(video on-demand).  The latter are subject to a number of rules (e.g.  advertisi ng, protection of minors, 
prohibition of illicit content) on the same footing as traditional linear services so as to ensure similar treatment.  Sometimes, though, the non-linear services are subject to less strict rules, recognizing that 
consumers have greater control and choice in that context.   
(b) Competition and other regulatory issues 
115. As with other sectors, a well-functioning audi ovisual market requires appropriate regulation 
of cartels and anti-competitive practices, for example to monitor the extent and effects of vertical 
integration.  While it may yield economic efficiencies  that benefit consumers, vertical integration can 
also raise competition concerns.  For example, an  entity's control of television programming rights 
and distributor platform(s) may enable discrimina tion against competitors in the downstream market, 
unduly reducing their access to content.  Discrim ination can also occu r when anti-competitive 
conditions in the downstream market unduly deny  access of content producers to distribution 
platforms.
52 
116. A number of countries have measures in place to ensure the plurality of voices, or of sources 
of information, in the media.  These objectives ha ve often been implemented through cross-ownership 
limits.  In light of technological changes perm itting consumers to access content through different 
means, governments may need to consider whet her existing limits on owne rship across different 
media have not become too burdensome in a modifi ed business context.  Indeed, many regulations 
still in place ignore new media.  Traditionally, when terrestrial broadcasting was dominant, it could be assumed that there would only be a few broadcast ers and that their influence had to be limited.
53 
117. Must-carry (or must-list in the case of electronic program guides) obligations are a common 
area of regulation in the sector.  Typically, this involves requiring broadcasters to offer certain local, 
regional or public service channels, or, traditionally,  imposing on networks that they carry those TV 
channels that, in an age of distribution scarcity, were considered by the general public as the main 
ones.  Given the greater abundance of networks a nd content, adequate regulation on must-carry 
obligations are important to ensure a level playing field, e.g. ensuring that the number of must-carry 
or must-offer channels is not too high, that the cr iteria for selecting the channels are clear and public, 
and that any compensation rules ar e transparent and fair.  As men tioned above for other regulatory 
areas, the emergence of new ways of delivering television programming (e.g. mobile TV) raises the issue as to whether pre-existing must-carry rules s hould be imposed on new players (e.g.  mobile TV), 
                                                      
51 Singh, Rajendra and Siddhartha Raja (2010), op.cit. pp. 94-95; OECD (2007c), op.cit., p. 21. 
52 ITU (2008), "IPTV and Mobile TV: New Regulat ory Challenges for Regulators", Chapter 9 in 
Trends in Telecommunication Reform: Six Degrees of Sharing , Geneva, available at " http://www.itu.int/ITU-
D/treg/publications/trends08.html "  (accessed on 12 February 2012). 
53 OECD (2004a), op.cit. S/WPDR/W/48 
Page 30  
 
  or whether they should be equally relaxed for all.  Some research has also su ggested that, to ensure a 
level playing field, all broadcasters with must-c arry status should be subject to a must-offer 
obligation, whereby they would provide their programmes to all platform providers under non-
discriminatory terms and conditions.
54 
118. An obstacle that reduces the online cross-border supply of audiovisual content relates to the 
territoriality of intellectual property rights and obstacles to multi-territory licensing or clearing of 
rights.  With respect to the music industry, the European Commission concluded that the online 
supply of music services across the EU require d improving pan-European licensing for music 
services, which in turn required the creation of ne w structures for collective management societies.55  
Governments may facilitate the adaptation of the collective management of rights in the digital 
environment by encouraging collecting societies to set up new or improved schemes to address the 
licensing of new media exploitation and/or by stream lining their methods to facilitate multi-territory 
licensing of digital rights. 
119. Other regulatory measures that can negatively aff ect trade in this sector include insufficient 
protection of intellectual property rights, lack of  transparency regarding licensing procedures and 
requirements, inadequate procedures for appeal, lack of an independent regulator, preferential 
treatment of public companies (e.g. television), rest rictive limits on advertising, excessive withholding 
taxes, and excessively onerous or unclear rules with respect to censorship or content review. 
I. CONSTRUCTION AND RELATED ENGINEERING SERVICES  
120. Governments – including regional and local author ities – have an important role in regulating 
the construction industry and overseeing the quality a nd safety of structures, civil engineering works 
and residential houses.  For instance, land use and building regulations aim to  protect public health, 
safety and general welfare relating to the construction and occupancy of buildings and structures, as 
well as to promote a socially functional, envir onmentally sustainable and aesthetically harmonious 
living environment.   
121. Firms attempting to participate in construction service markets are subject to many different 
aspects of domestic regulation.  They must obtain building permits, conform to local land use/zoning 
requirements,56 urban planning and environmental regulati ons, as well as to other rules and technical 
requirements inscribed in local, national or intern ational building codes.  Contractors and all the 
professionals allocated to any given project must ofte n also be registered.  If considered belonging to 
a "regulated profession", skilled construction workers a nd craft persons must often be registered with, 
or accredited in, professional bodies or national registers of artisans in the country in which the 
service is supplied.  Their individual competen ces must be verified or, alternatively, their 
qualifications, education or skills formally recogn ised.  In some countries, construction firms are 
required to make a prior declaration if they want to post staff on a cross-border basis (mode 4), even for very short duration postings.  Companies frequently  have to undergo systematic on-site checks in 
case of temporary movement of natural persons.  They  also have to comply with social security 
regulations including fees and remunerations, he alth and safety regula tions, and liability and 
                                                      
54 Cullen International (2006), "Study on the Regulation of Broadcasting Issues under the New 
Regulatory Framework", prepared for the European Commission (Information Society and Media Directorate-General), 22 December 2006, pp. 77-89;  OECD (2007c), op. cit.;  European Audiovisual Observatory (2005), 
"To Have or Not to Have: Must-Carry Rules", Iris Special, Strasbourg.   
55 European Commission (2005), "Study on a Co mmunity Initiative on the Cross-Border Collective 
Management of Copyright", Commission Staff Document, Brussels. 
56 Zoning laws, enforced by local government  entities (municipalities) in most developed and 
developing countries, deal with land use, lot sizes, building heights, density, setbacks, and other aspects of property use.  Typically a zoning permit must first be obtained, which authorizes the building or alteration of a 
structure within the zoning ordinan ces specified for a given area.    S/WPDR/W/48 
 Page 31 
 
 
  professional indemnity insurance regimes in the hos t country.  Finally, they sometimes face complex 
and unclear procedures for the award of public contracts or concessions, as well as restrictions on the use of construction-site equi pment and material.     
122. These regulatory measures may affect one or sever al modes of supply.  Furthermore, a barrier 
hampering the service supply at any  one of the different stages of the construction process – ranging 
from sending a crew just for the time span of a particular project to a more permanent, 'duly 
constituted' commercial presence; and from the use of inputs necessary for the pr ovision of the service 
to the after-sales/maintenance and repair phase – may undermine the entire transnational service 
supply. 
1. Regulatory context 
123. The construction sector is relatively predisposed to national/local regulation on at least four 
accounts.  Firstly, given that the construc tion process involves a large mix of labour
57, materials,  
machinery and equipment, a wide range of regulatory measures by Members are implicated.  Barriers to the movement of any  factor of production can significantly affect trade in construction services.  
Labour for instance (i.e., the movement of foreign natural persons supplying a service) is sometimes 
subject to prior authorisation, registration and/or  declaration requirements, even for project-related 
work of short duration.  In some cases, short-term  contracts for construction workers are not permitted 
at all.  Many of these issues are similar to those di scussed in the mode 4 section of this Note.  The 
non-recognition of professi onal qualifications a nd overly burdensome/co stly qualification 
requirements and procedures to achieve such recogni tion may constitute a problem.  Firms that wish 
to bring their own materials , machinery and equipment often have to comply with a variety of 
different national technical specifications and standa rds in the host country.  In some cases, they face 
outright import restrictions; or goods imported on a temporary basis, such as construction-site 
machinery and specialty equipment, are not rel eased from the payment of import duties and taxes.
58  
124. Secondly, construction is an activity which is  relatively localised and unlike many other 
service industries its output is physical in nature.  It is the production process that is exported; the 
final output is located in the host country.  It is thus usually the lex rei sitae59 that applies:  i.e ., the 
activity is regulated under the national legislation wher e the construction site is located.  As a result, a 
service supplier that wishes to be  active in several countries is ob liged to conform to different 
regulatory regimes in parallel.  This is especially  problematic for small and medium-sized enterprises 
(SMEs) that are prominent in the construction indu stry.  They are potentially hit harder than their 
larger rivals by fixed regulatory costs which are not  proportionate to project size.  As a result, SMEs 
might be at a competitive disadvantage or even be  dissuaded from international activities altogether.60 
125. Thirdly, as a supplier of physical infrastructure, the sector has linkages to many different 
markets and activities:  mining, petroleum and pe trochemicals, power generation including renewable 
energy, manufacturing, water and utility distribu tions systems, sewer/waste, transportation, 
                                                      
57 Notably low-to-medium skilled labour in the project implementation (i.e., the physical construction) 
phase. 
58 Note, however, that there is no requirement in the GATS to schedule a limitation to the effect that the 
cross-border movement of goods associated with the provision of a service may be subject to customs duties or 
other administrative charges.  Such measures are su bject to the disciplines of the GATT (see WTO (2001) 
"Guidelines for the Scheduling of Specific Commitments under the General Agreement on Trade in Services 
(GATS), document S/L/92, 28 March 2001, paragraph 7). 
59 Latin for "the law where the property is situated".  
60 European Commission (2002), "Report from the Commission to the Council and the European 
Parliament on the state of the Internal Market for services  – presented under the first stage of the Internal Market 
Strategy for Services", COM(2002) 441 final, p. 8. S/WPDR/W/48 
Page 32  
 
  telecommunications, and public health are just a few.
61  Some of these key infrastructural, capital-
intensive sectors are themselves subject to consid erable government regulation.  Depending on the 
type of structure (commercial building, hospital, etc.) or civil engineering work/facility (e.g., power 
plant, port) that a contractor builds, he will f ace different sector-specific norms and regulations.   
126. Fourthly, being in a highly competitive and rather low-margin sector (except in niche 
segments), construction firms seek to add more value to their services.  This implies more partnering 
with the client, assuming responsibility not only for the 'brick and mortar' part but for an entire project, and looking at the whole-life costs of a built asset.  As a result, a growing emphasis is being placed by private as well as public sector contracts on 'design-build', a project delivery system whereby the design and construction aspects are contracted for with a single  supplier known as the 
design-builder.
62  For instance, a property developer who intends to have an office building 
constructed will be looking for a contractor that can take charge of the full range of tasks involved to 
have the building constructed including design, prep aring and applying for building permits, ensuring 
compliance with environmental rules, site preparat ion work, supervising and carrying out construction 
and follow-up works.  Site preparation work may involve the excavation and safe disposal of 
contaminated soil, necessitating additional licensing and qualification requirements.  As contractors 
are increasingly supplying integrated solutions, they potentially have to comply with a wide range of 
regulations.  
2. Regulatory developments and issues 
127. Difficulties for foreign construction service suppliers  may be created not only by the nature of 
the regulation, but also by the fact that the requi red permits and licenses may be granted by various  
government authorities at different levels (national,  regional and often local), or even by industry 
associations.  The latter may not always welcome fo reign competition in the market or may not be 
sensitive to the trade effects of regulation.  The lack  of transparency concerning the rules that apply, 
as well as certain informal business practices and, po ssibly, collusion of established suppliers with 
local authorities, could hamper market access.  Co mpetition policy is also relevant, as the sector has 
often given rise to anti-compe titive behaviour and practices.  
(a) Licences, authorizations, registrations, prior declarations 
128. Licensing is prevalent and, especially for more complex projects, construction firms have to 
comply with pre-qualification standards, also refe rred to as qualification rating systems.  The latter 
restrict the eligibility to bid – usually for capital-inte nsive or technically highly complex contracts – to 
companies with a given financial and/or technical capacity and track record.  Rating systems normally 
entail minimum capital outlay requirements and a pply in a non-discriminatory manner, based on 
objective criteria – as they aim to ensure the techni cal and financial capacity of the contractor and 
quality of the service.  However, it cannot be excl uded that some of these systems are used to de facto  
limit foreign  entrants. 
129. In certain countries, service suppliers are obliged to register with an administrative authority, 
a professional body, a chamber of craft trades or a trade association.  For example, construction 
companies may have to register with a prof essional body or with their profession's national 
association.  Craft persons (such as carpenters, electrici ans, tilers, etc.) have to be listed in the national 
register of artisans even if the intended service s upply is of limited duration; and regulated professions 
may be subject to a requirement to register with a professional body or trade association.  This could 
prove expensive for suppliers who wish to suppl y services in several countries, particularly on 
                                                      
61 WTO (2009b), "Construction and related engineering services", Background Note by the Secretariat, 
document S/C/W/302 , paragraph 4. 
62 Ibid., paragraph 22.  S/WPDR/W/48 
 Page 33 
 
 
  account of the annual contributions to be paid.  Often requirements already met by a service supplier 
in his/her country of origin are not recognized and thus not taken into account, leading to a potentially 
costly duplication of administrative formalities. 
130. Construction firms wishing to send their own st aff to perform works abroad ("contractual 
service suppliers" in standard mode-4 termi nology) are sometimes required to make a prior 
declaration for each individual site and worker.  A service supplier who wishes to regularly send 
contractual service suppliers for short periods ofte n cannot obtain an authorisation valid, for example, 
for one year.  For example, as the European Co mmission described the situation for construction 
services in the EU internal market in its 2002 repo rt:  "The burden and complexity of administrative 
formalities, the stringent and quasi-systematic ch ecks which some posted workers may have to 
undergo, excessive paperwork and the associated delays (stoppage of work), could result in 
difficulties in the case of regular and short-term posting".63  Finally, the application of the host 
country's labour-law provisions to foreign contr actual service suppliers, without account being taken 
of obligations and charges already met by the empl oyer in his country of origin, also can make it 
challenging to supply services in other countries, particularly for SMEs.           
(b) Requirements in respect of professi onal qualifications and experience 
131. Differences between countries regarding 'regul ated activities' and disparities in national 
requirements concerning the necessary professional qualifications often make it difficult for service suppliers to provide services abroad using their original professional title.  Certain construction-
related activities – such as engineers, consulting engi neers, surveyors and crafts persons (carpenters, 
electricians, etc.) – are considered to be 'regulat ed professions' in some countries, while they are not 
regulated in others.  A service supplier of a Memb er with no requirements for a professional diploma, 
who wishes to set up a commercial presence in, or supply services on a cross-border basis into, 
another Member that has such a requirement, may not always find it easy to have his/her professional qualifications, education or skills recognized. 
(c) Technical, health and safety standards 
132. As an activity with great impact on public hea lth and safety (of workers and later occupants) 
and on the environment, the construction sector is frequently subject to minimum health and safety 
standards.  These are usually included in building co des, which apply to construction products as well 
as to the design of buildings and other civil engineering structures. 
133. The practice of developing, approving, and enfo rcing building codes varies considerably from 
Member to Member.  In some jurisdictions, build ing codes are developed by government agencies or 
quasi-governmental standards organizations and then  enforced across the te rritory by the central 
government.  In others, where the power of regulati ng construction and fire safety is vested in local 
authorities, a system of model building codes is used.
64      
134. The Eurocodes (European technical standards for structural design), for instance, constitute a 
pan-European building code that is mandatory for public works and the de-facto  standard for the 
private sector in the European Un ion.  The Eurocodes replaced nati onal building codes published by 
national standard bodies, although many countries had a period of co-existence.  Additionally, each 
EU Member is expected to issue a National Annex to the Eurocodes, which will need referencing for 
a particular country (e.g.,  the UK National Annex). 
                                                      
63 European Commission (2002), op. cit., final, pp. 23 (footnote omitted). 
64 For instance, many municipalities in the US have model codes which are adapted to their own needs.  
See for instance the New York Ordinance on Land Usage or the Municipal Code of Chicago, Illinois (available 
at http://www.amlegal.com/library  – accessed on 5 March 2012). S/WPDR/W/48 
Page 34  
 
  135. Another example is the National Building Code  of India (NBC), which provides guidelines 
for regulating the building construction activities acr oss the country.  It serves as a model code for 
adoption by all agencies involved in building construc tion works, be they Public Works Departments, 
other government construc tion departments, municipalities or private construction agencies.  India's 
National Building Code contains administrative re gulations, development control rules and general 
building requirements; fire safety requirements; as we ll as stipulations regarding materials, structural 
design and construction, and safety.  
136. Construction products  also are subject to a range of national (and regional, for instance at the 
EU level) approvals and other t echnical performance specifications.  Although pertaining to the goods 
sector, they may impact the cross-border provision of construction services. 
(d) Other Regulatory Measures 
137. In addition to the above-mentioned sector-specifi c measures, the suppliers of construction and 
related engineering services are also likely to be affected by a range of other regulatory measures in 
the host country, including labour market regulations;  environmental and energy efficiency regulations; and liability and professi onal indemnity regulations.  P ublic procurement policies might 
also be used in support of particular regulatory objectives.  
138. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Construction firms have to comply with a great variety of national and sub-national 
(local) regulatory requirements, which may r esult in lack of transparency, and even 
uncertainty, concerning the applicable rul es and the requirements/procedures to be 
fulfilled.  To what extent might Articl e VI:4 disciplines and/or Article XVIII 
additional commitments deal with these tr ansparency issues?  Would Members that 
have set up electronic platforms ('sing le windows') where domestic and foreign 
suppliers can gather all available informa tion on applicable legislation, mandatory 
approvals, etc. be willing to share their experience?
65  
(b) Would it be useful for Members to examine common principles and procedures for 
the recognition of professional qualifications of skilled construction workers and craft 
persons (including the recognition of prof essional experience as a substitute for a 
formal diploma)?  Could guiding principles be  elaborated to deal with situations 
where the construction workers/craft pers ons come from jurisdictions where these 
professions are unregulated (i.e., where obtaining a professional diploma is not 
mandatory)?   How is that issue dealt with, if at a ll, in bilateral and regional free trade 
agreements/mutual recognition agreemen ts?  Could the GATS facilitate such 
regulatory co-operation through Ar ticle XVIII additional commitments? 
(c) Could registration requirements (obliging service suppliers to register with an 
administrative authority, a professional body, a chamber of craft trades or a trade association) be eased, or even waived, if th e service supply is of a limited duration?  
Could the contribution fee to be paid to  these bodies be made proportionate to the 
duration of the stay (e.g., a service supplier providing a service for two months would not have to pay the full annual contribution)? 
                                                      
65 For instance, the Finnish Ministry of the Environment has set up a webpage on 'regulating 
construction' and plans to introduce eServices for housing and building;  see 
http://www.ymparisto.fi/def ault.asp?node=4076&lan=en  (accessed 25 April 2012).  S/WPDR/W/48 
 Page 35 
 
 
  (d) Could it be advantageous to exchange inform ation on Members' practices in regard to 
pre-qualification standards/qualification rating systems (usually minimum  
requirements on contractors' financial and/or technical capacity and track record that restrict the possibility to bid) and to review some of the possible GATS implications?  
(e) Would it be useful for Members to examine which regulatory 
simplification/facilitation measures could be taken, including specifically for small 
and medium-sized construction firms? 
J. D
ISTRIBUTION SERVICES  
139. The distribution services industry is highly dynami c.  While distributors had in the past been 
perceived as mere dispensers of goods adding little value, modernisation of the sector has boosted its 
contribution to consumer satisf action by offering a broader ra nge of products and value-added 
services (e.g. delivery, after-sales services).  The performance of the sector is crucial to efficient 
resource allocation and contributes to consumer welfare by providing access to a wide variety of goods at competitive prices.  Inefficient distribution services limit the extent to which gains from the 
liberalization of trade in goods benefit consumers in terms of lower prices and greater choice.  
Exposure to competition stimulates local supp liers to improve their production methods and 
standards, the organization of their supply ch ains, and their use of technology.     
1. Regulatory context 
140. Distribution services are quite diverse, in terms of forms (e.g. fixed location stores, electronic 
commerce, door-to-door sales, open markets), formats (hypermarkets, supermarkets, department stores, convenience stores, traditional small s hops), product offerings (food vs. non-food, multi-
product vs. specialized goods, etc.), and legal st ructures (e.g. independent, integrated groups, 
franchises).  Distributors also interact upstream wi th producers, including across borders, and with 
various other economic actors, e.g. providers of logistics and transport services, payment systems, 
commercial property managers, or adve rtising agencies.  Often, regulation of the sector is directed at 
consumer and environmental protection, ensuring that  health and safety requirements are met, and at 
preventing abuse of market power by dominant players.   
2. Regulatory developments and issues 
141. Since distribution services play a fundamental ro le in the movement of goods from producers 
to consumers, a wide variety of regulatory issues are of relevance to trade in this sector.  This section seeks to highlight some of the key issues but does no t aim to be exhaustive.  For example, the section 
does not address barriers to the move ment of goods (e.g.  customs clearance processes) that, naturally, 
also affect distributors.  Neither does it focus on regulatory barriers in other service sectors, on which 
retailers and wholesalers rely, such as transport, logistics or financial services.   
(a) Zoning and urban planning  
142. Since a preponderant proportion of trade in distribution services takes place through 
commercial presence, distributors can be negatively affected by certain practices relating to zoning 
and urban planning.  Typically, at the local or regi onal level, zoning or urba n planning regulations aim 
to attain such general objectives as facilitating orde rly urban development, making best use of existing 
facilities and land, promoting the economic devel opment of local communities or regions, assessing 
the impacts of new developments on the environm ent and on traffic congestion, or facilitating 
citizens' access to a range of shopping services.  Th e relative priority given to any such objective 
varies across different regions and countries.  Further, in a number of countries, additional S/WPDR/W/48 
Page 36  
 
  authorizations and special regulations are applied in relation to the opening of large distribution 
outlets.   
143. Notwithstanding the regulatory objectives bei ng pursued, zoning and urban planning systems 
can sometimes operate in an inconsistent, slow, in sufficiently transparent, or seemingly inconsistent 
manner.  In such situations, costs increase for ac tors involved, and investors and developers may see 
market opportunities frustrated.  An ineffective sy stem may reduce the capacity of new entrants to 
introduce greater competition, affecting, in turn the benefits for consumers.  In some cases, 
established distributors participate in the planning decision process, which may tilt the balance against 
new entrants.
66 
144. Clear and transparent procedures, objective ev aluation of applications, limited overlaps and 
duplications across levels of governments, applicati on of the general principles of proportionality and 
reasonableness between planning obligations impo sed and objectives pursued, the provision of 
reasoned information justifying deci sions taken, and the right to quick and efficient appeals of 
decisions taken, could help limit negative impacts,  as well as strike an appropriate balance between 
the pursuit of relevant regulatory objectives and free dom of establishment of distributors.  As noted in 
the case of the EU, zoning plans are sometimes not in place and authorities take case-by-case planning 
decisions on the basis of procedures lacking transparency.67 
145. Land use permits are often subsumed into th e more general zoning  and urban planning 
process, though in some cases they are subject to sp ecific regulations.  The OECD, on the basis of a 
review of national experiences, noted that some  projects underwent substantial qualitative evaluation 
and that refusals often did not require a well-reasoned b asis.  It noted that such situations did not need 
to involve corruption, but that corruption was mo re likely to occur when no clear criteria were 
required to reject an application.68 
146. While some zoning and urban planning systems include the impact on existing distributors as 
a criteria for obtaining permits or licences, this would be akin to a schedulable "economic needs test".  
Such entries can be found in a number of Member 's scheduled commitments on distribution services, 
especially as regards large wholesale or retail outle ts.  The OECD recommends that adverse impact 
tests, where effects on competing firms or the pr esence of sufficient demand for new facilities are 
examined, should not be used by planning authoriti es because they are likely to hinder competition 
and harm consumers.69   
147. Duplication and complexity of licences requi red for opening new retail outlets can also 
increase costs.  Aside from zoning and planning perm its, specific licences are often needed to operate 
                                                      
66 WTO (2010b), "Distribution Services", Background Note by the Secretariat, document S/C/W/326, 
29 October 2010, pp. 20-25; European Commission (2010a), "Commission Staff Working Document on Retail Services in the Internal Market",  Accompanying document to the Report on Retail Market Monitoring, 
SEC(2010) 807, 5 July 2010;  European Commission (2010b), "Towards More Efficient and Fairer Retail 
Services in the Internal Market for 2020", Report from the Commission to the European Parliament, the Council, the European Ec onomic and Social Committee and the Co mmittee of the Regions, COM(2010)355, 
5 July 2010;  Boylaud, Olivier and Giuseppe Nicoletti (2001), "Regulatory Reform in Retail Distribution", 
OECD Economic Studies No. 32;  See also UNCTAD (2005), "Report of the Experts Meeting on Distribution Services", 15 December 2005, pp. 8-9. 
67  European Commission (2010a), op.cit., pp. 24-26 and 61-62. 
68 OECD (2008a), "Land Use Restrictions as Barr iers to Entry", Directorate for Financial and 
Enterprise Affairs, Competition Committee, Paris.  Se e also: Autorité de la concurrence (France) (2010), 
"Réponse à la consultation publique européenne rela tive au fonctionnement du sect eur du commerce et de la 
distribution", available at: http://www.autoritedelaconcurrence.fr/ doc/contribution_ce_distrib_sept10.pdf  
(accessed on 6 June 2012). 
69 OECD (2008a), op.cit., p. 9.  S/WPDR/W/48 
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  a retail business.  In addition, furthe r authorizations or permits may be required from the retailer to be 
able to sell certain types of products.  The greater  the number of permits that have to be obtained 
(sometimes by different regulatory bodies or levels of government), the greater the costs and possible 
barriers for new entrants, and hence limits to competition.70 
(b) Competition 
148. Several competition-related concerns arise in  the distribution sector as governments may seek 
to prevent the abuse of power by major distribut ors, as well as similar practices by major suppliers, 
which may affect distributors.71  One important issue relat es to possible anti-competitive 
consequences of vertical relations between di stributors and suppliers (manufacturers, food 
processors).  While integration can improve effici ency and be generally welfare-enhancing, some 
practices may also have anti-competitive effects.  Different views have been expressed on how these 
should be regulated.  Practices that have attracted concerns include selective distribution, exclusive 
dealing arrangements, exclusive territories72, and resale price maintenance.73  While resale price 
maintenance is prohibited under various countries' comp etition laws, others do no t have outright bans 
but restrict it in some manner (e.g. when it involves companies with significant market power).74 
(c) Other regulatory issues 
149. In addition to zoning and planning laws, whic h are likely to impact more on large outlets, 
there are also the general conditions for establis hing new retail businesses to consider.  These will 
have a substantial impact on small and medium si zed enterprises (SMEs) which, in terms of number 
of establishments, are predominant in the distribution sector.  Complex and costly administrative procedures to open new businesses are particularly constraining for SMEs, a great share of which 
operate in the distribution sector. 
150. Although this affects all distributors, SMEs also suffer significantly from certain practices 
that make cross-border e-retailing more difficult.   A number of factors contribute to this, many of 
which relate to consumers' or suppliers' perceptions (e.g. language  problems, doubts about after-sale 
support, concerns about capacity to seek redress if  something goes wrong), or to other services sectors 
(e.g. high delivery costs or barriers to goods tr ade).  Perceptions aside, limits to cross-border e-
retailing can also be linked to regulatory differences faced by traders.  Within the EU, for instance, 
apart from value added taxes, differences in consum er laws reduce interest for cross-border on-line 
                                                      
70 Boylaud, Olivier and Giuseppe Nicoletti (2001), op.cit., p. 261. 
71 WTO (1998), "Distribution Services", Background  Note by the Secretariat,  document S/C/W/37, 10 
June 1998;  WTO (2010b), "Distribution Services", Back ground Note by the Secretariat, document S/C/W/326, 
29 October 2010; Arkell, Julian (2010), "Market Structure, Liberalization, and Trade: The Case of Distribution Services", in Cattaneo, Engman, Sáez, and Stern (eds.), International Trade in Services;  New Trends and 
Opportunities for D eveloping Countries , World Bank, Washington DC, p. 161. 
72 For example, EC (2010a), op. cit., p. 41 and 50-5 1,  notes that in certain  instances wholesalers and 
subsidiaries of manufacturers are refu sing to sell the products to retailers established abroad that sought to 
engage in licit parallel trade.  
73 Resale price maintenance generally refers to an  agreement between the distributor and the supplier 
that specifies the minimum or fixed price that th e retailer charges consumers for the product.   
74 In order to facilitate retailer-supplier relations, a number of countries have developed codes of good 
practice – often non-binding or a mix of self-regulatory  and legal-regulatory approaches – to govern buyer-
supplier relationships and help prevent and resolve co nflicts.  See WTO (2010b), document S/C/W/326,op.cit., 
p. 25.  S/WPDR/W/48 
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  sales of goods.  Strengthening on-line and cross- border enforcement and establishing efficient 
mechanisms for dispute resolution would he lp foster trust for such transactions.
75 
151. Other important regulations aff ecting the operation of the sector  relate to shop opening hours, 
the freedom to set prices (including measures restricting the capacity to offer discounts), and restrictions relating to advertising (e.g. regula tion of telephone and electronic media marketing, 
prohibitions on the offering by service providers of incentives, rewards, and other promotional 
programmes).  While these regulations are inte nded to pursue general non-trade objectives 
(e.g.  consumer protection in the case of regulations relating to promotions or advertising), they can 
significantly limit competition, when too restrictive or burdensome.
76  For example, certain 
restrictions on advertising can make it more diffi cult for newcomers to expand their market share. 
152. Finally, regulatory approaches with respect to franchising can also facilitate, or hamper, the 
development of this fast growing distribution segment .  In particular, the adoption of franchise-related 
laws – e.g.  dealing with mandatory disclosure of information – as well as trademark/copyright law is 
important so as to effectively protect rights of franchisors and franchisees.77  Since franchising is 
based on contractual relationships, the degree of clarity and stability of laws and regulations 
governing such contracts (e.g.  procedures applyi ng in case of dispute) can constitute important 
obstacles or incentives for these types of business arrangements.78  More generally, whilst not 
pertaining directly to the regulatory framework for distribution, increased protection of intellectual property rights would tend to benef it retailers and franchisers who rely on trademarks or brand names.  
K. E
DUCATION SERVICES  
153. Due to its social and economic importance, re gulatory measures in the education sector cover 
a vast array of issues including the promotion of ethical and social values; national language and 
culture; as well as universal access to basic education.  It is not the intent here to address all these 
issues in detail but rather to highlight certain regul atory areas that could be said to be more directly 
related to trade in education services.  In particular , the focus is on the private higher education as this 
is the segment of the sector where trade in education services has been the most dynamic. 
Historically, public provision of education on a n on-commercial basis has been the norm for the most 
of the world.  However, as a result of significant ch anges in the structure, governance and financing of 
public sector institutions, private education has been growing strongly, particul arly in the segment of 
higher education.  An important feature of that gr owth has been the emergence of private-for-profit 
education providers in the form of sole proprie torships, franchises or national/international chains.79   
                                                      
75 European Commission (2009), "Report on Cross-Border E-Commerce in the EU", Commission Staff 
Working Document, Brussels, SEC(2009)283 final;  Bureau Européen des Unions de Consommateurs (BEUC) 
(2010), "BEUC Response to the Retail Market Monitoring Report", 10 September 2010, https://circabc.europa.eu/d/d/work space/SpacesStore/6e4dc0aa-006b-41 3b-8acb-5c8da4fa2 392/BEUC-en.pdf  
(accessed on 11 February 2012). 
76 OECD (2009b), "Reform of Product Market Regulation in OECD countries: 1998-2009", Chapter 7 
of Economic Policy Reforms 2009: Going for Growth , Paris, pp. 179-192. 
77 UNCTAD notes that franchising is often under-regulated in developing countries.  For example, in 
some cases, franchisees are often unaware of their rights  and obligations and the regulation of franchisors is 
weak. See UNCTAD (2011a), "World Investment Report 2011:  Non-Equity Modes of International Production 
and Development", Geneva, pp . 8-9. 
78 UNCTAD (2011a), op.cit. pp. 169-170. 
79 See Lim, Aik Hoe and Saner, Raymond (2011), "Rethinking Trade in Education Services:  A wake-
up call for trade negotiators", Journal of World Trade , Volume  45, No 5. October 2011, pp. 993–1034.   S/WPDR/W/48 
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  1. Regulatory context 
154. The expansion and broadening of the private sector 's role in the delivery of education and the 
large increase in the numbers of international students, programmes and institutions have made the 
regulation of the sector a key challenge.  With in creased trade, particularly through modes 1 and 3, 
national authorities face the challenge of either  applying existing regulatory regimes on private 
education to foreign services and suppliers or cr eating wholly new regula tions and quality assurance 
frameworks.   
155. Regulatory frameworks in education typically seek inter alia  to: ensure the quality of the 
service (including the protection of consumers/ students and measures to ensure international 
equivalence of degrees and diplomas);  maintain the particular character of the education sector (such 
as the state-funded status of educational institutio ns);  promote ethical and social values, cross-
cultural understanding, national langua ge and history;  ensure ge nder equality;  promote cultural 
identity and the use of the national language; and uni versal access to education.  These are objectives 
which would have implications not  only to foreign but also to domestic providers of education 
services.   At the same time, foreign providers, given their unfamiliarity with the domestic regime 
may need to be assured that quality, accredita tion and recognition systems are based on objective 
criteria, and that adequate verification procedures exist.   
2. Regulatory developments and issues 
156. Some of the key regulatory issues with impli cations for trade in education services are 
discussed below. 
(a) Licensing and registration 
157. Education sector regulation is typically concer ned with ensuring that students receive a good 
quality service from competent providers.  This usua lly means that regulatory measures are taken to 
monitor and control the teaching staff, facilities, equipment, curriculum, materials and methods for 
evaluating students.  The ultimate goal being to protect  the interests of the student and the integrity of 
the education system. 
158. Regulatory regimes tend to be most developed for commercial establishment in the form of 
branch campuses.80  Foreign education institutions are often treated as local private providers and 
have to undergo the same registration and/or licensing procedures.  Typically, this would involve an assessment of whether the provider has the substa ntive competence to supply the service and the 
financial capacity to implement the project.  Ther e is a great variety of licensing practices and it 
would be beyond the scope of this section to describe them all.
81  Very generally, some regimes grant 
an initial licence to operate with final author ization only after a second assessment has been 
undertaken following several years of operation.  Others only have a single stage for licensing and once authorization has been granted, there is no s upplementary approval required.  In both cases, there 
could be on-going monitoring of the programmes offe red, staff qualifications and student numbers.  
159. Registration with a national authority is often compulsory for an education provider and may 
be the only way to obtain recognition for its progr ammes.  Although the regulations might not be 
discriminatory, ineffective and/or highly cumberso me registration procedures could still have an 
                                                      
80 UNESCO (2007), "Cross-border higher education: re gulation, quality assurance and impact - Chile, 
Oman, Philippines, South Africa." Available at http://www.iiep.unesco.org/  (accessed 5 March 2012). 
81 See Verbik, L and Jokivirta, L.(2005), "Nationa l regulatory frameworks for transnational higher 
education: Models and trends ", Part 1. Briefing Note 22, February 2005, Observatory on Borderless Higher 
Education (OBHE) for a discussion of various models of national regulatory frameworks. S/WPDR/W/48 
Page 40  
 
  impact on trade.  These could include multiple  or duplicative procedures and administrative 
requirements that are not fully transparent, wh ich may leave the provider uncertain of what 
documentation is required or to which authority it should be submitted.  In addition to procedural 
issues, imposition of opaque and subjective criteri a or outdated standards could give rise to 
uncertainty and arbitrary decision making.
82 
160. In some situations, the difficulty of obtain ing authorization to supply education services, 
might be exacerbated by unclear national policies concerning the role of the private sector in the education system or insufficient administrative ca pacity to implement appropriate and up-to-date 
standards and quality criteria.  Education providers  might find it difficult to obtain authorization to 
operate in another country simply because informat ion on applicable laws and regulations are absent 
or incomplete.  Other issues related to registration include special rules on the use of specific titles 
such as 'university', and associated restrictions on thei r ability to set fees at market rates and operate as 
for-profit entities, programme/curriculum content and the type of qualifications that can be offered.
83 
(b) Quality assurance and accreditation 
161. A central feature of virtually all educati on systems are quality assurance mechanisms to 
ensure that education standards are being met.  Quality assessment varies considerably between 
countries in terms of approach and degree of stringency.  Nevertheless, it typically involves an assessment of: inputs, such as the qualifications of the teaching faculty; and of processes, for example 
the conduct of research and student assessments.  It can also include an assessment of outputs, for 
instance the numbers of graduates, publications a nd research findings.  Accreditation is a related 
concept, where the provider is accredited by an  appropriate body as having met a particular quality 
standard and is thus authorised to offe r educational programmes in that area.  
162. From the perspective of trade in education services, it is important that quality assessment 
regimes are transparent and relevant to the goals  sought, and that standards are based on certain 
objective criteria.
84  Closely linked to the issue of quality assurance and accreditation is the 
recognition of academic and professional qualifications .  National systems for granting qualifications 
as well as the nature of qualifications vary signif icantly across countries.  This means that when 
students or employees move to a foreign country th ey often have to repeat the same qualification 
requirements already completed in the home count ry.  Enhanced trade in education services and 
growing professional mobility have significantl y increased the importance of academic and 
professional recognition of qualifications.85  Yet, the sheer diversity of quality assurance and 
accreditation systems, and the lack of comprehensiv e networks for coordinatin g various initiatives at 
the international level can impede trade.  
(c) Regulation of cross-border exchanges 
163. Cumbersome and time consuming registra tion and licensing procedures for commercial 
establishment have in a way given rise to a large variety of working arrangements between foreign 
and existing local education providers.  The most  prominent model has been franchise and twinning 
arrangements.  Such arrangements are typically re gulated less intensively than the establishment of 
branch campuses.  Since franchising and twinning arrangements usually involve all modes of supply, 
                                                      
82 See Fielding, J. and LaRocque, N (2008), "The Evolving Regulatory Context for Private Education in 
Emerging Countries, Education" Working Paper Se ries No.14, IFC, The World Bank, Washington. 
83 See APEC (2009), "Measures affec ting cross-border exchange and investment in higher education in 
the APEC region" APEC Human Resources Development Working Group. 
84 See OECD (2004b), "Quality and Recognition in Hi gher Education:  The Cross-Border Challenge", 
Paris. 
85 Ibid.   S/WPDR/W/48 
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  the responsibility for regulating the activity will lie with both the provider and receiver country.  The 
'provider country' is the source country of the pr ogramme, qualification or ot her intellectual property 
(e.g. component of a course of study).86  While the 'receiver country' is the host country where 
students receive the programme, qualification or other intellectual prope rty sourced overseas.  
164. A particular concern is that such forms of  trade in education services could challenge 
countries where administrative capacity is weak a nd where there are no functioning quality assurance 
systems in place.  There may be problems associated with non-recognized, unregulated higher education institutions that are not subject to quality control systems in either the sending or receiving 
country.  Education authorities have an incentive to co-operate in order to protect consumers by, for 
instance, identifying and monitoring unscrupulous provid ers.  There would also be scope for technical 
assistance to be provided to authorities who lack the capacity to review and assess the quality of 
particular education programmes or providers.  
(d) Regulatory co-operation and recognition 
165. Various initiatives have been taken at the nationa l and international level in response to these 
challenges.  Examples include the International Ne twork for Quality Assurance Agencies in Higher 
Education (INQAAHE) which has published guid elines on good practice based on 10 general 
principles.
87  In 2005, UNESCO and OECD, after consultati on with their respective sets of members, 
prepared a set of "Guidelines for Quality Provi sion in Cross-Border Higher Education".  The 
Guidelines published by the OECD recommend good practi ces for a range of stakeholders and call on 
governments, both sending and receiving, to establi sh mechanisms for the accreditation and quality 
assurance of all institutions in their territory.  
166. UNESCO and the Asia-Pacific Quality Network (APQN), a regional association of quality 
assurance professionals, have prepared a toolkit on regulatory considerations , including examples of 
approaches taken at the national level.88  Regulatory approaches vary from licensing or registration 
systems, where academic standards are not set, to  accreditation systems which specify academic as 
well as other requirements and standards.  Qualit y assurance may also be of concern to the home 
government of the foreign service supplier which is  interested in upholding the reputation of its 
education and qualification system, especially si nce it could have a bearing on the status and 
recognition of qualifications aw arded to domestic students.   
167. The UNESCO Regional Conventions  on recognition of qualificati ons have been the main 
international instruments addressing the recognition of academic qualifications for academic purposes 
and sometimes play a role in recognising diplomas for professional purposes.89  At present there are 
six regional conventions on the recognition of qualifi cations (Africa, Arab States, Asia and Pacific, 
Latin America and the Caribbean, and two Euro pean conventions) as well as one interregional 
convention (Mediterranean Convention).  The Bologn a Process, although originally only focused on 
Europe, is also a leading international instrument  on the issue of harmonisation and comparability of 
programmes and degrees.  The process, with the goal of permitting students, faculty and graduates to 
                                                      
86 The definitions of 'provider' and 'receiver' are based upon th e "UNESCO-Asia Pacific Quality 
Network Toolkit: Regulating the Quality of Cross-Border Education", available at 
http://www2.unescobkk.org/elib/pub lications/087/APQN_Toolkit.pdf  (accessed  5 March 2012).  
87 INQAAHE was established in 1991 as a professional association in support of quality assurance 
agencies.  See http://www.inqaahe.org  (accessed on 7 March 2012). 
88 UNESCO (2006), "Global Education Digest 2006", Paris. 
89 These Conventions are available at: " http://portal.unesco.org/education/en/ev.php-
URL_ID=13880&URL_DO=DO_TOPIC&URL_SECTION=201.html " (accessed 5 March 2012). S/WPDR/W/48 
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  move freely across national borders, started with 29 economies and now includes over 40, with the 
inclusion of many developing countries.
90   
168. Other processes that can have a positive impact  on trade in education services include the 
conclusion of mutual recognition agreements, which are relatively easier to achieve than harmonisation.  Overall, greater cooperation be tween national quality assurance agencies, and the 
development of common standards will be an important  factor in the future internationalization of 
education services. 
169. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Could additional commitments under Artic le XVIII have a role to play in 
supporting/complementing regulatory coope ration on internationally accepted 
principles for quality assurance and accreditation? 
(b) In what other ways could the GATS facilitate arrangements for the recognition of 
foreign qualifications, including schemes for the transfer of credits of completed 
studies, between receiver and host countries?  
L. E
NERGY SERVICES  
170. While there has been a long tradition of privat e sector involvement in oil markets, public 
monopolies have been predominant in gas and el ectricity markets.  Until the end of the 1980s, 
electricity and gas were supplied principally by stat e-owned, vertically integrated monopolies.  Given 
the high-capital costs involved in building and maintaining infrastructure, and the monopoly situation characterizing the transportation segment in these se ctors, direct state involvement was seen as the 
best option for meeting public service obligations.  Drivers for liberalization of gas and electricity 
markets included increased energy demand due to economic development and demographic growth, 
coinciding with strained public budgets.  T echnological developments, which led to the 
competitiveness of smaller power generation units and greater performance of power grids, as well as 
public concerns about monopoly-relate d efficiency have also contributed to the liberalization of the 
sector.  On the other hand, a different trend has emer ged in the oil sector, with the increasing role of 
state-owned national oil companies (NOCs), in particular in the upstream segment.   
1. Regulatory context 
171. The energy supply chain is subject to a wide  array of government re gulations which pursue 
various policy objectives, among them:  ensuring re liable and affordable access to energy goods and 
services, mitigating the negative effects of energy  production and consumption on public health and 
the environment, and promoting the diversification of energy sources in order to guarantee long-term 
security of supply.  Subsidies are widespread in the energy sector and concern all energy sources.  
Relevant programmes pursue different objectives, such as ensuring access for the poor, encouraging 
the development of alternative energy sources, or facilitating more sustainable energy consumption.  
They may target consumers and/or producers, and ta ke many different forms (grants, low-interest or 
preferential loans, tax rebates, tax credits, feed-in tariffs, support for research and development, etc.).  
172. An important concern for governments is to ensu re reliable and affordable access to energy 
goods and services.  Regulatory measures include univ ersal service obligations which typically exist 
in relation to distribution of gas and electricity.  Moreover, when private companies provide such 
                                                      
90 Hopper, R (2007), "Building the Capacity in Qu ality Assurance: The Challenge of Context", in 
OECD, Cross-Border Tertiary Education: A way towards capacity development , Paris.  S/WPDR/W/48 
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  services to the public, various measures can be put  in place to protect consumers, especially low-
income groups, from market risks.  Regulatory inst ruments used by governments include price caps, 
minimum customer service standards, price subsidies and other bill assistance programmes.  
2. Regulatory developments and issues 
173. Government regulation also aims at mitigati ng the negative effects on public health and the 
environment stemming from energy production and cons umption.  Such effects may be very different 
depending on the energy source and the type of activ ity involved, hence, a variety of measures exist, 
targeting both suppliers and consumers.  These measures include mandatory environmental impact 
assessments as a prerequisite for starting energy pr ojects, technical standards, labelling requirements 
and economic instruments, such as tax schemes or  financial incentives.  Mandatory licensing 
requirements may exist at various points of the energy supply chain (construction and operation of 
energy plants, trading of energy, etc.).  Licensing systems allow inter alia  governmental authorities to 
ensure that licensees comply with relevant legisl ation regarding technical standards, consumer and 
environmental protection requirements. 
174. The lack of adequate regulatory frameworks is al so an issue in the energy sector.  A recurrent 
concern expressed by energy firms, especially t hose providing oil and gas field services, relates to 
opaque frameworks and administrative systems.  P oor regulatory transparency reportedly provides 
scope for corruption, arbitrary business and licensing  practices and unpredictable policy changes, e.g., 
in tax regimes.  Energy service suppliers view the ability to comment on new regulations, procedures 
and other measures potentially affecting their inte rests as a key transparency element in the 
implementation of policies.     
175. Competition policy is an important aspect of government regulation in restructured markets.  
Anti-competitive practices by recently-merged utiliti es represent barriers to trade in energy services, 
especially for network-based activities, e.g., tr ansmission and distribution segments of gas and 
electricity.  After unbundling and privatization, former monopoly suppliers may retain a dominant 
position on the market, impede or discriminate among new entrants and skew competition.  Hence, 
market reforms need to be supporte d by a regulatory framework aiming, inter alia , at (i) promoting 
transparency in the adoption and implementation of ru les, regulations and technical standards;  (ii) 
guaranteeing non-discriminatory third-party access ( TPA) to, and interconnection with, networks, 
grids and other essential infrastructure;  (iii) establis hing an independent regula tor;  (iv) ensuring non-
discriminatory and timely information on data releva nt for transportation and transmission of energy, 
such as prices, transmission capacity, etc.;  an d (v) more generally, preventing anti-competitive 
practices.   
M. ENVIRONMENTAL SERVICES  
176. The environmental services sector has undergone significant changes over the last 20 years.  
Industrialization, urbanization a nd demographic growth, but also consumer pressures for cleaner 
products, have contributed to increasing the dema nd for environmental goods and services.  Many 
new products have appeared, beyond the traditional infrastructure services.  Global environmental 
challenges, like climate change, and increasing need s in developing countries are fostering demand 
for new services. 
1. Regulatory context 
177. Environmental services can be divided into two broad categories.  The first – and, for a long 
time, most common – use of the term refers to services such as waste water treatment, refuse 
collection and disposal, or street cleaning, which ar e typically provided by public authorities to local 
communities.  The provision of these services, al so dubbed infrastructure environmental services, S/WPDR/W/48 
Page 44  
 
  normally entails important capital costs (constructi on and maintenance of a pipe network for waste 
water treatment, for instance), which may give ri se to natural monopolies.  Services like street 
cleaning have the characteristics of public goods
91, which mean that private suppliers do not have 
sufficient incentive to provide them .  Moreover, these services entail important social, public health 
and environmental policy dimensions.  These featur es explain why public authorities tend to be the 
main suppliers and private companies operate ma inly through delegation of tasks or following 
divestiture of assets.  Given their social and politi cal dimensions, structural reform programmes are 
not without controversy.  Liberalization of m onopolistic-type industries normally requires a strong 
regulatory framework and on-going surveillance in or der to protect consumers and ensure the quality 
of the service.     
178. The second category of environmental services em erged in the wake of the environmental 
policy initiatives implemented in developed countries in the 1960s  and 70s, and responded to new 
requirements regarding air pollution prevention and mitigation, noise abatement and remediation of 
polluted sites, amongst others.  These services – also  referred to as "non-infrastructure" environmental 
services – are supplied primarily on a business-to-business basis as the main clients are private firms 
needing to comply with environmental regulation.  Non-infrastructure environmental services do not 
raise the same level of concerns as infrastru cture environmental services when it comes to 
liberalization and are, in fact, already provided mostly on a competitive basis.   
2. Regulatory developments and issues 
179. Thus, when examining regulatory issues, a dis tinction should be made between infrastructure 
and non-infrastructure environmental services.  Infrastructure environmental services, such as waste 
water treatment or refuse collection and dispo sal, serve important public policy objectives related  
inter alia to health and environmental protection.  When  governments decide to involve private firms, 
they often put in place various regulatory measures to  ensure that these objectiv es are fulfilled.  These 
include regulations to ensure universal access, and to set tariffs and enforce various standards (e.g. 
relating to service quality, environmental impact s, relations with customers, etc.).   
180. As infrastructure environmental services are pr one to monopolies, there is limited – or no – 
competition in the market, although competition may be possible.  When delegating the supply of 
infrastructure environmental services (such as the operation of a waste water treatment plant, or the collection and treatment of solid waste), govern ments can elect among various contractual forms 
depending on the type of task to be outsourced a nd degree of responsibility to be delegated (e.g., 
concessions, service contracts, management contracts,  build-operate-transfer (BOT) contracts, etc.). 
Adequate legislation could help ensure a fair  and transparent tendering and selection process. 
181. Non-infrastructure environmental services, such  as remediation services, are supplied mainly 
on a business-to-business basis and the main clients ar e firms needing to comply with environmental 
regulation.  Since polluters are not always willing to engage voluntarily in cleaning-up the 
contamination caused by their activities, the demand for non-infrastructure services is correlated with 
the development of environmental legislation, with more stringent standards increasing demand.  For 
instance, the implementation of legislation requiri ng the clean-up of industrial sites will trigger 
demand for remediation services.   
182. Regulatory regimes in related sectors (in particular architecture services, engineering and 
integrated engineering services, technical testing and analysis services, construction services) have a 
                                                      
91 A public good can be defined as an "[i]tem whose consumption is not decided by the individual 
consumer but by the society as a whole, and which is fina nced by taxation.  A public good (or service) may be 
consumed without reducing the amount available for others, and cannot be withheld from who do not pay for it."  
See http://www.businessdictionary.com/  (accessed on 12 July 2010).  S/WPDR/W/48 
 Page 45 
 
 
  direct relevance for suppliers of environmen tal services, in particular non-infrastructure 
environmental services. 
183. Suppliers of environmental services are not only a ffected by the lack of appropriate regulatory 
frameworks but also by inefficien t administrative processes.  Typical problems include insufficient 
information regarding licensing and certificati on procedures, and tendering processes; unnecessary 
delays in processing applications a nd informing applicants; and weak or inconsistent enforcement of 
environmental regulation.   
184. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Would domestic regulation disciplines on qualification and licensing requirements 
and procedures also be relevant in this sector, in particular for non-infrastructure 
environmental services? 
(b) Would regulatory concerns related to infrast ructure environmental services, such as 
those arising in relation to bidding processes and award of concession contracts, require a more specific approach? 
N. F
INANCIAL SERVICES  
185. The financial services sector has unique characte ristics that have motivated special treatment 
in regulation and trade agreements.92  Understanding these features is crucial to comprehending the 
objectives and rationale of domestic regulation in this sector.  First, financial services provide 
functions essential to the modern economy, such  as facilitating transactions, mobilizing savings, 
allocating capital, monitoring borrowers and ma nagers, mitigating risk, allowing payments, and 
providing liquidity.93  Second, financial services are ubiquitous , in the sense that all economic agents 
(companies, governments and individuals) need them.94  Third, financial services underpin the 
operation of the monetary and payments systems of any modern economy, which makes it crucially 
important for the functioning of all other economic sectors.   
1. Regulatory context 
186. Financial services are extremely varied and incl ude many different types of products and 
services such as insurance, deposit taking, financ ial leasing, payment and money transmission, 
securities trading, elaboration of credit ratings, and pr ovision and transfer of financial information.  
The sector is characterised by a multiplicity of ser vice suppliers, with special  features, such as banks, 
trust and loan companies, credit unions, life and health insurance compani es, property and casualty 
insurance companies, securities tr aders and exchanges, investment fund companies, pension funds, 
finance companies, insura nce agents and brokers, and a myriad of auxiliary service providers (e.g. 
independent financial advisors, act uaries, financial information companies, credit rating agencies).  
This variety of services and service suppliers implies th at the rationale for - an d therefore the focus of 
- regulation will also depend on the specific natu re of such products, services and service suppliers. 
                                                      
92 As in the GATS, it is very common to find in preferential trade agreements specific annexes - or 
indeed separate chapters - on financial services, contai ning additional provisions or safeguards catering for the 
special nature of the sector (e.g. pr ovisions clarifying the scope of the sector, the so-called "prudential carve-
out").  
93  World Bank (2001), "Finance for growth: policy choices in a volatile world", Washington. 
94 White, Lawrence (2010), contribution to the OECD Policy Roundtable on "Competition, 
Concentration and Stability in the Banking Sector". S/WPDR/W/48 
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  187. A distinction is usually drawn between the r easons for regulation (why regulation is necessary 
at all) and the objectives pursued (what outcome re gulation is trying to secure).  As discussed in 
Section I of this Note, regulation is often needed to prevent or minimize various market failures. 
95  
Left unregulated, the financial sector could produ ce sub-optimal results and reduce market failure.  
Regulation is also sometimes used with non-ec onomic objectives in mind, such as improving access 
to financial services for segments of the popul ation that would otherwise be underserved.  
188. In terms of market failures in financial servi ces, the most prominent results from asymmetric 
information, e.g., one party to a transaction having information about itself or its actions that is not 
available to the other party.  Asymmetric info rmation is pervasive in all areas of finance.96  If the 
borrower knows more about its potential to repay than  does the lender, the latter is at a disadvantage; 
if an insured person knows more about the risks than does the insurer, the latter is at a disadvantage; if 
a company's manager knows more about its ability and real commitment to the firm than the 
shareholder or potential investor, the latter are at a disadvantage.  Asymmetric information can adopt 
basically two forms: adverse selection and moral hazard.  Adverse selection arises because one party has relevant information that the other party lacks,  which may lead to undesirable decisions, such as 
choosing an investment project, company manager or  insurance client which is riskier and less 
profitable than otherwise.  Moral hazard refers to  situations where the well informed party to a 
transaction (e.g. the borrower, the company's manage r, the insured) takes un due risks because, since 
that risk is under-priced, the costs of such actions will be borne by the other party to the transaction.  
In situations where asymmetric information prevails, the costs of detecting whether one party is taking 
advantage of their better information is extremely high.  The existence of these asymmetries can lead 
to partial or complete breakdowns of markets.
97 
189. Negative externalities are also pervasive in financial services.  These occur when an 
individual or firm making a decision does not have to bear the full cost of his or her actions.  Since decisions taken by economic agents are based on the equalization of private marginal cost and 
marginal benefit, thus ignoring the cost to third pa rties or the society at large, negative externalities 
result in market inefficiencies unless proper regulat ory action is taken.  In the case of financial 
services, such negative externalities could be delete rious to the financial system and the economy.  
Bank runs constitute the typical example of a negative externality in finance.  The failure of one bank 
could cause poorly informed depositors at other ba nks to become nervous and to run on their own 
banks to withdraw their deposits, potentially causi ng the failure of other banks, with yet further 
contagion effects. 
190. Contrary to other sectors of the economy, where th e failure of one firm tends to benefit other 
firms as it can take over the failed firm's market share, the failure of one bank could in fact be 
detrimental not only to its competitors, but to the rest of the economy.
98  When one bank fails, 
consumers might lose confidence in the system as a whole, and because of the interconnection among 
financial institutions and markets, this may spar k - as witnessed in 2007 and 2008 - a crisis of 
unpredictable proportions.  In other non-financial sectors, firms typically face problems of insufficient 
demand during a crisis.  While in a banking crisis, banks face the converse problem of being unable or 
                                                      
95 Llewellyn, David (1999) "The Economic Rationale for Financial Regulation", FSA Occasional 
Paper # 1  (April). 
96 Ibid; Stiglitz, Joseph E., Jaime Jaramillo-Vallejo, and Yung Chal Park (1993), "The role of the state 
in financial markets", in World Bank Research Observer , Annual Conference on Development Economics 
Supplement: 19-61. 
97 An extended version of the asymmetric information problem might be termed the "widows and 
orphans" situation, in which some market participants (e.g., depositors, borrowers, investors) may be incapable 
of looking after their own best interests and will not learn from their own mistakes.  White, Lawrence (2010), 
op.cit.  
98 OECD (2010a) "Policy Roundtable on Competiti on, Concentration and Stability in the Banking 
Sector", Paris.  S/WPDR/W/48 
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  unwilling to supply credit to businesses, consumers or each  other.  If banks lose the confidence to lend 
to one another, this ultimately undermines confiden ce and stability in the system as a whole.  During 
the recent financial crisis, losses on sub-prime mortgag es led banks to radically re-assess the risks that 
they were willing to take, leading to the drastic reduction of available credit, something known as a 
"credit crunch".  Banks stopped lending  not only to individuals and companies, but also to each other, 
leading to the breakdown of the interbank market  and pushing the economy into recession.  This, in 
turn, undermined confidence in the banking system  and the economy as a whole, further deteriorating 
the situation and the prospects of recovery.99 
191. While a more detailed framework might be set by particular regulators, in the final analysis, 
the three core objectives of financial regulation are: (1) to sustain the integrity and stability of the 
financial system;  (2) to maintain the safety and soundness of financial institu tions; and (3) to protect 
the consumer.100  The impact of the failure of financia l institutions on systemic stability and the 
interests of consumers means that  regulators are almost inevitably bound to have a prudential concern 
for the liquidity, solvency and riskiness of financ ial institutions.  The first two objectives mentioned 
earlier will necessarily focus on indi vidual institutions and also on the system itself.  The recent 
financial crisis has brought about an emphasis on micro- and macro-prudential regulation.  Micro-
approaches are aimed at preventing th e costly failure of individual financial institutions, whilst macro-
approaches are focused on the aggregate risk aris ing from the collective behaviour of financial 
institutions.101  The goal is to safeguard the financial system as a whole and to create a more 
disciplined, and less pro-cyclical financial system , which better supports balanced and sustainable 
growth.102  The third objective on consumer protection issues is usually focused on safeguarding 
customers from unsatisfactory business conduct.    
2. Regulatory developments and issues 
192. The modalities and scope of financial regulati on tend to change over time in light of 
developments.  For example, financial innovation, and the emergence of new financial products and 
markets, has made the risk characteristics of financ ial institutions and the fi nancial system generally 
more complex.103  In particular, as shown by the recent financial crisis, the systemic dimension to 
regulation and supervision shoul d no longer be exclusively focused on banking, given the close 
interconnection of banks and other types of financial institutions, wh ich imply that banks may not be 
the only source of financial contagion.  The "r egulatory perimeter" has expanded to formerly 
unregulated or lightly regulated areas (e.g., hedg e funds and hedge fund managers, and credit rating 
agencies), with a view to ensuring that all systemi cally important activity is subjected to appropriate 
oversight and regulation.104  
193. As indicated in the preceding section, in ma ny cases regulators erect barriers to entry in 
financial services.  For example, rules preventing the establishment and operation of banks that are 
                                                      
99 For a discussion on the origins and development of  the recent financial crisis, see  WTO (2010c), 
"Financial Services", Background  Note by the Secretariat, docu ment S/FIN/W/73 and Corr.1, 3 
and10 February 2010. 
100  Llewellyn (1999), op.cit.  
101 Borio, Claudio (2009), "The macroprudential approach to regulation and supervision", VoxEu.org, 
14 April;  Financial Stability Board, IMF, and Bank for International Settlements (2011) "Macroprudential 
policy tools and frameworks - Update to G-20 Finance Ministers and Central Bank Governors" 
(14 February 2011). 
102  Financial Stability Forum (2009a), "Addressing Procyclicality in the Financial System" (April). 
103 WTO (2010c) document S/FIN/W/73 and Corr.1, op.cit.; and WTO document S/FIN/W/74, "Impact 
of Technological Developments on Regulatory and Compliance Aspects of Banking and Other Financial 
Services under the GATS", Background Note by the Se cretariat, 21 September. 
104 Financial Stability Board (2009b), "Improving Financial Regulation - Report of the Financial 
Stability Board to G-20 Leaders" (25 September) ; and WTO (2010c) document S/FIN/W/73, op.cit. S/WPDR/W/48 
Page 48  
 
  inadequately capitalised, insufficiently liquid, or r un by unfit individuals seek to protect depositors 
and maintaining confidence in the banking system.  Similarly, rules preventing the establishment and 
operation of inadequately capitalized insurance co mpanies are aimed at protecting policy holders.  
Disclosure requirements are necessary in capital markets to safeguard the interests of investors.  Rules 
on leverage are to ensure that banks  do not undertake excessive risks.  
194. While prudential regulations are required to pr omote financial stability, it is important to 
ensure that they do not undermine competition excessively, and contribute to a stable and sound 
financial system.  At times licensing and qualifi cation requirements and procedures, as well as 
standards, may distort competition by being excessive ly burdensome.  The appropriate combination of 
regulations and their administration depends on country circumstances, including the development 
and complexity of the country's financial sector and the quality of supervision.   
195. The literature on financial services libera lization suggests that the following 
situations/measures may be particularly  burdensome and could hamper trade:  
(a) Lack of transparency of regulations. Rele vant regulations, existing and new, are not 
made publicly available at all times.  Notification periods are insufficient.   
(b) Lack of public prior comment on draft regulations or inadequate follow-up of 
comments made by financial service supp liers.  Forthcoming regulations are not 
submitted for public comment with a reas onable amount of time prior to their 
enactment.  Suppliers that provide comm ents and recommendations do not receive a 
reply from the supervisory authority. 
(c) Inadequate time to implement new regulati ons.  Financial service suppliers are not 
afforded sufficient time to become familiar  with and be prepared to implement new 
and revised regulations before these become effective. 
(d) No written information on the status of licence applications. 
(e) Burdensome requirements for new produc ts, forms, rates and services (e.g.  
insurance).  For example, it may take betw een 6 and 12 months for new products to 
be approved.  No provision that allows new products to be de emed approved after a 
set period (e.g. between 30 and 90 days) if  the supervisor has not taken action 
otherwise.  In addition, where filing and approval of a product is required, the policy 
reasons for such requirements are not made  publicly available by the regulatory 
authority. 
(f) No internationally recognized accounting, auditing and actuarial standards in use by 
the regulatory authority.   
(g) Obligation for insurance companies to employ  a locally qualified actuary in order to 
be able to introduce new products.  Forei gn-qualified actuaries working in insurance 
groups are not acceptable, hindering compan y's development in the host market.  
(h) Undue limits on the supply of product lines.  For example, in some markets, the 
supply of personal accident and medical insurance is sometimes allowed only to life 
insurance companies, while in most mark ets general insurance companies may write 
these lines of business.  
(i) Tight rules on distribution of insurance pr oducts (i.e. restrictions on the ability of 
other financial services institutions to sell insurance products over the counter).  For  S/WPDR/W/48 
 Page 49 
 
 
  example, it is sometimes required that all the administrative procedures linked to an 
insurance policy are conducted in the office of the insurer and signed proposal forms 
used in every case.  This restricts dist ribution arrangements such as bancassurance 
(i.e. sale of insurance and other related products through a bank). 
(j) Restrictions on advertising of financial products, which may make it particularly 
difficult for the business to be conducted over the Internet.  
(k) Unreasonably high (by international standards)  levels of minimum registered capital, 
for example to open a bank. 
(l) Cumbersome and lengthy approval processes.  For example, sometimes financial 
service suppliers have to go through a le ngthy preparatory approval process, followed 
by a formal approval process, and even by an additional business licence granted by 
the regional regulator.  
(m) Existence of multiple regulatory authorities, making authorization lengthy and 
cumbersome.  
(n) Need to have all parent bank documents  "notarized" in the home country and 
authenticated at the host Member's embassy or consulate. 
(o) Need to have all personnel approved by the regulatory authority.  Sometimes 
regulators must approve the appointment of all persons of responsibility in a bank, 
going beyond a traditional "fit and proper" t est of main shareholders and directors. 
O. TOURISM  
196. Tourism's multi-sectoral linkages are both a strength and potential source of weakness.  These 
linkages offer extensive opportunities for poverty a lleviation and economic diversification, but 
inefficient or inappropriate regulation in par ticular sectors can reduce overall competitiveness.  
Immigration and entry/exit control regulations, for instance, have a direct influence on international 
tourism, and the industry is vulnerable to temporary sh ocks, such as terrorism or health crises, as well 
as related regulatory responses.  Regulations, or the lack of them, on other e nvironmental issues, and 
social/cultural concerns can also have a significant impact on the sector. 
1. Regulatory context 
197. Under the WTO's Services Sectoral Classification List (WTO document MTN.GNS/W/120), 
the scope of "Tourism and Travel Related Services" is distinctly limited, comprising only hotels and 
restaurants, travel agencies and tour operators, and tourist guide services (complemented by a residual "Other" category).  Numerous other tourism services - such as computer reservation systems;  cruise 
ships and many other transport services;  hotel cons truction;  car rentals;  certain distribution, 
business, and financial services;  as well as most recreational, cultural and sporting services - have been placed within other W/120 sectoral categories.
105  While this complicates  the task of negotiating 
tourism-related GATS commitments, it often makes sense from a regulatory perspective (e.g.  having 
the transport ministry establish and administer safety standards for tourism buses).  It also means that 
the way the various segments of the tourism supply chain are regulated can have an impact on the 
overall competitiveness of the sector.   
                                                      
105 See, for example, WTO (2000), "Communicati on from the Dominican Republic, El Salvador, 
Honduras, and Panama – The Cluster of Tourism Industries ", document S/CSS/W/19, 5 December 2000.  S/WPDR/W/48 
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  2. Regulatory developments and issues 
(a) Travel warnings 
198. Typically issued in response to natural disasters,  health crises or terrorism, travel warnings 
can be devastating for tourism.  Consequently, the World Tourism Organization (UNWTO) in 2005 
adopted the Guidelines on Travel Advisories, whic h address the procedures used when formulating 
and administering travel warnings, emphasisi ng the need for transparency, accuracy, etc.
106  Growth of 
the tourism sector, including the increased movement  of natural persons, has also led to increased 
demand for the development of international standa rds.  The UNWTO has worked to develop a range 
of quality standards, commencing with those to be a pplied to tourism destinations.  The International 
Organization for Standardization (ISO) has also fo rmed a Technical Committee to examine standards 
on terminology for tourism and related services.107 
199. Travel warnings can cause serious disruption to both employment and revenue in the short-
term.  At the same time, governments obviously do have the right – and arguably the obligation – to 
help protect the well-being of their citizens trave lling abroad.  Consequently, the issue at stake is 
evidently to ensure that trav el warnings are objective, impartial, and do not cause unnecessary 
negative effects.   
200. In addition to natural disasters, health crises or terrorism, travel warnings, advisories and 
travel alerts often include warnings about high crime levels or other relevant tourism issues.108  While 
most governments do evidently exercise caution and r estraint in issuing travel warnings, there are 
apparently no commonly agreed definitions of the terms used, which means they can indicate different 
degrees of risk.  In the United States, for exampl e, travel warnings are issued when the State 
Department decides, based on all relevant informati on, to recommend that Americans avoid travel to a 
certain country.109  Countries where avoidance of travel is  recommended will have travel warnings, 
complemented by country specific information.  By  contrast, travel alerts constitute a means to 
disseminate information about terrorist threats and other relatively short-term and/or trans-national 
conditions posing significant risks to the security of American travellers.  Travel alerts are issued 
when there is a specific threat that cannot be counter ed, and have to date been issued to deal with 
short-term coups, violence by terrorists, anniversary dates of specific terrorist events, etc.  There is 
also a "worldwide caution" to update information on the continuing threat of terrorist actions and 
violence against American citizens and interests throughout the world.110 
201. In other countries, such as the United Kingdom , travel warnings/advisories indicate specific 
categories of risk, for example, countries where all tr avel, or in certain parts within the territory, is 
advised against;  countries where all but essential trav el is advised against; and countries where all but 
essential travel is advised against in parts of those countries.111  Some other countries are more 
descriptive as to the dangers encountered and do no t specify clear categories of risk.  Instead, the 
                                                      
106 Adopted by resolution A/RES/508(XVI) at the sixteenth session of the General Assembly of the 
World Tourism Organization, Dakar, Senegal, 28 November – 2 December 20 05.  See also the UNWTO Global 
code of Ethics for Tourism, available at UNWTO website http://www.unwto.org  (accessed 8 March 2012). The 
Secretariat is not aware of so urces listing all travel warnings currently in effect.   
107 See ISO website, available at http://www.iso.org/iso/iso_technical_committee?commid=375396  
(accessed 8 March 2012).  
108 With regard to the strongly negative impact of criminality on tourism, see UNWTO (1996), "Tourist 
Safety and Security:  Practical M easures for Destinations", Madrid. 
109 See http://travel.state.gov/travel/cis_pa_tw/cis_pa_tw_1168.html  (accessed 5 March 2012).    
110 Available at http://travel.state.gov/travel/cis_pa_tw/pa/pa_4787.html  (accessed 5 March 2012). 
111 For further details, see http://www.fco.gov.uk/en/tr avel-and-living-abroad/tr avel-advice-by-country/  
(accessed 5 March 2012), as well as " http://www.fco.gov.uk/en/travel-and -living-abroad/travel-advice-by-
country/how-we-advise/ " (accessed 5 March 2012).    S/WPDR/W/48 
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  strength of the language used to describe the security /safety issues gives an indication as to the degree 
of danger.  Regarding health and environmental risks, the categorisation is somewhat easier and less 
controversial, as the evaluation of risk is monitored at the international level.112  Hence, travel 
advisories often report the information issued by in ternational organisations such as the World Health 
Organization. 
202. The UNWTO Guidelines on Travel Advisories addr ess the procedures used when formulating 
and administering travel warnings.  Nonetheless, wi de variations in terms of application evidently 
remain, and few government websites for travel warni ngs refer to the UNWTO Guidelines.  It must be 
noted that some of the differences in the applicati on of travel warnings, e.g. their duration and degree 
of severity, might be accounted for by higher levels of  perceived risk in a given situation for citizens 
of some countries than for others.   
203. The predecessor of the UNWTO Guidelines is th e Global Code of Ethics for Tourism, which 
was adopted in 1999.113  Both the UNWTO Global Code of Et hics for Tourism and the Guidelines on 
Travel Advisories are non-binding under internati onal law.  The UNWTO conducted three surveys 
among its member States (2000, 2004 and 2008/2009) in  order to monitor implementation of the Code 
by governments, and its incorporation into domes tic law.  Institutional and legal commitment towards 
implementation of the Code has been expressed by a large group of countries, in fact, 49 responding States have indicated that they had incorporated it s principles into their legislative texts, while 48 
countries had used them as a basis for establishi ng national laws and regulations or for designing 
policies and master plans assuring the sustaina ble and responsible development of tourism.
114  A  
newer UNWTO initiative, the UNWTO Declaratio n on the Facilitation of Tourist Travel, was 
approved at the UNWTO Genera l Assembly in October 2009.115  With regard to travel warnings, the 
declaration calls upon UNWTO Member States issuing tr avel advisories in respect of third countries 
to commit to consult as widely as possible with the governments of these countries and destinations, 
especially on the safety and security aspects of each t ourist region in the country, and to update the 
relevant information at regular intervals (i.e. at least every six months). 
(b) Anti-competitive practices 
204. While not frequently documented, especially with respect to developing country destinations, 
anti-competitive practices, such as by airlines or t our operators, can also have significant bearing on 
tourism.116  Such practices can arise at different stages of the tourism value chain, according to the 
type of service supplied, and may need to be addressed through market-oriented regulation.   
205. Preliminary research has identified some ke y anticompetitive measures affecting trade in 
tourism, including cartels, abuse of dominant po sition and of buying power, and attempts to 
monopolise.  The vertical relationship between ho liday package providers, retailers and tourism 
service suppliers can be an important source of  anticompetitive behaviour.  International tour 
                                                      
112 New Zealand uses a system of:  Extreme risk – advi sing against all travel (within all or parts of a 
destination);  high risk – i.e. non-essential travel, includi ng tourist travel, should be deferred;  and some risk – 
signifying a level of risk that warrants caution; see  http://www.safetravel.govt.nz/advisories/aboutadvisories. 
shtml  (accessed 5 March 2012).  Canada uses a four-step system, see http://www.voyage.gc. ca/faq/tip_prv-eng  
(accessed 5 March 2012). 
113  Resolution A/RES/406(XIII),   adopted at the UNWTO General Assembly (1999), Santiago de 
Chile, Chile, 27 September - 1 October 1999. 
114 UN General Assembly (2010) "Implementation of the Global Code of Ethics for Tourism", 
document A/65/275, New York, 10 August 2010, paras. 11 and 13. 
115 Resolution A/RES/578(XVIII), adopted at the UNWWTO General Assembly (2009), Astana, 
Kazakhstan, 5 - 8 October 2009.  
116 Geloso Grosso, M. Lesher,M. and Pinali.E (2007), "Services Trade Liberalization and Tourism 
Development" , OECD Trade Policy Working Paper, No. 57, pp. 25-27. S/WPDR/W/48 
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  operators act as the wholesalers of tourism produc ts, such as transport, accommodation or organised 
excursions, provided in destination countries by local  suppliers, while travel agents in origin markets 
act as the retailers.  The tour operators segment  of the industry is dominated by a few large 
international firms and has featured increasing vertical  integration in recent years.  Other segments of 
the industry, especially local suppliers such as inde pendent hotels, restaurants and tourist guides, are 
characterised by a large number of SMEs.  Scope for anticompetitive practices may also arise in 
related industries.  For example, large airlines ha ve in some cases been accused of abusing their 
market power to the detriment of local suppliers.  
206. Documented case studies of anti-competitive pr actices affecting tourism, especially with 
respect to developing country destinations, appear to  be quite rare, thereby hindering the development 
of appropriate policy responses.
117   Anti-competitive practices can also occur both between and 
within countries, and can involve abuses by bot h developed and devel oping-country suppliers.118  For 
example, an OECD study notes that large Western airlines have in some cases been accused of 
abusing their market power to the detriment of local suppliers119, while another publication provides 
evidence of similar practices on the part of certain developing country airlines.120 
207. Examples also exist of anti-competitive practices in  other sectors that directly affect tourism.  
These sectors include cement (essential for buildi ng hotels), jet fuel, freight transport, cable TV, 
telecoms, banking services, computer software, shipping, and air freight.121  With regard to Computer 
Reservation Systems (CRS) and Global Distribution Systems (GDS), by contrast, technological and ownership changes have apparently reduced  the potential for anti-competitive practices.
122 
(c) Movement of tourism professionals 
208. The movement of tourism professionals are also affected by a wide range of measures on 
mode 4 such as quantitative restrictions and relate d qualification requirements.  Eligibility criteria 
tend to be strict, with a preference for categories of persons who are highly skilled and well-educated, 
while application procedures often tend to be cu mbersome, costly, and administratively complex.  
Quantitative restrictions are frequently placed on visas and work permits, expressed as numerical 
quotas and/or economic needs tests (ENTs).  These measures are alr eady subject to scheduling by 
virtue of Article XVI of the GATS.  There are, however, other regulatory measures outside the scope of schedules such as that the assess ment of an applicant's credentials may take into account only 
                                                      
117 The most complete information on the actual extent and types of anti-competitive practices 
involving tourism would, of course, be national-level information.  Unfortunately, no such submissions have 
been made by WTO Members to date in the context of the services negotiations. 
118 A, E, Rodriguez and James Murdy (2006), "Anti- Competitive Practices in the Tourism Industry:  
The case of small economies", in Journal of Business & Economics Research , October 2006. 
119 Geloso Grosso, M. Lesher,M. and Pinali.E (2007), op. cit.,  p. 26.  See also OECD (2008b), 
"Tourism in OECD Countries 2008: Tr ends and Policies,", p.73, for an example of anti-competitive practices 
regarding destination management in the Caribbean. 
120 World Bank (2007b),  "Services Trade and Development:  The Experience of Zambia", A. Mattoo 
and L. Payton, Washington D.C.,  p. 197. 
121 PowerPoint presentation by Simon Evenett and Frédéric Jenny, Anticompetitive Practices in Sub-
saharan Africa: Myth, Re ality and Perspectives , CRC 3rd International Conference: Pro-Poor Regulation and 
Competition: Issues, Policies and Practices, Capetown, 7-9 September 2004.  
122 See WTO (2006), "Second Review of the Air Transport Annex, Developments in the Air Transport 
Sector  (Part One)", Note by the Secretariat,  document S/C/W/270, 18 July 2006, pp. 20-42.   S/WPDR/W/48 
 Page 53 
 
 
  formal qualifications, rather than al so considering skills and experience.123  A number of these issues, 
which are not specific to tourism, are also discussed in the mode 4 section of this Note.  
209. Article 9 of the UNWTO Global Code of Ethics for Tourism concerns workers and 
entrepreneurs in the tourism industry.  With r espect to visa procedures, the UNWTO Declaration on 
the Facilitation of Tourist Travel noted that tourist travel could be greatly facilitated by measures that 
can be implemented easily and without detrimen t to this discretionary authority.  The UNWTO 
General Assembly thus called upon Member States, whenever possible and taking consideration of 
the respective legislation, to adopt measures to simplify visa application and processing formalities 
and to improve the timeliness of visa issuance.  
210. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Would it be useful for Members to specifically examine procedures for the 
recognition of professional tourism-related qualifications, e.g. hotel managers and 
restaurant chefs, including recognition of professional experience as a substitute for 
formal qualifications? 
(b) To what extent can domestic regulation disciplines address anticompetitive practices 
in the tourism value chain?  
(c) Should Members discuss procedures for th e establishment and removal of travel 
warnings, especially regarding consu ltations with affected parties?  
P. MARITIME TRANSPORT  
1. Regulatory context 
211. The maritime transport sector is closely linked to international trade: it derives its growth 
from trade, and also contributes to its expansion.  The sector includes various distinct segments, from 
liner and bulk cargo transport, to different forms of passenger transport (e.g., ferries, cruise ships), to 
port operation services.  At both the national and inte rnational levels, various regulations are applied 
in the sector, reflecting each segment's specificities.   Regulations aim, among other things, to ensure 
maritime safety, protect the environment, preven t anti-competitive practices, promote security, or 
meet certain labour standards.   
2. Regulatory developments and issues 
212. This section focuses on regulatory issues relati ng to port services, competition policy, and 
security.  It was beyond the scope of this Note to  cover in depth environmental, safety and social 
regulatory concerns affecting the sector.124 
                                                      
123 An earlier informal paper regarding administrative procedures for obtaining visas and work permits 
was circulated by Colombia to the Working Party on Domestic Regulation (WPDR) as WTO document JOB(04)/84, 1 July 2004. 
124 This section largely relies on the comprehensive discussion of regulatory issues in WTO (2010d) 
"Maritime Transport Services", Background Note by the Secretariat, document S/C/W/315, 7 June 2010, as well 
as Members' comments on that Note (JOB/SERV/119).  Li ke the Background Note, this section does not focus 
on passenger transport services.   S/WPDR/W/48 
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  (a) Regulatory issues relating to port services 
213. Major steps have been taken over the past te n years towards privatization and opening up to 
foreign participation in the port sector.
125  This has given rise to considerable regulatory action.  Since 
a growing number of ports are managed/owned to  different degrees by private actors, achieving 
access to and use of port services in a non-discriminatory manner and on the basis of reasonable terms 
and conditions has been of high importance for mar itime transport suppliers and also a key objective 
of various governments.126 
214. Regulatory activity in the port sector has been closely related to the transformation of service 
ports into landlord ports, that is, moving from a s ituation where ports provided all port services, in 
particular cargo handling, to a situation where they  merely supply and manage heavy infrastructure.  
Light infrastructure (e.g. cranes, forklifts) are left in  the hands of concessionaires or private operators.   
215. Port reforms have taken various  forms, but all involve importa nt institutional changes that 
shift the role and responsibilities between the p ublic and private sectors.  When reforms are 
undertaken, governments have to select among options  for private sector participation, and develop 
legislation, contracts and institutions to regulate pr ivate sector participation.  The number of countries 
with experience in port reforms is si gnificant and has been increasing rapidly.127 
216. The World Bank's inventor y of best practices in that regard  suggests that port regulations 
should spell out clearly the requirements for hand ling and storage of hazardous cargoes, as well as the 
technical regulation of operations to ensure compliance with security, safety, labour and 
environmental protection standards.  Economic regul ation is also necessary when competition is weak 
or non-existent.  Relevant initiativ es in that regard include requireme nts to publish tariffs, prohibitions 
of undue discrimination against similar port users,  and the establishment of mechanisms though which 
the government can monitor competitiveness of th e market and investigate any anti-competitive 
practices.  Ports faced with greater competition (inter-port or intra-port) require less economic regulation than others.
128  The main objective of an independent regulator would be to ensure effective 
competition among the various operators in the port,  control monopolies and mergers, and prevent 
such practices as abuse of dominant position, pr ice fixing, or cross-subsidization from monopoly 
services to services in competition. 
217. In initiating and carrying out port reforms, in stitutional arrangements may require important 
changes.  While reforms can take many forms a nd have different objectives,  a sound and clear legal 
framework defining public-private partnerships is cr ucial to ensure success (e.g.  attract commitments 
from investors).  For example, BOT (build-opera te-transfer) arrangements should be accompanied 
with rules spelling out the responsibilities of the parties, and by regulations describing how the 
concession law would be applied in practice (e.g. clear and transparent process for awarding contracts).  The entity responsible for monitoring relevant private participation in port activities 
should be specified, and the basis for any licen sing process should be made clear in the law.
129  
Another sound regulatory practice ma y include the use of competitiv e bidding processes to select the 
investor providing the best commitments, port servic es or price levels.  An efficient bidding process 
                                                      
125 Port services include such services as pilotage, towage, vessel traffic management, garbage 
collection, provisioning, fuelling,  and watering services, etc. 
126 The principles are reflected in the additional commitments foreseen in the maritime model schedule.  
Certain economic integratio n agreements also incor porate similar disciplines. 
127 UNCTAD (2011b), "Review of Maritime Transp ort 2011", Geneva;  International Bank for 
Reconstruction and Development/World Bank (2007), "Port Reform Toolkit", 2nd edition, Washington DC, 
available at: http://siteresources.worldbank .org/INTPRAL/Resources/3 38897-11171970 12403/mod1.pdf  
(accessed 12 June 2012). 
128 IBRD/World Bank (2007), op.cit. 
129 Ibid.   S/WPDR/W/48 
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  supposes that barriers that could restrict the nu mber of bidders (e.g. costly administrative 
requirements and procedures) be limited and that tr ansparency prevails through the different phases of 
the process.130 
218. Concession contracts will contain economic conditions.  Importantly, the port authority may 
require the operator/concessioner to meet certain pub lic service requirements as regards, for example, 
service continuity, and equal access and treatment of users, including non-discrimination regarding 
pricing, priorities, level of service.  As noted by the IBDR/World Bank (2007), the principle of non-discrimination among users does not prevent prudent commercial management of activities, including 
differentiated tariffs, priorities or service levels, if these are based on such objective criteria as annual 
traffic or vessel characteristics that are applied uniformly to all similar users. 
219. The difficulties encountered in some countries by foreign port operators (no pre-qualification 
for tendering, compulsory resale of assets acquired following a merger/acquisition) point to continued 
political and economic sensitivities.
131 
(b) Competition policy  
220. Competition policy is another important regulatory issue in maritime transport.  The practice 
of carriers to commonly fix prices and regulate capac ity (i.e., control supply) has been debated for 
many decades.  Historically, shipping conferen ces, where groups of ship-owners fix departure 
frequencies and common prices for a given geographi cal area, are the oldest form of cooperation 
between ship-owners.  When competition laws were  first developed, conferences benefited from anti-
trust immunities, typically on the grounds that th ey ensured price stability and reduced uncertainty 
with respect to available tonnage.132 
221. The end of the 1990s marks the gradual loss of in fluence of liner conferences, at least in the 
largest markets.  The United St ates introduced a system of confidential "services contracts", freely 
negotiated between individual ship-owners and sh ippers (Ocean Shipping Reform Act (OSRA) 
of 1998).  The Act continued to grant immunity to liner conferences, but introduced a number of 
conditions to avoid effective collusion, e.g.  it elim inated tariff filing requirements; allowed shippers 
and carriers to negotiate confidentia l agreements and not reveal the terms of the contract to other 
operators; and permitted independent  rate action (IRA) (the right to fix tariffs independently of 
conferences) to cover multiple trade lanes.  Re ducing transparency of freight rates and giving 
conference members independent contracting ri ghts rendered cartel enforcement more difficult.133 
222. In the meantime, in the European Union, a series of prosecutions for abuse of dominant 
position, gradually reduced the ability of conferences to fix tariffs and regulate capacity, thus forcing 
European ship-owners also to resort to indivi dual services contracts.  In 2003, the European 
Commission started to re-examine its existing polic ies, in particular the block exemption.  The 
examination found no causal link between price fixing a nd reliable liner services, and estimated that a 
repeal of the exemption would improve service qua lity, and lead to a moderate drop in prices and 
considerable reductions in charges and surcharges.134  In 2006, the Council of the European Union 
                                                      
130 UNCTAD (2011c), "How to Utilize FDI to Improve Transport Infrastructure - Ports: Lessons from 
Nigeria", Best Practices in Investment for Development: Case Studies in FDI , Geneva. 
131 WTO (2010d), document S/C/W/315, op.cit.  
132 These immunities were very broad in "ship-owning countries" (e.g.  Japan, European Union)  and of 
a more conditional nature in "shipper countries" (e.g.  Australia, Canada, United States), with obligations in respect of agreement filing, the open ing of conferences to any ship-owner wishing to participate, and equal 
treatment for shippers, and the right to fix tariffs in dependently of conferences (Independent Rate Action). 
133 Phang, Sock-Yong (2009), "Competition Law and the International Transport Sectors", Competition 
Law Review  5 (2) , pp. 193-213. 
134 Ibid. S/WPDR/W/48 
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  abolished, through Regulation No. 1419/2006, the block exemption and the shipping conference 
system as of 31 October 2008.  All joint price fi xing activity for services from or to the European 
Union and the European Economic Area is now illegal.   
223. Elsewhere, conferences are authorized, but under various, increasingly strict, conditions 
which are typically aimed at protecting the ri ghts of shippers (exporters and importers).
135  
Notwithstanding immunity for shipping conferences or similar arrangements,  regulations may help 
limit anti-competitive effects.  First, governments may provide individual conference members with 
the right to offer rates or services that are differe nt from those set by the conference; shippers and 
carriers should have the option of freely negotiate d rates, surcharges and terms of carriage, and 
freedom to negotiate not constrained by outside pa rties.  Second, confidentiality of these negotiations 
and agreements, including regardi ng rates, should be strongly protected.  Finally, governments may 
provide a mechanism for hearing complaints from affected shippers.136 
224. In the US, conferences are treated like any othe r group of ship-owners though they have in 
practice disappeared on routes to and from the country.137  In Australia, the two most recently revised 
versions of Part X of the Trade Practices Act ( 1999 and 2005) have maintained anti-trust immunity 
for conferences.  However, in line with the reco mmendations issued by the Productivity Commission, 
the Government has prohibited all ship-owner groups (including, therefore, conferences) from 
inhibiting in any way their members' capacity to c onclude services contracts.  Penalties and provisions 
concerning the lodging of complaints by shippers have been reinforced and a net public benefit 
requirement has been introduced. 
225. In September 2007, the Competition Commission of India ordered shipping companies to 
desist from anti-competitive behaviour.  Legislation is envisaged to reinforce the powers of this 
commission.  In China, maritime competition legislation requires that conference agreements or any other agreements between ship-owners be filed with the Shanghai Shipping Exchange, which has 
been designated as the delegated authority for this  purpose.  The Exchange prohibits undeclared 
shipper discounts, sanctions abuses of dominant posit ion, obliges shipping companies to have a local 
representative in China and sets forth requi rements concerning shipper consultations.
138   
226. In Singapore, the Competition Commission granted in 2006 a five year block exemption 
(subsequently extended to 31 December 2015) to all liner shipping agreements, subject to a list of 
conditions.139  For some countries, there may have been concerns that non-exemption decisions would 
                                                      
135 In 2002, an OECD study recommended that limited anti-trust exemptions not be permitted to cover 
price-fixing and rate discussions.  It called for capacity ag reements to be carefully scru tinized to ensure they did 
not distort markets in which they were present.  The study found no convincing evidence that discussing/fixing rates offered carriers more benefits than imposed cost s to shippers and consumers.  It recommended that 
countries seriously consider removing anti-trust exemptions for price-fixing and rate discussions;  exemptions 
for other operational arrangements could be retained as long as they did not result in excessive market power.  See OECD (2002), "Competition Policy in Liner Shipping", Final Report, Paris. 
136 OECD (2002), op.cit.  
137 The last one, the Trans-Atlantic Conference Ag reement (TACA) covering traffic with Europe, was 
dissolved on 1 October 2008 upon the entry into force of Council Regulation (EC) No 1419/2006.  In 1998, the 
EC Commission had fined the "Trans-Atlantic Conference Agreement" US$314 million for setting prices not 
only for the ocean leg, but also for inland transportation by truck or train.  See Fink, Carsten, Aaditya Mattoo, and Ileana Cristina Neagu (2002), "Trade  in International Maritime Services: How Much Does Policy Matter?" 
World Bank Economic Review 16 (1) , pp. 81-108. 
138 See Containerisation International, November 2009, p. 21.   
139 See http://www.ccs.gov.sg/content/ccs/en/Le gislation/Block-Exemption-Order.html  (accessed 
5 March 2012).  S/WPDR/W/48 
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  risk diversion of cargo to ports in neighbouring co untries without a competition law regime or with 
antitrust exemptions.140 
227. Distinct from shipping conferences, "stabilizati on", or "discussion", agreements vary greatly 
in status from one jurisdiction to another.141  In particular, capacity stabilization agreements have 
always been banned for traffic to and from the European Union, and now also in Australia.  
Elsewhere, they are tolerated under terms which, overall, are becoming increasingly stringent.   
(c) Security 
228. Security measures have increased at both natio nal and international level since the tragic 
events of 11 September 2001.  As most measures ha ve been unilateral, international cooperation has 
had to increase in view of the need to preven t conflict of laws, the accumulation of operationally 
incompatible standards, and the costs associated therewith.  To this end, both the International 
Maritime Organization (IMO) and the World Cust oms Organization (WCO) further developed key 
multilateral standards.  Meanwhile, regulations are revi sed so as to take more effective account of the 
needs of operators and the risks of conflict of laws.   
229. In terms of content, security-related measures can  be grouped into four categories.  The first 
category seeks to ensure, in the port of arrival, that  neither the vessel nor its cargo is being used for 
terrorist purposes and that no terrorists are hiding among the vessel's crew.  Such measures include 
the posting of guards in ports, security audits, light ing and fencing requirement s, the installation of 
detection systems − including radiological and nuclear dete ction systems, and procedures for the 
screening and identification of port workers.  At th e multilateral level, the IMO International Ship and 
Port Facility Security Code (ISPS) of December  2002, which came into force on 1 July 2004, 
represents the main international regime. 
230. The second category of measures covers the vessel and its equipment: pilot projects 
concerning electronic seals and geo-localized container tracking;142  introduction of a "black box" 
identification system (IMO Automatic Identification System (AIS)); vessel audits and security plans, 
including the appointment and training of security  officers, administrative authority approval, 
introduction of an alert system, and overall monitoring by the State in which the vessel puts in to port 
(IMO ISPS Code), and obligation to provide full details of the content of the vessel's before its arrival 
at the port of destination (Japan) or its departure from the port of origin.143 
231. The third category of measures involves "exporting" security obligations to the port of origin:  
targeted or general pre-shipment inspection pr ogramme conducted by customs officials from the 
destination country in collaboration with customs officials from the country of origin.144 
                                                      
140 See Phang, Sock-Yong (2009), op.cit., pp. 203-4 in reference to discussions in Canada with respect 
to the review of the Shipping Conferences Exemption Act.   
141 They seek to establish a modus vivendi  between conference members, on the one hand, and 
independent ship-owners, on the other, through capacity and price coordination.   
142 US programmes "Smart and Secure Trade Lanes" and "Operation Safe Commerce"; APEC 
electronic container tracking project; ASEAN shipping movements database; and ISO standards on electronic seals (2008). 
143 US "24-Hour Rule" and "10+2 Rule";  European Commission Regulation No. 312/2009 of 16 April 
2009.  Since 1 January 2011, the advance declaration is an obligation for traders and is no longer optional, which means that relevant security information must be sent in advance of goods' arrival to the EU.  See: 
UNCTAD (2011b), op.cit., p. 122. 
144 The targeted US Container Security Initiative (CSI) programme; the five US pilot projects 
conducted in the United Kingdom;  Pakistan;  Oman;  Honduras and Hong Kong, China, under the 2006 Safe 
Port Act; and the US "100 per cent scanning" law of July 2007, due to enter into force on 1 July 2012. S/WPDR/W/48 
Page 58  
 
  232. The fourth category seeks to ensure the secur ity of the entire transport chain, from the 
production facility in the country of origin through to the port exit point in the destination country, 
and to place responsibility on the chain's private actors.   In return, these actors will benefit from "fast 
lane" cargo clearance.  At the multilateral level, th e WCO Safe Framework provides a set of minimum 
standards and principles that must be applied by national customs administrations.  The four core 
principles relate to: advance electronic informa tion; risk management; outbound inspections; and 
business partnerships.  These are furthered by cu stoms-to-customs network arrangements, and 
customs-to-business partnerships.   
(d) Other regulatory issues 
233. Various other regulatory issues are particularly  relevant for maritime transport, though a 
detailed presentation would go beyond the scope of this  Note.  These include regulations in relation to 
the environment, maritime safety, and maritime social legislation.
145   
234. On environmental protection, the IMO adopted in July 2011 a new package of technical and 
operational measures to reduce greenhouse gas (GHG) emissions from international shipping.  The 
package aims at improving the energy efficiency  of ships through improved design and propulsion 
techniques, as well as through operational practices.  The IMO has also discussed the introduction of 
market-based instruments to reduce emissions, but  there has so far been  no agreement on such 
instruments.146   
Q. ROAD TRANSPORT SERVICES  
235. Suppliers of road freight transport compete not only with each other for traffic, but also with 
operators of other transport modes.147  This inter-modal competition,  particularly in land-based 
transport, has strongly influenced the regulator y regime governing the road freight industry.  
Compared with maritime shipping, road and rail are currently transporting relatively small quantities 
of freight traded internationally, particularly betw een different continents.  Just under one quarter of 
global trade (measured in value) takes place betw een countries sharing a land border, where surface 
modes are assumed to be dominant.  As land-based tr ansport has a relative advantage in terms of cost 
per transit-time compared to water and air transport,  this is expected to result in increased demand for 
international movements via this mode. 
1. Regulatory context 
236. The road freight transport sector is heavily re gulated with measures ranging from security to 
road safety, the taxation of vehicles, fuel and infrast ructure, social legislation (driving hours and rest 
periods, wage norms and social insurance cover), road traffic (prohibitions and restrictions), 
environmental standards, and technical standa rds (in particular, weights and dimensions). 
237. While road transport is mainly regulated at the national level, in States with a federal 
structure, some regulations may also be operated at the sub-federal level.  At the international (mostly 
regional) level, regulation tends to focus on the harmonization of the operating conditions, such as 
weight and dimensions, environm ental standards, driving hours  and rest periods, and fiscal 
harmonization. 
                                                      
145 On these issues, see WTO (2010d) do cument S/C/W/315, op.cit., pp. 27-30. 
146 See International Maritime Organization (2011), "Main events in IMO's work on limitation and 
reduction of greenhouse gas emissions from international shipping", available at: 
"http://www.imo.org/MediaCentre/resources/Docum ents/Main%20events%20IMO%20GHG%20work%20-
%20October%202011%20final_1.pdf " (accessed 5 March 2012).   
147 See also OECD (2010b), "Globalisation, Transport and the Environment", Paris.  S/WPDR/W/48 
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  2. Regulatory developments and issues 
238. In discussing regulatory issues, it is useful to di stinguish between regulations that apply at the 
border, and thus, affect only international traffic,  and regulations that apply behind the border, and 
hence affect traffic irrespective of its origin.  
(a) Regulations at the border  
239. Regulatory issues pertinent to border crossing ar e perceived by operators in the sector as 
amongst the most significant.  These revolve essentially around two main matters. 
240. First, harmonisation and facilitation initiatives aimed at facilitating border crossings.  The 
road transport industry follows with keen inte rest the WTO trade facilitation negotiations, in 
particular where transit issues are concerned.  A l eading role has already being played by the United 
Nations Economic Commission for Europe's (UNE CE) harmonization and f acilitation conventions, 
the scope of which extends far beyond the European continent.  Out of 57 conventions, at least five 
are of major importance.  These are summarised in Box 5. 
Box 5 : Examples of main UNECE harm onization and facilitation conventions 
 
The European Agreement on Main Int ernational Traffic Arteries (AGR)  of 15 November 1975 (37 
contracting parties in January 2012) defines a uniform legal framework for the construction and development of 
a coherent international road network in all member coun tries and territories of UNECE, in particular for main 
arteries (so-called "E-road" network).  It defines such main arteries and the construction parameters to which 
they must conform.  The Agreement, which is regu larly updated, underwent a major revision with the 
integration of the road network of the countries of the Caucasus and Central Asia.  It has served as a model for several similar initiatives in Asia (by ASEAN and by  the United Nations Economic Commission for Asia and 
the Pacific) and in the Middle East  (by the United Nations Commission for Western Asia).  The Agreement was 
consolidated in 2006.   
The European Agreement Concerning the Work of Crew s of Vehicles Engaged in International Road 
Transport (AETR) of 1 July 1970 (51 Contracting Parties in January 2012) establishes uniform working 
conditions for the drivers of vehicles used in international road transport in accordance with relevant provisions 
of the International Labour Organization.  These concern driving and rest periods, rules on the composition of crews and uniform conditions applicable  to drivers.  The AETR is regula rly aligned with the corresponding 
European Union Directives.  The consolidated version of the AETR currently in force dates from 2006. 
 
The Customs Convention on the International Transport of Goods under Cover of TIR Carnets (TIR 
Convention)  of 14 November 1975 (68 Contracting Parties in January 2012, including 15 Contracting Parties 
outside the area covered by the UNECE) allows for international transports of goods via as many transit countries as may be necessary without intermediate customs inspection.  The affixing of seals and an 
international guarantee chain to ensure the payment of duties and taxes owed and to prevent fraud complete the 
system.  The IRU is responsible for issuing TIR carnets and administering the guarantee.  The application of the TIR Convention now extends beyond Europe to the Middle East (Lebanon, Kuwait, United Arab Emirates, 
Syria, Iran), North Africa (Algeria , Morocco, Tunisia), West Africa (L iberia), Asia (Indonesia, Mongolia, 
Republic of Korea), North America (United St ates) and Latin America (Chile, Uruguay).   
 
The Agreement concerning the Adoption of Uniform Co nditions for Periodical Technical Inspections of 
Wheeled Vehicles and the Reciproc al Recognition of Such Inspections  of 13 November 1997 defines the 
legal framework and procedures for the adoption of uniform rules for technical inspections and the mutual 
recognition of the resulting certificat es.  This Agreement had 12 Contracting Parties in January 2012.  
 
The International Convention on the Harmonization of Frontier Controls of Goods  of 21 October 1982 (56 
Contracting Parties in January 2012) aims to reduce the formalities and the number and duration of all types of 
controls (medico-sanitary, veterinary, phytosanitary, et c.) relating to compliance w ith technical standards or 
quality control.  This Convention applies to imports, exports and goods in transit.  S/WPDR/W/48 
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241. Apart from the Conventions listed in Box 4, num erous other specialised  and general regional 
organizations have developed c onventions and other instruments intended to promote harmonization 
of the conditions of competition in the internati onal road transport industry and the facilitation of 
trade in the sector.
148   
242. Second, problems arise from the way in which border-crossing regulations are implemented.  
According to the IRU and the World Bank, border cro ssing difficulties are particularly acute in certain 
geographical areas such as West Africa or the eastern borders of the European Union.149  There is a 
substantial amount of information from the Wo rld Bank, the various United Nations Regional 
Economic Commissions, the regional Development Banks and UNCTAD concerning, for example, 
the costs and delays generated by these problems.  For its part, the IRU has set up a 'border waiting 
times observatory'.   
243. These difficulties are generally linked to infr astructural, human resource or governance 
issues, rather than regulatory measures per se.  E fforts to alleviate or eliminate such problems are 
being made in connection with numerous bilateral and multilateral technical assistance projects, 
which often include regulatory reforms.  Amongst recent initiatives is the Chirundu One Stop Border 
Post (OSBP) between Zambia and Zimbabwe.  The OSBP was launched in December 2009 under the 
North South Corridor Pilot Aid for Trade Progra mme initiated by COMESA-EAC-SADC, to address 
the challenges of one of the busiest border crossi ngs in the region where transporters experienced 
significant delays.  As a result of the establishmen t of the OSBP, freight operators stop only once to 
complete border formalities for both countries, and waiting times have been reduced from about four 
to five days to a maximum of two days and often to a few hours.150 
(b) Regulations behind the border  
244. Many regulations governing domestic traffic appl y also to "visiting" foreign trucks through 
the principle of territoriality.  A foreign-registered ve hicle is subject to its host country’s legislation in 
terms of weights and dimensions, rules of the road , payment of tolls, etc.  Main exceptions are the 
taxation of the transport company (in the absence of  a double taxation agreement), the taxation of the 
vehicle in relation to its registration, and the driv er's wage and social insurance contributions, which 
remain those of vehicle's country of origin. 
245. National regimes tend to be fairly similar in c ontent, at least between countries at the same 
level of development, with a few exceptions.  In ternational and regional conventions often seek to 
establish the lowest common denominator of the nationa l regimes within their sphere of application.  
Such conventions may have been developed by international organizations with very broad 
geographical coverage (typical ly, the above-mentioned UNECE conventions) or by regional 
organizations with specific or gene ral mandates (for example, ASEAN). 
                                                      
148 For an overview of these activities, see th e IRU (2004), "TRANSLex -IRU Handbook on Road 
Transport Facilitation, Legislation and Practices", pages 12-20 for Europe, 21-38 for Africa, 40-70 for Asia and 
the Pacific, 71-81 for the Middle East and 82-102 for Latin America.  This  work also contains the Internet 
addresses to obtain updated information. 
149 See, for instance, ILO (2006), "Labour and social issues arising from problems of cross-border 
mobility of international drivers in the road transport s ector – Report for discussion at the Tripartite Meeting on 
Labour and Social Issues arising from Problems of Cros s-border Mobility of International Drivers in the Road 
Transport Sector", Geneva;  Arvis, J.F, G. Raballand and J.F Marteau (2007), "The cost of being landlocked : 
logistics costs and supply chain reliability", World Bank Policy Research Working Paper, No. 4258.  
150 See World Bank (2012), "De-Fragmenting Africa: Deepening Regional Trade Integration in Goods 
and Services", Washington.  S/WPDR/W/48 
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  246. A full description of the regulatory regime for road transport lies beyond the scope of this 
Note and would also run into insurmountable data pr oblems, particularly with respect to taxation and 
social policy.151  Thus, only environmental standards and regulations regarding weights and 
dimensions will be considered. 
(c) Environmental regulations 
247. Unlike in maritime and air transport, there is no universal standard for emissions in the road 
freight transport sector.  This multiplicity of standard s is attributable not only to the regional, or at 
most continental, nature of road freight transport, but also to the physical and fiscal characteristics of 
each market.  Thus, in the United States, the pref erence is for vehicles with powerful engines 
delivering high torque and, hence, displaying a particular emission profile, whereas in Europe, mainly 
for fiscal reasons, the range of vehicles is more vari ed in terms of engine capacity.  Vehicles produced 
and used in emerging countries are often geared  to more difficult road conditions, requiring 
mechanical characteristics  that may generate proportionally mo re emissions.  However, there are 
ultimately only very few competing emission standards:  three altogether, of which two are often accepted simultaneously.   
248. According to the data of the Intergovern mental Panel on Climate Change (IPCC), the 
transport sector as a whole (including the transport of persons by sea, air, bus and private car and freight transport) accounts for 23 per cent of CO2 emissions.
152  Freight transport by road accounts for 
25 per cent of the transport sector's energy cons umption (16 per cent for heavy lorries, 9 per cent 
medium-sized lorries), a figure directly proportional to the emission of carbon dioxide.153 
249. The volume of carbon dioxide emitted by the sector  is clearly destined to increase in the 
coming decades.  However, there is no consensus am ongst forecasters.  Historically, the demand for 
road transport runs more or less parallel to gr owth in GDP, but its energy intensity (energy 
consumption per tonne-km) is expected to decrease by  about one-third by 2030 thanks to technical 
progress (notion of "environmental decoupling").  Nevertheless, technological improvements will 
probably not suffice to stabilise the overall volume of emissions at its present level, but will merely 
help to slow down its growth.  
250. Road transport operators are generally in favour  of the regulation of CO2 emission standards 
because a reduction in these emissions would lead, ipso facto , to a reduction in the consumption of 
fuel, which is one of their main running costs.154  Technical innovations, the training of drivers in 
economical driving, and innovative logistical concep ts, such as Intelligent Transport Systems (ITS) 
and "optimized" (i.e. increased) weights and dimensions  would also contribute to reducing emissions.  
The suggestion that weights and dimensions be in creased has been opposed by environmental groups 
because of the additional damage that heavier lo rries could inflict on road networks and the 
infrastructure in general. 
                                                      
151 The IRU Information Centre ( http://www.iru.org/index/en_services_infocentre ) collects a large 
amount of regulatory information concerning road transport.  However, it is designed to provide professionals 
with specific operational information and, as its author s themselves acknowledge, is far from being exhaustive, 
particularly in terms of geographical coverage. 
152 IPCC (2007), Working Group III Fourth Assessment Report "Mitigation of Climate Change" B. 
Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer (eds) Cambridge University Press, Cambridge, United Kingdom and New York, NY, USA; See also International Transport Forum (2008), "Forum highlights, 
transport and energy, the challenge of climate change". 
153 These figures are however disputed by road transport professionals.  
154 On the other hand, the latest toxic emissions standards led to a slight increase in fuel consumption 
per ton-kilometre. S/WPDR/W/48 
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  251. The greenhouse gas emissions generated by road  transport (a notion which encompasses both 
polluting and carbon dioxide emissions) are included in the reduction targets of the Kyoto Convention.  So far, however, the sector is not subject to emission trading rights programmes.  
Notwithstanding, at least in the northern hemisphere , there has been a proliferation of environmental 
taxes levied on heavy goods vehicle traffic, including those aimed at reducing congestion and the 
general deterioration of road networks and infrastructure. 
(d) Regulation of weights and dimensions 
252. Standards governing weights and dimensions tend to differ significantly, even between 
countries that are neighbours and/or at comparable le vels of development.  Such differences can have 
major adverse consequences for actual market acce ss which, in some cases, may go so far as to 
eliminate or seriously restrict competition from neighbouring countries.  The World Bank's freight 
corridor studies contain several pertinent examples.
155  The ensuing (protective)  effects may be one of 
the reasons why sector representatives, at least at  national level, do not seem to be calling for 
harmonization. 
253. The debate over weights and dimensions seems to have shifted, at  least in developed 
countries, towards the domestic front.  It pits the providers and users of road transport, who favour 
heavier and longer rigs which are more economicall y efficient and proportionally less polluting, in 
terms of greenhouse gas emissions, against envi ronmentalists who are concerned about road 
congestion and its infrastructural implic ations (construction and maintenance). 
R. LOGISTICS SERVICES  
254. Emergence of global supply chains, expansio n of world trade in goods and services, and 
application of new technologies allowed logistics se rvices to flourish as an industry.  It also has 
become an increasing tendency for manufacturers and suppliers of goods and services to outsource logistics-related activities to specialists so that th ey can focus on core business es and at the same time 
ensure efficient management of supply chains.   
1. Regulatory context 
255. Driven by clients' increasingly sophisticated demands as well as by competition in the market, 
companies that used to deal with one or two components of the logistics chain have increasingly transformed into integrated operators.  Such co mpanies typically engage in services activities across 
the logistics chain from pre-production to end consumption, including inter alia  supply-chain 
consulting, warehousing and distribution, air a nd ocean freight forwarding, customs brokerage, 
transportation management, cargo handling, home delivery, etc.   
256. Today, traditional freight forwarders and inte rnational transport companies all claim to be 
logistics operators capable of providing customiz ed services to the needs of their clients.  The 
organizational and economic advantag es of integrating and controlling the entire logistics chain have 
been widely recognized.  The availability of e fficient logistics services is critical to overall 
competitiveness as it facilitates participation in gl obal supply chains and economic globalization.  The 
efficiency of the sector depends on accessibility to qu ality and reliable logistics infrastructure as well 
as a regulatory environment that is conducive to competition and to the smooth movement of goods 
and services along the logistics chain.   
                                                      
155 Arvis, J.F., G. Raballand and J.F. Jean-Francois (2007), op.cit.   S/WPDR/W/48 
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  2. Regulatory developments and issues 
257. Regulatory issues that may have important implicat ions for logistics services often relate to 
access to logistics infrastructure, licensing requireme nts and procedures, competition policy, technical 
standards, and customs and inspection procedures, etc.  As transportation is a component of the 
logistics chain, regulatory issues related to freight transport through various modes (air, maritime, rail 
and road) are relevant for logistics services.156  A number of these sectors have already been discussed 
in this Note.  Thus, the observations below focu s on regulatory issues that are more relevant for 
contract logistics, i.e. third party logistics (3PL).157  
(a) Access to logistics infrastructure 
258. Easy access to quality and reliable logistics infra structure (e.g. ports, rail terminals, roads, 
ICT networks, etc.) contributes to logistics servi ces providers' performance and competitiveness.  
Such access does not simply mean av ailability of physical infrastruct ure, it also means the possibility 
to access infrastructure on non-discriminatory and reasona ble terms.  In addition, as logistics services 
often involve multimodal transportation, easy access to infrastructure requires that the connectivity 
between different modes of transport be ensured as well.  Today, logistics services cannot function 
without the support of advanced ICT technologi es at each stage from planning, inventory 
management, tracking and tracing to transport and timely  delivery.  Therefore, it is also important to 
ensure that logistics operators gain access to exis ting ICT networks and are allowed to introduce new 
systems applications.  Restrictions on access to infrastru cture affect the efficiency of logistics services 
and may lead to delay, low service quality or even interruption of the logistics chain.  For example, in some countries, logistics service providers are required to use designated companies for cargo-
handling at airports or ports and are prohibited from self-handling cargos; access to storage and 
warehousing facilities at airports/ports is lim ited or conditional on financial investment in 
infrastructure.   
(b) Competition 
259. Competition-related concerns are often raised in terms of access to logistics infrastructure.  In 
many countries, logistics infrastructure owners (e.g. railways, ports, etc.) have directly or indirectly 
engaged in logistics services in order to diversif y or expand their businesses.  This may lead to 
competitive distortions that are not easy to address.  For example, with only accounting separation between the rail infrastructure business and train op erations, it is difficult to guarantee absence of 
discrimination between the rail owner and competitor s in the allocation and pricing of track access 
                                                      
156 For example, regulations on the allocation of take-off and landing slots for airlines, environmental 
restrictions on airlines' hours of operation, cabotage regu lations in air and maritime transport, regulations on 
fleet size and hours of operatio n in road tran sport, etc. 
157 WTO (2010e), "Logistics Services", Secretariat Background Note, document S/C/W/317, 10 June 
2010; examined three major subsectors in the logistics chain: storage and warehousing, freight forwarding, and 
contract logistics.  It is pointed out that it is not al ways easy to separate the activities provided.  There is no 
distinct category in the current GATS classification.  During the DDA negotiations, a group of Members 
proposed a checklist for scheduling substantial and meanin gful specific commitments in sectors (TN/S/W/20).  
While services inscribed in the checklist are all considered being involved one way or another in the logistics 
chain, they are divided into three tiers : (1) core freight logistics services; (2 )  related freight logistics services; 
and (3)  Non-core freight logistics services.  In th e definition by the United States International Trade 
Commission (USITC) in its 2005 survey on logistic s services, supply-chain consulting and transport 
management services are the core servi ces offered by the majority of logistics services providers.  Supply-chain 
consulting services involve global network design and distribution strategies while transport management 
services include storage and warehousing, cargo handlin g, transport agency servi ces and customs brokerage. S/WPDR/W/48 
Page 64  
 
  and ancillary services.
158  Full separation would be a way of ensuring neutrality and avoid that public 
funding of infrastructure be used to indirectly support other activities.159  In some countries, as 
incumbent postal operators have e xpanded their businesses into logi stics services, competition issues 
have also been raised in view of possible cross- subsidization by incumbent postal operators through 
its businesses in the reserved area.  As integrati on has become a way to enhance competitiveness (e.g. 
a shipping line integrates into its business the func tions of shipping agents, cargo handling companies, 
freight forwarders and inland tran sport providers), abuse of market power could arise.  Excessive 
market concentration could be to the detriment of smaller competitors or new entrants.  For example, 
when rail and port operations are commonly owned, the port operator has a clear incentive to favour 
rail access over trucks.   
(c) Licensing requirements 
260. As logistics services are increasingly provided in an integrated manner, an operator may have 
to obtain several licences from many different authorities in charge of various parts of the logistics chain (e.g. authorities in charge of customs, inspection,  port, airport, rail, road, postal, etc.).  Licences 
for the provision of transportation services are requir ed in virtually every country.  Many countries 
also require separate licences for warehousing, fre ight forwarding, express delivery, or shipping 
agency, etc.  In some cases, provincial or lo cal governments maintain inconsistent licensing 
requirements and procedures.  The need for multiple licences raises transaction costs, in particular for 
integrated operators, which have to either c hoose between the time-consuming process applying for 
all needed licences or subcontract domestic suppliers.  As logistics services are increasingly customized to meet the needs of the client, integrat ed operators often need to directly engage in a 
wide range of services or control the entire logisti cs chain in order to ensure high service quality.  In 
the case of subcontracting, domestic suppliers may not always possess expertise to deliver goods "at 
the right place, at the right time, right price and right quality".  Burdensome licensing requirements are often compounded by lack of transparency.  In this context, it has been suggested that service 
suppliers be allowed to supply in combination the services that make up the logistics chain, from 
cargo handling, warehousing, freight forwarding,  to transport, distribution and delivery.
160 
(d) Border procedures 
261. According to a United States International Tr ade Commission (USITC) survey on logistics 
services in 2005, border clearance procedures, including customs and inspection, constitute the 
greatest impediment to the supply of global logistics services.  In a survey undertaken by the World Bank, efficiency of the customs clearance process is  one of the six indicators to assess the logistics 
performance of an economy.
161  As the main objective of logistics services is to move goods 
expeditiously, reliably, and at low cost, time-c onsuming and cumbersome border procedures have 
significant adverse impacts on the efficiency of the sector.  Excessive paper documentation for the 
customs clearance, limited hours of operation at customs facilities, preferred treatment of domestic carriers, and security-related delays in inspection ar e cited as factors that make it more difficult for 
logistics suppliers to deliver on time.  In add ition, customs laws and regulations are sometimes 
applied inconsistently at different customs stations in certain countries.
162  This raises uncertainty and 
                                                      
158 OECD and International Transport Forum (2010),  "Integration and Compe tition Between Transport 
and Logistics Businesses" p. 23. 
159 Ibid.  
160 WTO (2004), "Communication from Australia; Hong Kong, China; Liechtenstein; Mauritius; New 
Zealand; Nicaragua; Switzerland and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu - 
Logistics Services ", document TN/S/W/20, 25 June 2004. 
161 World Bank (2010), "Connecting to Compete 2010 - Trade Logistics in the Global Economy: The 
Logistics Performance Index and Its Indicators", Washington. 
162 USITC (2005), "Logistics Services: An Overview of the Global Market and Potential Effects of 
Removing Trade Impediments" Investigation No. 332-4623, USITC Publication 3770.  S/WPDR/W/48 
 Page 65 
 
 
  unpredictability of business operations and may result in extra costs for logistics providers.  It has 
been proposed in the DDA negotiations and PTA nego tiations to develop regulatory disciplines that 
extend to procedures and formalities such as documen tation requirements, customs clearance, customs 
inspection, and electronic processing.  One specifi c suggestion is for Members to accept electronic 
trade administration documents.163  In some PTAs, parties have undertaken certain regulatory 
commitments to facilitate customs cl earance and inspection procedures.   
III. MODES OF SUPPLY 
A. CROSS -BORDER SUPPLY (MODES 1 & 2) 
1. Regulatory context 
262. Cross-border trade can occur in all but a very few services today, due to advances in 
information and communications technologies (ICT).  However, certain sectors such as computer and 
related services, certain business support services, and many auxiliary services to other sectors have become most closely associated with  the recent rise in potential for cross border trade.  This trend is 
often referred to as offshoring.  These and an incr easing number of services considered to be ICT 
enabled are therefore subject, in principle, to any re levant regulations affecting the sectors concerned.  
Some of the key factors in fostering cross-border tr ade, particularly in back office support services, 
include not only cheaper labour costs for both workers and managers, but also a blend of factors involving available skills and education levels , cost and quality of infrastructure (e.g. 
telecommunications, internet, electricity), and co mplementary language abilities.  Of particular 
relevance, given the degree of IT outsourcing and the reliance of cross-border trade on ICT services, 
are the regulatory issues cited in the sections of this Note on computer and related services and 
telecommunications.  Nevertheless, some unique regulat ory considerations exist due to the fact that 
the suppliers do not have or do not need a commercia l presence in the legal jurisdiction to which they 
export.  As a result, the application of regulator y measures to cross-border trade raises a number of 
questions. 
2. Regulatory developments and issues 
263. First is the feasibility for the importing country of applying some regulations to a supplier 
outside its jurisdiction.  These might include techni cal or quality standards, certification requirements, 
and consumer protection.  Also, there is the ques tion of whether some aspects of regulation impact 
differently on services supplied cross-border, on-line as opposed to those supplied by suppliers who are present within the territory of the Member (m odes 3 and 4).  In the case of licensing, where it 
exists for a service, is it possible that electronic supply may call for new or different approaches to 
licensing regimes?  How are qualification or technical  requirements to be implemented with respect to 
suppliers situated outside the territory of the impor ting country?  In some cases, such concern may be 
in part the reason for the persistence that some  governments retain commercial presence requirements 
for cross-border supply.  In some cases, also, an  inbuilt presumption of licensing requirements is that 
the supplier has a presence in the territory  of the Member granting authorization. 
264. Governments have relatively limited experience with regulating cross-border transactions, 
although some sectors such as financial services have  a significant history in this regard.  In the 
financial sector, cooperation between regulatory au thorities has been common and some other sectors 
are exploring ways to do so.  However, since such cooperation is not always in place or is impractical, 
it is not uncommon for regulations or  other controls considered a prio rity to be implemented by means 
of measures directed at the consumer's right or  ability to purchase certain services from abroad.  
                                                      
163 WTO document TN/S/W/20, op.cit. S/WPDR/W/48 
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  265. National regulatory regimes, in many cases, have  not kept pace with the technologies that are 
transforming the ease with which many services can now be traded across borders.  So-called e-commerce laws often address only targeted issues such as electronic signatures and the admissibility 
of electronic documents in legal proceedings.  The difficulty in keeping pace applies to many forms of 
regulation, not only potential trade restrictions.  To deal effectively with cross-border supply, 
governments might feel that they need to have so me regulatory reach beyond their borders, to increase 
coordination with the authorities in the national ju risdiction of the suppliers concerned.  Another 
approach is to rely to a considerable extent on an  expectation that suppliers outside their borders will 
abide by the laws in the client's jurisdiction, how ever, developing effective sanctions and enforcement 
to ensure that this will be likely is a consideration. 
266. As with IT services in general, other areas of  governmental regulatory activity relevant to 
cross-border supply include research and developmen t (R&D) policy, rules governing the privacy and 
security of information,  the protection of intell ectual property rights and government procurement.  
Research and development is not only a service that itself can be increasingly supplied cross-border, it 
also underpins many of the technologies and applica tions used to engage in cross-border supply.  
Since much of cross-border supply deals with the transfer of information, and with outsourced 
corporate back office support, financial auxiliary ser vices, personnel services, and health services, this 
information can be sensitive and confidential.  Therefore, regulations protecting the privacy and 
confidentiality of information are also relevant to cross-border trade.   
267. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Points made above in relation to comput er and telecommunication services may often 
have relevance to cross-border supply of services in general.  However, additional issues particular to cross-border supply of services may arise as concerns domestic regulation (i.e. jurisdictional question, extra- territorial application of regulations).  
Some such concerns have arisen in the p ast in the context of the e-commerce work 
program.  Should these continue to be pursued either in that context or in regular 
GATS bodies?  
(b) Also, even for economies that do not im pose commercial presence requirements, 
licensing or certification requirements may nonetheless imply or inadvertently require 
a degree of commercial presence in order to supply services.  Where some forms of authorization are required, certain agencies with respect to particular services have 
instituted on-line application procedures that can facilitate participation in the market 
by non-resident suppliers.  Would there be  advantages to exploring this and other 
possible regulatory mechanisms that could facilitate cross-border supply? 
(c) Another problem for cross-border supply can be the lack of mechanisms to facilitate 
the cooperation of regulatory authorities acro ss different national jurisdictions.  At 
present, only the joint efforts of financ ial supervisory authorities are formally 
recognized, in the Annex on Financial Services.  Are there improved means by which GATS bodies could serve to promote such cooperation among regulators, e.g. via information sharing, consultations , notifications or other means? 
B. C
OMMERCIAL PRESENCE (MODE 3) 
268. This section illustrates some of the regulatory issues that affect trade through the 
establishment of a commercial presence as defined in Article I:2(c) of GATS (mode 3).  It focusses on 
elements that are pertinent horizontally, i.e., to all or most of mode 3 trade, leaving the discussion of 
sector-specific issues to the relevant sectoral sections.    S/WPDR/W/48 
 Page 67 
 
 
  1. Regulatory context 
269. Establishing a commercial presence in a foreign country or territory is the primary way in 
which many services are traded internationally.  Mode 3 is believed to account for approximately 55-
60 per cent of all services trade falling under the GATS.  Likewise, foreign direct investment (FDI) in services accounts for about two-thirds of FDI infl ows worldwide and about 55 per cent of FDI inflows 
into developing countries.
164  Establishing a presence in the hos t market, which allows for direct 
interaction with the customer (as well as with local  regulatory and supervisory authorities) often is the 
preferred way of doing business, ev en when cross-border supply is technically feasible.  It makes it 
easier to respond to consumer preferences, which ar e shaped by factors such as culture and language 
but also, not insignificantly, by the regulatory environment.  Tax deductibility, health insurance 
portability, grants and subsidies in the education field, as well as tariff setting in relation to utilities 
like water or electricity are cases in point.   
270. In many cases, regulatory requirements compel  service suppliers to establish a commercial 
presence and incorporate as a particular type of  legal entity.  For instance, by requiring the 
establishment of a fully-capitalized, locally-register ed subsidiary, host country authorities often wish 
to ensure that the foreign-controlled entity falls within their regulatory/supervisory purview and actual 
reach.  Some of the reasons for insisting on co mmercial presence were discussed in the preceding 
section on cross-border supply.  This can be the case  in particular for sectors considered to be 
sensitive, such as infrastructural, financial,  and certain social and cultural services. 
271. The key rationales for regulation have already been  discussed in section 1 of this Note.  More 
specifically, other public policy goals or overriding public interest motivations to regulate mode 3 
might include:  national security considerations (e.g ., national screening of foreign investments to 
assess the latters' impact on critical infrastructures or technologies);165  public health considerations;  
safety;  consumer protection against fraud or violat ion of privacy, or to ensure the quality of the 
service (regulation of many professional services through  qualifications and licensing requirements);  
protection of depositors and investors (prudential re gulation in the financial sector);  development or 
other economic concerns;  reliable and affordable access (e.g., in th e health, education and energy 
sectors);  as well as the protection of data integr ity and online security (e-commerce, information and 
communications sector). 
2. Regulatory developments and issues 
272. In many countries, developed,  developing and least-developed, there has been an increasing 
trend towards the introduction of competition in services activities.  Countries have taken measures 
designed to eliminate public monopolies and to open up to private (including foreign) competition 
major infrastructural services such as financial, telecommunications, energy, rail and other transport 
services.  All these examples show the close inte rrelations between mode 3/investment, domestic 
regulatory reform,166 competition and trade policies.  In this section, three mode-3 relevant regulatory 
issues are briefly described.  They relate to tran sparency, licensing and qualification requirements and 
procedures, and regulatory co-operation. 
                                                      
164 UNCTAD (2006), "Measuring Restrictions on FDI in Services in Developing Countries and 
Transition Economies", United Nations, New York and Geneva, p. 1. 
165 See for instance, Clark, H. L. and Wang, L.W. (2008), "Foreign Investment and National Security – 
New Approaches to National Security Screening of Fore ign Investments in the United States and China could 
subject Deals to Closer Scrutiny", China Business Review , January-February 2008, pp. 51 ff. 
166 Domestic regulatory reform may include, inter alia , the separation of regulatory responsibilities, 
increased accountability and effectiveness, increas ed competition and third-party access provisions. S/WPDR/W/48 
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  (a) Transparency  
273. Foreign service suppliers often experience c onsiderable difficulty in obtaining precise 
information on the applicable national rules and th eir interpretation, the competent authorities at 
various federal and sub-federal le vels and the procedures to be complied with in order to set up a 
commercial presence in the territory of anothe r Member.  The accumulation of formalities and 
procedures, combined with the lack of informa tion (regarding necessary authorizations, qualification 
requirements and other conditions attached to th em, employment law, technical regulations for 
equipment and material to be used by the service s upplier, etc.) can have a dissuasive effect on service 
suppliers from other Members. 
(b) Complexity of licensing (including authorization/prior declaration) and qualification 
requirements 
274. The complexity of services regulation, coupled with the fact that the quality of a service is 
directly dependent on the characteristics and ability of its supplier, engenders a number of licensing, 
authorization and qualification requirements, whic h are not to be found in regulations governing 
goods.  Beyond the quantitative and territorial rest rictions, as well as the nationality and residence 
requirements imposed by some Members on servi ces activities (which pertain to Articles XVI 
and XVII of GATS and thus do not fall within the sc ope of this Note), access to a large number of 
service activities is subject to licensing, authoriza tion or prior declaration procedures.  They are 
particularly widespread in areas such as professi onal services (especially the so-called "regulated 
professions"), technical testing and analysis servi ces, services incidental to mining, placement and 
supply services of personnel, as well as private security , telecommunications, environmental, financial 
and transport services.   
275. Furthermore, the failure to take into account requirements already met by a service supplier in 
his/her home country – for instance, securities or guarantees already deposited, liability and professional indemnity insurance policies alrea dy taken out – may lead to duplicating and 
compounding the constraints facing suppliers who wish  to establish a commercial presence in several 
markets.   
(c) Multiple procedures 
276. Often, it is the sheer number of different lo cal and national authorizations/licences required 
for some activities that is particularly burdensome  for foreign service suppliers – as if it means having 
to contact more administrative authorities, fill in  more forms and provide more certificates.  For 
instance, suppliers of retail distribution services often need a building permit, an environmental 
impact as well as a socio-economic impact certifi cation – in addition to having to comply with 
complex zoning regulations.  This multiplicity of au thorizations can be especially onerous for foreign 
service suppliers as they are less familiar with local  authorities and modus operandi.  The procedures 
and conditions associated with su ch permits and regulations may de facto  have restrictive or even 
discriminatory effects on foreign service suppliers, pa rticularly if the procedures involve bodies which 
include domestic competitors. 
277. The bureaucratic complexities of certain author ization and registration procedures, the long 
time required for completion, the onus of proof, th e certification of translations, the administrative 
fees to be paid, the less than constructive attit ude taken by some authorities and the difficulties 
involved in lodging administrative appeals, a ll entail substantive compliance costs that may 
discourage foreign service suppliers from setting up  a commercial presence, particularly small and 
medium-sized enterprises (SMEs) and start-ups.  S/WPDR/W/48 
 Page 69 
 
 
  278. To enhance trade opportunities, governments have taken a series of business facilitation 
measures, inter alia ; e-government platforms and single window s for applications to guide national 
and foreign investors in fulfilling the myriad of  administrative procedures needed to establish 
commercial presence.  These government measures ar e not exclusive to service suppliers; however 
they offer good examples of trade enhancing initiativ es available to service suppliers.  For instance, 
examples include EU points of single contact,167 Nigeria's One-Stop Investment Centre (OSIC),168 
Rwanda's E-Regulation Platform and El Salvador's National Investment Office.169  Such services are 
increasingly common and can be found in many other countries.170 
(d) Independence of decision making 
279. In addition to regulatory obstacles arising from national, regional and local legislation and 
regulation, impediments may arise also from the be haviour of administrations, including the use of 
discretionary powers or heavy and non-transparen t procedures, which favour  domestic suppliers.  
Another difficulty often cited by business is the unpredictability resulting from unclear requirements 
which are applied on a case-by-case basis by national authorities.  
280. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Are there any mode 3 specific regulatory issues which are not already addressed in 
the respective sectors?  
(b) Would it be helpful to exchange information on what horizontal initiatives could help 
facilitate service suppliers to fulfil ad ministrative procedures needed to establish 
commercial presence? 
C. PRESENCE OF NATURAL PERSONS (MODE 4) 
281. This section highlights the main regulatory issues that affect trade through the presence of 
natural persons (mode 4).  It focuses on elements th at are pertinent horizontally, to all or most trade 
under this mode.    
1. Regulatory context 
282. Mode 4 trade takes place in a heavily regulated c ontext.  This is largely because both a "trade" 
and a "migration" component are involved in the move ment of natural persons to provide a service.   
283. Supplying a service through mode 4 necessarily requires that the individual concerned enter 
and be physically present in another Member's terri tory.  Hence, in addition to regulation stemming 
from the nature of the individual as a service provid er, a whole set of mode 4-relevant measures 
                                                      
167 EU Directive 2006/123/EC on Se rvices in the Internal Market , 12 December 2006, Article 6. 
168 Nigeria's Investment Promotion Commission (NIPC) established a One-Stop Investment Centre 
(OSIC) to bring together officials fr om 16 different ministries and agencies with the intention of facilitating 
entry and establishment for investors. See Nigerian Investment Promotion Commission (NIPC) website 
available at  http://www.nipc.gov.ng/onestop.html  (accessed 6 March 2012).  
169  Ministry of Economy created the National Investment Office (Oficina Nacional de Inversiones – 
ONI-) to facilitate the establishment of national and fo reign investments in the country. See El Salvador's 
Ministry of Economy website, available at http://servicios.minec.gob.sv/oni/main.html  (accessed 6 March 2012) 
170 For general discussion on business facilitation measures See UNCTAD (2011a) op.cit and 
UNCTAD's smart solutio ns for business facilitation, available at http://businessfacilitation.org/ (accessed 
9 March 2012).  S/WPDR/W/48 
Page 70  
 
  originate from the fact that the person is simultan eously also a "migrant", albeit with a temporary, 
economic and service-providing profile.   
2. Regulatory issues and cooperation 
284. Mode 4 raises a number of regulatory challenges,  mostly revolving around four main sets of 
issues.  They are illustrative of the intersection of  the trade and migration backdrops against which 
mode 4 occurs.  While some issues pertain primaril y to either the trade or the migration contexts, 
others may straddle across the two. 
285. The main issues relate to:  transparency ; procedures concerning admission and stay; 
verification of competence;  and mechanisms to ensure a person's return.  The remainder of this section discusses each issue in turn, while also  highlighting instances where governments have 
responded to the challenges involved by putting in place mechanisms of regulatory co-operation.  
(a) Transparency 
286. One particular challenge when it comes to mode  4 relates to the different requirements that 
may need to be satisfied before services can be supplied through this  mode of supply.  Depending on 
the category of persons concerned, mode 4 may im ply the fulfilment of requirements and procedures 
related to admission, work authorisation, reside nce permit and/or verification of competence.  
Business visitors, for instance, will most likely be faced exclusively with entry requirements, whereas 
specialists working as intra-corporate transf erees might need to fulfil all four.   
287. In light of the non-permanent nature of mode 4 movements, moreover, these requisites may 
need to be met several times over in order to supply services to the same market .  In addition, they are 
proportionately more costly to fulfil for an indivi dual than for a commercial entity.  They might prove 
particularly burdensome if the appl icant is an independent professional
171, but would be of 
consequence also for contractual service suppliers.172  Both of these categories of persons cannot rely 
on the support of a commercial entity established in the host market that would be more resourceful 
and better informed about local requirements and procedures.   
288. Transparency-related concerns relevant to m ode 4 include cases when:  not all relevant 
regulatory measures are published, or are not easily accessible, for instance electronically; 
information on entry, work and residence authori sations are not available from a single source or 
measures pertaining to temporary and perman ent presence are bundled together; the national 
authorities competent to receive applications for the different permits and authorisations are not 
clearly identified; information on material or eviden ce to be submitted and relevant process is lacking; 
indicative time-frames for processing of visas and app lications are not specified; no information is 
available on the way in which Economic Needs Tests (ENTs) are administered; the reasons for the 
denial of an application are not provided; the possi bility of redressing any procedural shortcomings is 
foreclosed; and new measures or modifications of existing ones are not promptly made available. 
                                                      
171 "Independent professionals" are usually defined as self-employed persons who are present in a 
foreign market to supply a service to a local  client pursuant to a service contract. 
172 "Contractual service suppliers" commonly refers  to employees of a service supplier without 
commercial presence in the hos t country, who are present in that mark et to provide a service pursuant to a 
service contract concluded between their employer and a local client.  S/WPDR/W/48 
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  (b) Procedures relating to admission and stay 
289. Procedures for visas, work and residence pe rmits can act as significant impediments to 
mode 4 trade.173  Application procedures may be cumbersome, excessively costly and administratively 
complex; processing times can be lengthy, rejection rates high and the costs of reapplying important.  Applicants are often required to follow separate procedures for entry visas and work and residence 
permits.  Permit extension and renewal processes may not always be more streamlined than those 
governing initial applications.  Procedures, particul arly work-permit related ones, rarely distinguish 
between temporary and permanent movement of la bour, and are therefore particularly ill-suited for 
the temporary, and often time-sen sitive, types of movement that mode 4 involves.  Opaque and 
arbitrary procedures may compound these problems. 
290. To try to deal with concerns of this nature , a number of initiatives have been taken at the 
regional level.  Notable examples are the APEC Bu siness Travel Card (ABTC) and, more recently, 
the EU Blue Card.   
291. The ABTC scheme commenced permanent operati ons in March 1999.  While it does not grant 
any right of entry, the system streamlines entry for business people within the Asia-Pacific region.  
The scheme allows accredited professionals to obtai n, through a single application form, a travel card 
for multiple, short-term visits to  other APEC economies over a period of three years.  The holder of 
an ABTC is allowed repeated two-or three-month st ays in an APEC economy that is a full member of 
the scheme without the need to apply for individual visas or entry permits.
174  Cardholders are also 
entitled access to fast-track immigration processing lanes at major airports of the region.175  
292. The EU Blue Card is a much more recent scheme.176  It entered into force on 19 June 2009 
and was to be transposed by EU Member States by 19 June 2011.  The scheme is aimed at facilitating 
conditions of entry and residence in the EU of third-country nationals for the purpose of highly 
qualified employment and includes the creation of a fast-track procedure for issuing the EU Blue 
Card, a special residence and work permit.   
293. Applicants that fulfil a set of conditions will be  issued with the Card, which is valid for a 
standard period of one to four years, with the possib ility of renewal.  A Blue Card may also be issued 
or renewed for shorter periods in  order to cover the work contract period plus three months.  A 
decision on the application will be provided within 90 da ys of filing and, if successful, the applicant is 
to be given every facility to obtain the requisite vi sas.  Cardholders and their families are entitled to 
enter, re-enter and stay in the issuing Member St ate and pass through other Member States, work in 
the sector concerned and receive equal treatment w ith nationals as regards, for example, working 
conditions, social security, pens ions, recognition of diplomas, e ducation and vocational training. 
(c) Verification of competence 
294. Not all mode 4 trade requires that the competence of the individual concerned be verified or  
qualifications, education or skills be formally  recognized.  When it comes to non-regulated 
                                                      
173 Problems in government handling of visas for foreign business travellers have been estimated to 
have cost US businesses more than US$30 billion in revenue and indirect costs between July 2002 and March 2004, for instance (The Santangelo Group (2004) "Do Visa Delays Hurt US Businesses?" Washington). 
174 Eighteen out of the 21 APEC economies participate fully in the ABTC scheme.  The remaining 
three economies, i.e. Canada, the Russian Federation and the United States, are transitional members.  As such, 
they only provide fast track immigration processing lanes.  
175 More information about the main features of the ABTC scheme can be obtained at 
http://www.businessmobility.org/key/A BTCArrangementsMarch2008.html . 
 
176 Council Directive 2009/50/EC of 25 May 2009. S/WPDR/W/48 
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  professions, for instance, an entry visa, possibly comp lemented by a work permit, might be all that is 
needed to engage in th e supply of a service. 
295. However, particularly when it comes to prof essional services, mode 4 trade implies that the 
competence and credentials of the professional concer ned be verified and recognized.  In assessing an 
applicant's credentials, formal qualifications are gene rally the main, if not the sole, element taken into 
account.  In certain sectors, however, skills and experience might prove equally or even more 
relevant.  Even when expertise and on-the-job fam iliarity are considered, the assessment criteria may 
still be oriented towards local knowledge and norms.   
296. Qualifications obtained abroad are rarely fully recognized in the host country.
177  The impact 
of non-recognition is likely to vary depending  on the type of mode 4 movement involved 
(independent professionals pr obably being more affected than intra-corporate transferees), size of the 
supplier (smaller enterprises encountering more difficu lties than larger corporations), sector (regulated 
services being significantly more concerned than unr egulated ones), possibility of modal substitution 
(suppliers of services that may be provided throug h alternative modes being less impaired), and the 
country concerned (depending on the relative di fferences of the regulatory regimes involved). 
297. Mutual Recognition Agreements (MRAs) are mo stly concluded for licensed professions with 
established international standards and practices.  They are not necessarily a viable option for 
occupations where skills and experience are judged ma inly through a concrete demonstration of work 
or after a period of service.  MRAs usually in volve neighbouring (mainly developed) countries, 
partners of broader integration in itiatives, or countries with former colonial or linguistic ties.  These 
agreements rarely award 'pure' recognition.  They  mostly require a significant amount of regulatory 
cooperation and often some  regulatory adaptation.178  Since the process of negotiating MRAs is 
generally complex, time- and resource-intensive, these agreements tend to be concluded only when 
there are prospects of exploiting promising comme rcial opportunities abroad or in order to fill 
domestic skill gaps.   
298. Article VII:4 of the GATS requires that, with in 12 months from the date on which the WTO 
Agreement takes effect, each Member inform the Co uncil for Trade in Services (CTS) of its existing 
recognition measures.  As of Februa ry 2012, 49 such notifications have been submitted to the CTS.  
Though this is likely not the full extent of recognition measures currently in existence179, it still 
provides a sense of how rarely qualifications and e xperience acquired abroad have been recognized.   
299. In the absence of MRAs, mechanisms to assess and recognise competence may range from 
case-by-case evaluations of prior qualifications to th e passing of examinations at licenced facilities to 
demonstrate equivalence with national qualificatio ns.  The processes involved may be discretionary, 
particularly when they are based on unspecified cr iteria, imply substantial delays and costs, and 
concern multiple government levels and entities.  To remedy any verifiable de ficiencies in education, 
training or experience, the applicant may be require d to take specific courses and training, which may 
replicate, at least to some extent, prior education or  coaching, or be made to acquire fresh experience, 
irrespective of past practice.180   
                                                      
177 See, for instance, Chanda, R, (1999), "Movement of natural persons and trade in services: 
Liberalising temporary movement under the GATS", ICRIER Working Paper , No. 51. 
178 As described, for example, in Chaitoo, R. (2008),  "Services liberalisation and domestic regulation:  
Why is it important?" Paper prepared for CUTS/FICCI Conference on "Global Partnership for Development: Where do we stand and where to go?". 
179 Some recognition arrangements might have been negotiated as part of Economic Integration 
Agreements, for instance.  
180 See, for example, Ganguly, D. (2005), "Barriers to movement of natural persons.  A study of 
federal, states and sector-speci fic restrictions to mode 4 in the United States of America", ICRIER Working  S/WPDR/W/48 
 Page 73 
 
 
  (d) Mechanisms to ensure return 
300. Mode 4 movements are mostly of a non-permanen t nature.  In this regard, it might be argued 
that mode 4 poses substantially the same challenge as other kinds of temporary migration, i.e. the risk 
that entrants might overstay.   
301. To address this risk, bilateral labour agreements  in particular have put in place cooperative 
mechanisms between authorities in sending and recei ving countries.  Source countries have taken on 
obligations that include pre-movement screening a nd selection, education and training pre-departure, 
facilitation of the return and reintegration of th eir nationals, and measures to combat irregular 
emigration to the host country.  On their part, d estination countries have permitted re-entry of the 
same migrant on a priority basis, to facilitate circ ular movement, and offere d assistance to sending 
country governments to help them implement such return schemes.   
302. Such co-operation mechanisms have also been  accompanied by unilateral measures.  To 
prevent overstaying, destination countries have pla ced obligations on both employers and employees.  
Examples of the former include requiring firms or individuals to place a bond which is forfeited in the case of non-departure, or fining the domestic sponsoring company for workers who do not leave and 
withdrawing their right to sponsor future worker s.  In the latter case, measures have included 
withholding part of the compensation of the servic e providers until they or their employees leave the 
country.  Many of these mechanisms are more easily  applied to companies than to individuals.  
Unsurprisingly, enforcement difficulties have been fewer for intra-corporate transferees, where the 
local company can be sanctioned, than for self-employed suppliers.
181   
303. In light of the above, the following are some specific questions that Members might like to 
consider: 
(a) Does the temporary nature of a significant portion of mode 4 movement call for 
specific solutions to transp arency-related challenges?  
(b) Do elements of the APEC Business Travel Card and the EU Blue Card mechanisms 
offer viable blueprints for similar co-ope ration initiatives, possibly including those at 
the multilateral level? 
(c) Are the provisions of Article VII:4 sufficien t to ensure adequate transparency with 
regard to the existing and prospec tive mutual recognition agreement and 
arrangements negotiated by Members? 
(d) Could features of the cooperative mechanisms set up between origin and destination 
countries in some bilateral labour agreemen ts be usefully transposed under the GATS 
in an MFN-consistent manner?   
IV. CONCLUDING OBSERVATIONS 
304. The purpose of this Note has been to provide  background information on regulatory issues 
that might arise in various sectors and modes of su pply.  In keeping with the request from Members, 
the approach has been to discuss generally the re gulatory environment and trends affecting sectors 
and modes, and to highlight, where relevant, issues that may have a particular bearing on trade in 
                                                                                                                                                                     
Paper , No. 169 or Mattoo, A. and D. Mishra (2009), "Foreign professionals in the United States:  Regulatory 
impediments to trade", Journal of International Economic Law , Volume 12, Issue 2. 
181 See World Bank, OIM, OECD (2004), "Trade and migration.  Building bridges for global labour 
mobility", Paris.  S/WPDR/W/48 
Page 74  
 
  services.  The issues raised in the Note are not exhaustive and Members may wish complement them 
with their own specific experiences, or contribute  other regulatory matters, to the discussions, as 
appropriate.  Thus, any conclusions that are to be  drawn would depend on any further discussions by 
Members.  
305. Nevertheless, in the interest of  facilitating consideration of the Note in the Working Party on 
Domestic Regulation, some general points, appear to be pertinent: 
(a) Whilst there are considerable differences between services sectors and modes of 
supply, the underlying rationale for re gulation is often based upon addressing 
perceived market failures  or to achieve particular social equity objectives .  The extent 
of market failures (see Section I for furthe r background) may arise to different extents 
depending on the sector/mode concerned.  For instance, in network services (i.e. 
telecommunications, transportation, logisti cs, energy), regulation is often closely 
related to competition policies, as the regulator seeks to ensure that the dominant market player, often a former monopoly does not abuse its position through its control of essential infrastructure.  In other sectors, such as professional services, 
regulation may be more directed at offsetting information asymmetries and protecting 
consumers from unqualified pr actitioners.  Problems of asymmetric information can 
also arise in other sectors, such as financial services, and can lead to less than optimal 
financial choices and risks assessments, which lead to market imbalances.  A market 
failure cited in virtually all sectors are ne gative externalities, such as environmental 
impacts.  In fact, certain sectors, such as tourism, distribution and transport, have a 
predominance of externality-rela ted regulation.  In terms of social equity objectives, 
fulfilment of universal service obligations and access to essential services, is a theme which runs through a number of sectors, su ch as education, telecommunications, and 
postal and courier services.  
(b) Actual regulatory practices vary, but here  again there appear to be some common 
threads.  Regulations are typically applied either upon entry or authorisation to supply 
the service, or during the conduct of the servi ce.  Thus, in the literature on regulation, 
a distinction is sometimes made between these two categories.  Entry regulations  may 
set conditions restricting the entry into the market to supply a particular service (e.g. 
licensing and qualification requirements, quantitative limits on the number of 
suppliers of professional services, forms of business, and exclusive rights granted to 
suppliers in certain areas).  C onduct regulation  govern how the service is to be 
provided, including restrictions on  prices and fees, and advertising.
182  T h e  
categorizations of entry and conduct  do not translate directly into the GATS 
provisions on market access (Article XVI), national treatment (Article XVII) and domestic regulation (Article VI), though certain of these measures are already subject 
to these disciplines.  In the context of this No te, what is of interest is the distinction 
between those which are within the scope of  Article VI:4 and those that go beyond. 
The latter include regulatory issues cited for certain sectors, such as intellectual 
property rules, competition policy, procur ement, and protection of privacy and 
confidentiality.      
(c) In the case of competition policy, depending on the sector and regulatory approach 
taken, many issues raised in this Note suggest a close link between competition and 
regulation.  Competition-related interventi ons typically include measures such as 
                                                      
182 Paterson et al (2003) op. cit.; and Conway an d Nicoletti (2006) "Product Market Regulation in the 
Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights", OECD Economics Department 
Working Papers , No. 530.  S/WPDR/W/48 
 Page 75 
 
 
  banning, or imposing constraints on, agreements between firms that seek to fix prices 
or market shares, as well as measures preventing abuses of a dominant position, anti-competitive mergers and acquisitions, and pred atory pricing.  Thus, where promoting 
competition is seen to be in the public in terest, regulation is sometimes used to 
achieve or support the development of comp etitive structures.  On the other hand, 
complex or excessively onerous licensi ng and qualification requirements or 
procedures, by raising entry and transaction costs can hamper market contestability.  Competition policy also often gives rise to issues of appropriate institutional 
structures. 
(d) Promoting good regulatory practice, in terms of reducing the administrative burden 
and enhancing transparency is  yet another theme which, to greater or lesser extents, 
appears to be common to virtually all sectors.  For certain sectors and modes, application procedures may be cumbersome , excessively costly and administratively 
complex; processing times can be lengthy, rejection rates high and the costs of reapplying important.  Addressing such administrative burdens is a separate issue, 
independent from the substantive requirements that might be involved.  In this 
context, it is useful to recall that there are a number of GATS provisions (Article III and certain provisions under Article IV and Article VI) to ensure and promote 
transparency of the regulatory process and the resulting rules.  One particular facet is 
the requirement to establish contact points,  pursuant to Article IV:2, where service 
suppliers from developing countries can seek  information concerning commercial and 
technical aspects of supplying services, as well as registration, recognition and 
obtaining of professional qualifications.  
(e) Recognition of foreign education, professional experience and technical skills is 
another cross-cutting issue.  In order to ensu re that foreign services suppliers meet the 
standards imposed on suppliers of national origin, regulators are often called upon to 
assess the equivalence of domestic and forei gn qualifications.  Recognition is an area 
which has possibly seen the most regulatory  co-operation, particularly through the 
work of professional bodies, to either a ccept the equivalence of qualifications 
obtained under other jurisdictions or unilate rally recognise equivalence.  Linked to 
recognition are the use of international sta ndards which appear to be more prevalent 
in certain sectors, often as a result of market forces, as compared to others.  
306. As mentioned in Section I of this Note, it might  be helpful for Members to consider whether 
the regulatory issues reviewed would have an impact on trade in services and if so, to what extent any 
adverse effects might be addressed through disciplin es to be negotiated under Article VI:4 and/or 
should other potentially relevant avenues such as Article XVIII additional commitments be pursued.  
With the diversity of issues, sectors and modes cove red, the Note might also lend itself to use as a 
reference document for any future  regulatory-related discussions on sectoral or cross-cutting themes. S/WPDR/W/48 
Page 76  
 
  ANNEX I:  SECTORAL BACKGROUND NOTES BY THE WTO SECRETARIAT 
  
2009-2011 
 
 
Symbol Title Date 
S/C/W/298 and 
S/C/W/298/Add.1 Tourism Services 08.06.09 
S/C/W/299 and 
S/C//W/299/Corr.1 Telecommunication Services 10.06.09 
S/C/W/300 Computer and Related Services 22.06.09 
S/C/W/301 Presence of Natural Persons (Mode 4) 15.09.09 
S/C/W/302 Construction and Relate d Engineering Services 18.09.09 
S/C/W/303 Architectural Services 17.09.09 
S/C/W/304 Cross-Border Supply (Modes 1 & 2) 18.09.09 
S/C/W/310 and 
S/C/W/310/Corr.1 Audiovisual Services 12.01.10 
S/C/W/311 Energy Services 12.01.10 
S/C/W/312 and 
S/C/W/312/Corr.1 Financial Services  03.02.10 
S/C/W/313 Education Services 01.04.10 
S/C/W/314 Mode 3 07.04.10 
S/C/W/315 Maritime Transport Services 07.06.10 
S/C/W/316 Accountancy Services 07.06.10 
S/C/W/317 Logistics Services 10.06.10 
S/C/W/318 Legal Services 14.06.10 
S/C/W/319 Postal and Courier Services 06.08.10 
S/C/W/320 Environmental Services 20.08.10 
S/C/W/324 and 
S/C/W/324/Corr.1 Road Freight Transport Services 29.10.10 
S/C/W/326 Distribution Services 29.10.10 
S/C/W/334 Engineering Services 22.02.11 
 
  
__________