Introduction
2.1
This chapter examines the Joint Initiative on Services Domestic Regulation
(JI-SDR), which was signed in Geneva on 2 December 2021.
2.2
The JI-SDR contains rules, in addition to those already in the General Agreement on Trade in Services (GATS), with regard to the domestic regulation of services. The rules in the JI-SDR specifically deal with processes relating to licensing requirements and procedures, qualification requirements and procedures, and the use of technical standards that have an impact on trade in services.
2.3
In substance, the provisions in the JI-SDR largely go to matters of transparency and efficiency to ensure regulation, and regulatory processes in particular, do not operate as a barrier to services trade. The JI-SDR primarily deals with processes to obtain authorisation to supply a service, the substance of regulations is not prescribed. Provisions relate to transparency in fees and authorisation processes, efficient processing of applications, evaluation based on clear and objective criteria, reasonable access to examinations where required, and the acceptance of electronic documents. Negotiations were led by Costa Rica (Chair), the European Union (EU) and Australia.
2.4
While the content of the JI-SDR reflects international best-practice, the nature and value of Joint Statement Initiatives (JSIs), of which the JI-SDR is one, has been a matter of debate among some Members of the World Trade Organization (WTO). The JI-SDR is not a WTO agreement. Instead, a group of 69 Members of the WTO have agreed to unilaterally incorporate new rules contained in a ‘Reference Paper’ by making amendments to their respective Schedules to the GATS.
2.5
Those who are concerned about JSIs, such as South Africa and India, argue their legal status is questionable and they undermine the principle of consensus decision making at the WTO. JSIs are also part of broader debates concerning the current rule-negotiation impasse at the WTO, and the future direction of the organisation. Australia’s position is JSIs reinforce the centrality of the WTO and support multilateralism, while enabling progressive and normative improvement to the global trade architecture.
Background
Services
2.6
There is no single definition for services; the term encompasses a range of intangible products, including:
business and professional: accounting, advertising, architecture, engineering, computer and related, law, merchanting, operational leasing, management consulting
communication: audio-visual, postal, courier, telecommunications, satellite
other: construction, distribution, education, energy, environmental, financial, insurance, health, social, travel, tourism, transport (freight and passenger), research and development
intellectual property charges, royalties and licence fees.
2.7
Globally, services are the largest source of jobs and output with all segments of the economy depending on the provisions of services. Liberalising trade in services contains complexities because services are largely intangible and non-storable, and barriers can be difficult to identify. Most commonly, the barriers to international trade in services are not tariff barriers (in many instances services can be traded without the need to cross a border) but regulatory barriers.
Joint Statement Initiatives and World Trade Organization rule-making
2.8
The Agreement Establishing the World Trade Organization, known as the WTO Agreement (also referred to as the Marrakesh Agreement, referencing where it was signed), establishes the scope, functions, structure, status, decision making, amendment and accession processes of the WTO. The WTO Agreement is an international legal framework and its provisions are laws that bind WTO Members.
2.9
Incorporated as part of the WTO Agreement are a range of agreements appended in annexes. These annexed agreements have the status of WTO agreements which means Members are party to all (subject to some non-application provisions relating to certain agreements).
2.10
Annex 4 to the WTO Agreement contains plurilateral agreements which are part of the WTO Agreement for those Members who have accepted them. The WTO Agreement requires plurilateral agreements, because they are not founded on the principle of multilateralism, to be adopted by consensus prior to their incorporation and operation under the institutional framework of the WTO.
2.11
Under the provisions of the WTO Agreement, upon request of those Members who are party to a plurilateral agreement, the Ministerial Conference may decide by consensus to add an agreement to Annex 4. In this way, all WTO Members have a say, including those that did not participate in negotiations.
Incorporation of Joint Statement Initiatives
2.12
The JI-SDR essentially avoids the need for a consensus decision of WTO Members in two ways. First, although the JI-SDR is called a plurilateral agreement, it is not a plurilateral agreement within the WTO Agreement. The JI-SDR is not being incorporated into the WTO Agreement under Annex 4 (requiring a consensus decision by the Ministerial Conference), which would formalise its status in the WTO framework of rules. Rather, the JI-SDR essentially ‘comes into force’ for Members through the scheduling provisions in the GATS—Members unilaterally bind themselves to the rules in the ‘Reference Paper’ as ‘additional commitments’.
2.13
During the inquiry, the Department of Foreign Affairs and Trade (DFAT) characterised JSIs as ‘being a very valuable complementary piece to the WTO framework of agreements’.
2.14
Second, article VI(4) of the GATS does provide for further general rules like those contained in the Reference Paper to be negotiated as part of the general obligations and disciplines provisions in Part II of the GATS. This is to occur through the Council for Trade in Services and bodies it may establish. Any such amendment to the general obligations and disciplines in Part II of the GATS would essentially be a change to the WTO Agreement. Any changes to the WTO Agreement and agreements in Annexes 1, 2 and 3 to the WTO Agreement (GATS is in Annex 1), require formal amendment under article X of the WTO Agreement.
2.15
DFAT confirmed the JI-SDR had been negotiated separately from the Council for Trade in Services, and as discussed below would be unilaterally incorporated by Members through the scheduling provisions in Part III of the GATS, rather than the general obligations and disciplines provisions in Part II.
Scheduling provisions in the Reference Paper
2.16
Articles 7–9 in section I of the Reference Paper specify how Members are to indicate they will follow the ‘rules’ in the Reference Paper—referred to as ‘inscribing the disciplines’.
2.17
Members are to commit to the disciplines in the Reference Paper through the scheduling provisions in Part III, article XVIII of the GATS. Under Part III of the GATS, each Party to the GATS is required to specify in a Schedule the particular service sectors to which the market access and national treatment obligations in the GATS will apply, as well as any limitations the Party wishes to maintain. This is done with respect to the four modes of services supply—cross-border, consumption abroad, commercial presence, and presence of natural persons.
2.18
Article XVIII allows Members to negotiate commitments in addition to the market access and national treatment commitments, including regarding qualifications, standards or licensing matters. Any such commitments are to be made in each Member’s Schedule.
2.19
Under the JI-SDR, Members unilaterally inscribe the rules in the Reference Paper as additional commitments under article XVIII of the GATS. This means the provisions in the Reference Paper apply where existing specific sector or sub-sector commitments are made in a Member’s Schedule. These commitments are then applied equally to all WTO Members under the most-favoured-nation obligation, which is specified in article II of the GATS.
2.20
Under article XXI of the GATS, and subject to conditions, a Member may modify its Schedule.
Status of plurilateral agreements in the World Trade Organization
2.21
Plurilateral agreements have been part of the WTO for some time. Annex 4 of the WTO Agreement contains two current plurilateral agreements: the Agreement on Trade in Civil Aircraft, and the Agreement on Government Procurement. As noted above, plurilateral agreements in Annex 4 have been adopted by consensus prior to their inclusion within the WTO Agreement and institutional framework.
2.22
DFAT characterised the JI-SDR as a ‘WTO consistent’ plurilateral trade agreement:
… plurilateral agreements of this [JI-SDR] nature have always been an important part of the WTO framework. WTO consistent plurilateral trade agreements with broad participation by members do play an important role in complementing the global liberalisation efforts that are more commonly associated with big-piece multilateral agreements.
2.23
By way of precedent for the JI-SDR, DFAT cited the Agreement on Trade in Civil Aircraft, the Agreement on Government Procurement, the protocols on basic telecommunications and financial services, and the Information Technology Agreement.
2.24
According to legal academic, Dr Jane Kelsey, there is no precedent for JSIs as all plurilateral precedents cited by proponents of JSIs involved at some point a consensus decision and explicit mandate. As noted above, the JI-SDR differs from the Agreement on Trade in Civil Aircraft and the Agreement on Government Procurement, which are formally part of the WTO Agreement having been adopted by consensus.
2.25
The Information Technology Agreement was a sector-specific agreement to reduce or eliminate tariffs on a category of goods, which Members would bind through their tariff schedules through a procedure established consensually. Negotiations were launched in 1996 by 29 participating countries and the outcome adopted by a plurilateral Statement by Ministers of the participating countries at the Singapore Ministerial Conference. Negotiations on its expansion in 2012 were made within the Doha Round mandate on tariffs on goods.
2.26
Dr Kelsey argues the plurilateral negotiations on financial services and basic telecommunication services were mandated by consensus decisions taken at the Ministerial Conference in Marrakesh in April 1994 and set out in the Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations 1994, as well as in annexes to the GATS. The Reference Paper on Basic Telecommunications was adopted through the Fourth Protocol to the GATS, which recorded the end of the negotiations mandated by the Ministerial Decision in 1994. The Fifth Protocol to the GATS on Financial Services, which implemented the concluded negotiations, was adopted by consensus on 3 December 1997.
Impetus for joint statement initiatives
2.27
The JI-SDR is one of several JSIs negotiated or in the process of negotiation at the WTO. At the 11th Ministerial Conference in December 2017, some of the 164 Members of the WTO issued joint statements on their intent to discuss trade liberalisation measures and rulemaking in the following areas:
electronic commerce and digital trade (87 Members)
investment facilitation for development (112 Members)
micro, small and medium-sized enterprises (97 Members)
services domestic regulation (69 Members—counting the EU and its 27 member states as 27 participants).
2.28
JSIs have been called ‘critical mass’ initiatives, whereby if a sufficient proportion of WTO Members decide to be bound by their terms, these initiatives have the potential to become new de facto trade rules—that is, over time, the plurilateral process would be multilateralised, though this would occur outside the WTO rules for the negotiation of multilateral agreements. Because they do not require consensus from WTO Members, JSIs are seen by many governments as a way progress can be made in WTO negotiations on trade liberalisation and rulemaking.
2.29
Rulemaking at the WTO is currently regarded as challenging, with some attributing this to the WTO’s consensus and single-undertaking (nothing is agreed until everything is agreed) approaches to negotiations. As noted in the Regulation Impact Statement (RIS), the WTO has not been able to agree to new rules in services trade for over 25 years.
2.30
The last multilateral negotiating round of the WTO, the Doha Round, was launched in November 2001 and has not been formally completed. A key impasse during the Doha Round was differences between developed and developing countries, in particular, on agricultural subsidies and tariffs.
2.31
In essence, JSIs remove some of the leverage developing countries had to resist negotiation on significant new issues until the development mandate of the Doha Round had been realised. However, not all developing countries are opposed to the JSI process and many have participated in negotiations, including in the JI-SDR.
2.32
More broadly, given the lack of recent progress, there is a view that rule making at the WTO is failing to keep pace with the rapid transformation of the global economy: some rules are outdated and no longer ‘work’; rules in new areas, such as digital trade, have not yet been negotiated; and the rules do not reflect the fact trade barriers are no longer primarily in the form of tariffs but increasingly found in regulations and standards.
2.33
The challenges involved in concluding multilateral trade agreements also mean countries are turning to bilateral or plurilateral trade agreements—there are currently around 300 such agreements in force and all WTO Members have at least one bilateral or plurilateral trade agreement. There is a debate as to whether these agreements are a ‘building block’ or ‘stumbling block’ for the multilateral trading system.
Responses to joint statement initiatives
Views of the Director-General of the World Trade Organization
2.34
The Director-General of the WTO, Ngozi Okonjo-Iweala, in June 2022 welcomed the negotiation of the JI-SDR. More broadly, the Director-General expressed the view that a trust deficit dating back to the breakdown of the Doha Round was taking a toll on the WTO’s ability to negotiate:
The multilateral approach has delivered little in recent years, prompting many to turn, out of frustration, to plurilaterals. Our consensus decision-making approach, while democratic and egalitarian — qualities to be applauded — often leads to gridlock since just one member can hold up what might be a good agreement supported by many. We must reflect hard on how to modernize our negotiating function and innovate new approaches whilst improving existing ones. I repeat again, the multilateral instrument is the best one, we have to invest in it.
Concerns raised about joint statement initiatives within the WTO
2.35
JSIs have been characterised as an effort to create new rules without calling them rules. Within the WTO, India and South Africa have argued JSIs are WTO inconsistent, and circulated a formal paper on the matter to the WTO General Council in February 2021. A range of concerns were raised in the paper, including that JSIs:
are contrary to the multilateral underpinnings of the WTO, including that the WTO provides the common institutional framework for the conduct of trade relations among its Members and that the WTO is to be the forum for negotiations among Members concerning their multilateral trade relations
undermine the principle of consensus-based decision making in the WTO Agreement
are contrary to the procedures for amendments contained in the WTO Agreement.
2.36
Specifically, the formal paper argued introducing new rules that result from JSI negotiations into the WTO without fulfilling the decision making and amendment provisions in the WTO Agreement would be detrimental to the functioning of the rule-based multilateral system. It would:
erode the integrity of the rule-based multilateral trading system by subverting established rules and foundational principles of the Marrakesh Agreement;
create a precedent for any group of Members to bring any issue into the WTO without the required consensus;
bypass the collective oversight of Members for bringing in any new rules or amendments to existing rules in the WTO;
usurp limited WTO resources available for multilateral negotiations;
result in Members disregarding existing multilateral mandates arrived at through consensus in favour of matters without multilateral mandates;
lead to the marginalization or exclusion of issues which are difficult but which remain critical for the multilateral trading system, such as agriculture, development, thereby undermining balance in agenda setting, negotiating processes and outcomes;
leave Members with no option other than to choose between remaining outside the discussions or participating on matters that are inconsistent with their economic development priorities, needs, concerns and levels of economic development.
fragment the multilateral trading system and undermine the multilateral character of the WTO.
2.37
India and South Africa proposed three options for JSI proponents: negotiate within the WTO framework by seeking consensus among the whole WTO membership; negotiate outside the WTO framework; or amend the WTO Agreement to allow for a ‘flexible multilateral trading system’.
Australia’s views on joint statement initiatives
2.38
DFAT is of the view the JI-SDR is:
… proceeding in accordance with WTO rules and … under the auspices of the WTO framework. The negotiations take place in Geneva amongst the participating members in the same way as various other discussions and negotiations of the WTO may take place.
2.39
In general, DFAT stated:
There are views that have been expressed by … India and South Africa—and by various academics, that these types of plurilateral agreements are contrary to the purpose of the WTO, which is fundamentally about improving and ensuring a multilateral approach to trade. That is a view that has been expressed in a number of quarters.
That is not a view that we share …
Our view is: based on past practice, on our reading of the legal agreements of the WTO, and certainly the broad support of the membership of the WTO for these processes as a concept, we are confident that they are fully supported by the legal arrangements for the WTO.
2.40
Substantively, DFAT addressed the question of legality by reference to the conditions under which a Member may amend its Schedule:
… our strong view is that there is a very low risk of successful challenge to Australia and other member states that are seeking to make the change to their schedule to incorporate the DR JSI [Joint Initiative on Services Domestic Regulation], because the DR JSI is expanding and improving on their existing commitments and is doing it in a non-discriminatory manner. It would be difficult, from my perspective, to see how another member might be able to indicate or demonstrate that that is somehow adversely affecting their interest.
2.41
The National Interest Analysis (NIA) accompanying the treaty suggests the measure of an effective WTO is the negotiation of agreements, regardless of whether they are multilateral:
The DR JSI reinforces centrality of the rules-based multilateral trading system and will generate negotiating momentum in the WTO. As the first set of services trade rules agreed in the WTO in a quarter of a century, the DR JSI is strategically and symbolically significant for driving further WTO rulemaking.
2.42
During the hearing, DFAT stated JSIs would have a ‘demonstrative effect,’ which would be ‘a really useful thing for the WTO’. It was ‘necessarily difficult’ according to DFAT, ‘to work through a set of agreements that can satisfy all 164 countries at the same time.’ Instead, plurilateral agreements which allowed Members ‘that see real value in designing and agreeing on a shared set of values’ were a ‘good way to work to develop WTO practice around the broader multilateral agreements’.
2.43
The RIS stated ratifying the JI-SDR would ‘signal Australia’s support for rule-making through the WTO and reinforce the WTO’s role at the centre of the rules-based international trading system’. It acknowledged a strong and effective WTO is essential for Australia’s national interest and future prosperity because WTO rules provide certainty and predictability for businesses.
Reasons cited by the Australian Government to ratify the JI-SDR
2.44
The NIA provided a range of rationales for ratification of the JI-SDR. These include that ratification would bring commercial and strategic benefits to Australia, including by:
locking in and encouraging more predictable and transparent domestic services regulations, that would reduce costs and facilitate trade
joining with 13 of Australia’s top 20 services export markets, and with growing services exports markets
reinforcing the value of the WTO and its rulemaking function at a time of growing global disruption and restrictive trade practices
emphasising Australian leadership in best practice regulation and increasing Australia’s reputation as an attractive investment destination.
2.45
According to the NIA, prior to the pandemic, Australia’s services exports exceeded $100 billion. Improved regulatory practices, and consistency between markets, would benefit Australia. The NIA claimed the JI-SDR would particularly benefit small and medium-sized enterprises as the impact of complex regulatory regimes is proportionally higher in comparison to the value of their exports.
2.46
The RIS contained Organisation for Economic Co-operation and Development and WTO estimates of the likely impact of the JI-SDR and quoted WTO figures that costs involved in trade in services are almost double those in trade in goods. However, DFAT does not have data on the regulatory compliance costs faced by Australian services exporters. Further, during the hearing DFAT noted it was ‘necessarily difficult to measure’ the gains businesses might expect to obtain from more transparent and predictable services regulation, and had not independently modelled any figures provided by others.
2.47
Nevertheless, 13 of Australia’s largest services export markets are participants in the JI-SDR. The seven who are not are: India, Nepal, Malaysia, Vietnam, Indonesia, Pakistan and Sri Lanka.
Key provisions in the Reference Paper
2.48
The following summaries key provisions in the Reference Paper.
Section I—Initial provisions
2.49
In article 1, Members state their objective is to elaborate on the provisions in the GATS, pursuant to article VI(4) of the GATS. Articles in section I also deal with scheduling, which has been discussed above.
2.50
The Reference Paper deals with rules in two areas:
section II—Disciplines on services domestic regulation
section III—Alternative disciplines on services domestic regulation for financial services.
2.51
The rules in the Reference Paper do not require any particular regulatory changes—that is, they do not prescribe how compliance with the Reference Paper is to be achieved. Members retain the right to regulate, and to introduce new regulations, on the supply of services within their territories in order to meet their policy objectives.
Development
2.52
Members who designate as developing countries are able to specify that specific rules would be implemented after a transition period, which would be no longer than seven years following entry into force of the disciplines. In certain circumstances, developing country Members may request further time. Other provisions deal with the participation of least-developed country Members, and encourage the provision of technical assistance and capacity building between Members.
Section II—Disciplines on services domestic regulation
Scope of the rules
2.53
The rules in section II apply to measures by Members relating to licensing requirements and procedures, qualification requirements and procedures, and technical standards affecting trade in services. The rules do not apply where a Member has excluded sectors from the GATS commitments in its existing GATS Schedule.
2.54
Where reference is made to ‘authorization’, it means the requirement to obtain permission to supply a service through a procedure where the applicant demonstrates compliance with licensing requirements, qualification requirements, or technical standards.
Requirements with regard to applications
2.55
Section II contains a number of rules in cases where authorisation is required for the supply of a service including:
submission of applications—where practicable, applicants must not be required to approach more than one competent authority for each application for authorisation
application timeframes—to the extent practicable, applications for authorisation are to be possible at any time throughout the year; where there is a specific time period for applications, there is to be a reasonable period provided for the submission of an application
electronic applications and acceptance of copies—competent authorities must endeavour to accept applications in electronic format, and must accept appropriately authenticated copies of documents, unless original documents are required to protect the integrity of the authorisation process.
2.56
A range of provisions deal with the processing of applications in cases where a Member requires authorisation for the supply of a service, including:
applicants must be provided an indicative timeframe for application processing (where practicable), information concerning the status of an application (where requested), information on the completeness of an application (where practicable) and the decision concerning the application
where an application is incomplete, where practicable, applicants must be notified, provided relevant advice on information required (upon request), and be given the opportunity to submit additional information
if an application is rejected, applicants must be provided reasons (to the extent possible) and if applicable, the procedures for resubmission; an applicant should not be prevented from submitting another application solely on the basis of a previously rejected application.
2.57
When authorisation is granted, it is to enter into effect without undue delay.
Fees
2.58
Authorisation fees are to be reasonable, transparent, authorised, and not in themselves restrict the supply of the relevant service.
Assessment of qualifications
2.59
Where an examination is required, this it to be scheduled at ‘reasonably frequent intervals’ and applicants are to be given a reasonable period of time to request to take the examination. Subject to cost, administrative burden and integrity of procedures, Members are encouraged to accept requests in electronic format, and to consider the use of electronic means in other aspects of the examination process.
Recognition
2.60
Members should consider supporting dialogues between professional bodies that express mutual interest in discussing issues relating to recognition of professional qualifications, licensing or registration.
Independence
2.61
Competent authorities are to reach and administer decisions with regard to authorisation independently from any supplier of the service for which authorisation is required.
Publication and information available
2.62
The Reference Paper establishes a range of publication requirements for information on authorisation. Amongst other things, and where such information exists, Members are to publish authorisation requirements and procedures, contact information for competent authorities, fees, technical standards, procedures for review or appeal, procedures for monitoring or compliance with conditions of licences or qualifications, opportunities for public involvement, and indicative processing timeframes.
Opportunity to comment and information before entry into force
2.63
A range of provisions deal with providing advance notice of legislative and regulatory changes that affect trade in services. The provisions apply to licensing requirements and procedures, qualification requirements and procedures, and technical standards. To the extent practicable and consistent with each Member’s legal system, Members are to publish proposed laws and regulations or information about proposed laws and regulations in advance, and to provide the opportunity for public comment. Members are to consider any such comment.
2.64
Members are encouraged to explain the purpose and rationale of any law or regulation, and to the extent practicable, are to endeavour to allow reasonable time between publication and entry into force.
Enquiry points
2.65
Members are to maintain an appropriate mechanism to respond to enquiries regarding licensing requirements and procedures, qualification requirements and procedures, and technical standards.
Technical standards
2.66
Where technical standards are adopted, Members are to encourage their competent authorities to do so through an open and transparent process.
Development of a measure
2.67
Any measures relating to authorisation are to be based on objective and transparent criteria, and procedures for demonstrating competence are to be impartial and to allow applicants to demonstrate whether they meet requirements. Procedures must not in themselves unjustifiably prevent the fulfilment of requirements, and measures are not to discriminate between men and women.
2.68
Members may opt out of the provision requiring that there be no discrimination between men and women.
Section III—Alternative disciplines for financial services
2.69
The rules in section III, where incorporated in a Member’s Schedule, apply to measures by Members relating to licensing requirements and procedures, and qualification requirements and procedures affecting trade in financial services, subject to any carve outs in a Member’s existing Schedule.
2.70
The substance of section III is similar to section II—small differences include:
no section dealing with recognition—under section II Members should consider supporting dialogues between professional bodies that express mutual interest in discussing issues relating to recognition of professional qualifications, licensing or registration
a requirement to provide applicants with a schedule of fees or information on how fee amounts are determined—section II instead requires the publication of fees and that fees are reasonable, transparent, authorised and do not themselves restrict the supply of the relevant service
the obligation to publish information contains fewer requirements—the requirement in section II for the publication of information on fees, technical standards, and indicative timeframes for processing an application are not specified in section III
no reference to the development of technical standards.
2.71
The NIA explained section III was included in the Reference Paper to provide alternative rules:
… to accommodate the specific needs of certain participating Members with respect to financial services only. It excludes the above disciplines on technical standards; and provides more limited recognition of professional qualifications, licensing or registration and commitments on fees.
2.72
Australia has not opted to incorporate section III. The NIA stated Australia’s regulation of financial services is compliant with section II and as such there is no requirement to incorporate section III.
Entry into force
2.73
The JI-SDR would enter into force 45 days after Australia provides notification to the WTO Secretariat and it is circulated to all WTO Members. If no objection is raised at the completion of the 45-day period, the Secretariat would issue a communication to WTO Members advising the certification procedure had been concluded and indicating the date of entry into force of the modifications.
Implementation
2.74
The NIA advised Australia would not need to make any legislative changes to implement the JI-SDR.
Costs
2.75
The NIA did not anticipate any costs associated with entry into force or implementation.
Amendment
2.76
Any amendments would be subject to Australia’s domestic treaty-making requirements, including tabling in Parliament and consideration by the Committee.
Withdrawal or denunciation
2.77
The withdrawal or denunciation processes are determined by article XXI of the GATS. Under article XXI, a Member may withdraw from a commitment in its Schedule provided three years have elapsed from when it entered into force. Various requirements govern the notification process and establish certain time periods. If another Member considers its interests ‘may be affected’ by any withdrawal, providing the notification requirements are met, withdrawal cannot occur until arbitration between Members takes place. Withdrawal would need to be in conformity with the arbitration findings.
2.78
Under the WTO Agreement, Australia is able to withdraw from the GATS and article XV of the WTO Agreement establishes the procedures for doing so.
Consultation
2.79
According to DFAT, the department consulted widely throughout the negotiating process including with state and territory governments, industry and civil society. DFAT listed 26 stakeholders who were consulted on the JI-SDR consisting of state and territory governments, industry bodies, professional bodies, and international organisations.
2.80
DFAT consulted with state and territory governments through the Trade and Investment Ministers Meeting, the Senior Officials Trade and Investment Officials’ Group, and the Commonwealth-State-Territory Standing Committee on Treaties. It consulted with industry and civil society representatives by hosting a biannual International Trade Negotiations Update Meeting.
2.81
In relation to WTO negotiations and reform more generally, DFAT also conducts a range of other meetings, roundtables and email correspondence with Australian industry representatives in the Asia-Pacific Economic Cooperation Business Advisory Council, the Business20 and the International Chamber of Commerce. In addition, DFAT engages with other industry peak bodies.
Committee comment
2.82
The JI-SDR contains a range of provisions that would potentially increase the transparency and predictability of the regulatory environment in Australia’s services export markets by standardising processes to obtain authorisation to supply a service.
2.83
Reflecting the fact it is a negotiated agreement among 69 Members of the WTO, there is significant flexibility in the language of the JI-SDR, particularly where it references terms such as ‘reasonable’ and ‘transparent’ or requires Members to ‘encourage’ certain things or undertake certain activities ‘where practicable’. While the JI-SDR contains the first WTO rules requiring Members not to discriminate between men and women regarding the authorisation for the supply of a service, the Committee notes this is a commitment from which Members can choose to opt-out.
2.84
The countries participating in the JI-SDR have different levels of development, regulatory practice, and legal systems and notwithstanding the fact it is a plurilateral agreement where Members voluntarily commit to the disciplines, the underlying diversity means what is established is minimum standards of acceptable practice, or as expressed by DFAT, ‘guardrails’.
2.85
As to the benefits that might flow to Australian service suppliers from the JI-SDR, the Committee has previously commented in its scrutiny of trade agreements on the need for independent analysis of expected impacts. The need for such analysis was highlighted by DFAT itself when it stated it was difficult to measure gains that businesses may expect from the JI-SDR.
2.86
In general, the Committee has found it prudent to treat estimates of potential benefit with caution. In particular, it must be noted Australia’s major service export earners, tourism and international education, occur within Australia’s regulatory environment and the JI-SDR would not improve circumstances or reduce costs in relation to these sectors. As a mature regulatory jurisdiction, Australia’s current practice is in compliance with the disciplines in the Reference Paper, and in many cases goes beyond the disciplines.
2.87
The Committee is of the view that the value of the JI-SDR is in reinforcing the importance of consistency, transparency and predictability in services regulations. While many of the world’s largest service markets, such as the United States, EU and Japan have well-regulated markets, the Committee agrees there would be value in improving predictability in emerging markets.
2.88
In past inquiries, the Committee has commented on the importance of consultation being timely, meaningful, and responsive. The Committee notes DFAT’s contention that it had taken a ‘fairly broad reading of the term “civil society”’ in the NIA when listing the stakeholders it had consulted with on the JI-SDR. The Committee suggests the list of organisations consulted does not contain a meaningfully broad range of civil society groups, and encourages DFAT to consult more widely and proactively with all stakeholders, including civil society organisations.
2.89
More generally, the JI-SDR is a novel way to deal with negotiating challenges at the WTO while carrying forward the goal of liberalising trade in services by addressing behind-the-border regulatory measures that act as a barrier to trade. The Committee acknowledges the range of views within and beyond the WTO as to the status of JSIs, including views that are contrary to Australia’s position.
2.90
As to the consequences of JSIs, it remains unclear whether negotiating alongside but outside a WTO mandate to reach an agreement among some Members will reinvigorate an organisation and related rules and processes that have been unable to deliver new rules in services in over 25 years, or whether it will undermine the principle of multilateral decision making at the WTO, and perhaps lead to longer-term decline in the only institution that has a universal mandate for global trade rules.
2.91
On balance, the Committee is of the view the JSI process is likely to be WTO reinforcing and may come to be positively catalytic in some respects. It has the potential to reinforce the centrality of the WTO and the importance of the rules-based international trading system. Accordingly, the Committee agrees binding treaty action should be taken.
2.92
The Committee supports the Joint Initiative on Services Domestic Regulation and recommends that binding treaty action be taken.