An Economic Integration Agreement on Services: A Possible Solution to the Doha Development Round Impasse

Abstract

The World Trade Organization’s (WTO) Doha Development Round of negotiations has not yet produced the desired greater liberalization of trade in services. Considering the importance of further liberalization, at least among the willing WTO Members, this article proposes the establishment of a preferential agreement outside the Doha Round; an Economic Integration Agreement (EIA). If successfully negotiated, such an agreement could attract other Members to join, and have the potential of becoming a multilateral agreement such as the WTO agreements on telecommunications and financial services, or a plurilateral agreement such as the Information Technology Agreement.

Currently, EIAs are effectively the only exception to the Most-Favored-Nation (MFN) treatment principle practicable for broader agreements, in addition to the generally available exceptions. EIAs may not only revive negotiations among interested countries, but also offer a sensible way to account for different levels of Members’ technological and infrastructural development. For example, India may find an EIA with the U.S., EU, or OECD, whether concluded cumulatively or individually, accelerating its development. The same could be said in the case of Brazil. As a method of distancing service negotiations from negotiations on agriculture and non-agriculture market access, an EIA could enable closer cooperation between the U.S and EU. An EIA could also induce trade among the members of the Organization for Economic Co-operation and Development.

As an exception to the MFN principle susceptible to abuse on one hand, and as an opportunity to expand liberalization, Article V of the General Agreement on Trade in Services (Economic Integration), as interpreted, balances two main requirements for a valid EIA. This article analyzes the scope and interaction of the two main conditions for EIA’s creation: “substantial sectoral coverage” and “elimination of substantially all discrimination”. By exploring the meaning of Article V, its negotiating history, the relevant WTO Panel decisions, and practical application of EIAs, this article assesses the minimal requirements a valid EIA should satisfy.

In the past, EIAs have been concluded within a Free Trade Agreement (FTA) framework, but nothing prevents an EIA from being concluded as a stand-alone agreement, without relation to trade in goods or other trade. Once EIA partners agree on terms of their EIA or an enlargement of existing FTA, they should notify the agreement to the Council for Trade in Services. The Council will determine the EIA’s consistency with Article V. The EIA will likely satisfy those requirements if it covers most of each party’s major service sectors.