The Principle of Non-Discrimination and its Exceptions in GATS: Selected Legal Issues

The General Agreement on Trade in Services (GATS) represents one of the innovative features of the World Trade Organization (WTO) stemming out of the Uruguay Round as it provides for the first multilateral disciplines covering international trade in services. As the 10th anniversary of the entry into force of the GATS is just behind us, it is difficult to assess the impact of such disciplines to the 'expansion of trade in services' and the 'promotion of economic growth of all trading partners'. This is perhaps principally due to the fact that (a) the liberalizing provisions of GATS (in particular the Market Access and National Treatment obligations) are only binding in sectors and at the conditions specified in Members' schedules of specific commitments and (b) the GATS negotiating round, officially started in 2000, has still to bear any substantial fruit. However, it should be stressed that the (perhaps frustrating) state of being of the service liberalization agenda is also the result of a certain level of uncertainty of the precise meaning and scope of GATS disciplines. If one positions this legal uncertainty within the relevant context of trade in services (potentially touching upon very sensitive issues such as foreign direct investment, movement of workers, financial services, etc), it is perhaps easier to understand the very slow pace with which Members have been able to pursue GATS' objectives.

Dr Federico Ortino's paper aims to highlight a few fundamental issues of the GATS focusing in particular on its two non-discrimination principles - Most-Favoured-Nation (MFN) Treatment of Article II and National Treatment (NT) of Article XVII - and the two main exceptions to these principles - Economic Integration of Article V and the General Exceptions of Article XIV. Given the dearth of WTO dispute settlement reports that have dealt with these GATS provisions (compared to any of the other major WTO Agreements), the analysis will also rely on the interpretation of comparable provisions in other WTO Agreements. The paper only addresses a few selected issues within each provision. In particular, Part I will examine the National Treatment provision focusing in particular on the 'less favourable treatment' standard (section I) and on the General Exceptions provision focusing in particular on the 'necessity' test (section II). Part II will review the compatibility of bilateral investment treaties (BITs) with the MFN provision of Article II GATS (section III) and the applicability of the Economic Integration exception in Article V GATS to these treaties (section IV).

Click here to view a draft version of the paper.