How do WTO Rules Affect the Accountancy Profession

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How do WTO RulesAffect the Accountancy
Profession?

• Peter K Morrison
• Trade in Services Division
• WTO

IFAC SMP/SME and Developing Nations Consultative
Conference Prague, March 10-11, 2005
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What we need to cover

• What is the WTO and the GATS?
• How does the GATS affect the accountancy
  profession?
• How are SME/SMPs and developing country status
  taken into account?
• Where is the WTO headed on liberalization of
  accountancy rules?

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What is the WTO?

• An institution
• 148 member governments
• A set of agreements
• GATT trade in goods
• GATS trade in services
• TRIPS intellectual property
• A court to enforce obligations
• Panel and Appellate Body procedures
• A negotiating forum
• Uruguay Round (1986-94)
• Doha Round (2000 - ?)

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General Agreement on Trade in Services (GATS)
What does it cover?

• measures by Members
• laws, regulations, actions of any type
• by governments at any level, or
• private bodies acting under delegated powers
• ... affecting trade in services
• in any service sector except
• in the exercise of government authority
• air transport services
• directly or indirectly
• ... through any of 4 modes of supply

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Trade in services 4 modes of supply

• Cross-border
• e.g. accountancy advice over the internet
• Consumption abroad
• e.g. accounting services received in other
  countries or over the internet
• Commercial presence
• e.g. foreign offices of accountancy firms
• Movement of natural persons
• e.g. accountants practising abroad individually
  or through an established foreign accountancy firm

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Most-Favored Nation Treatment (MFN) (Art II)

• no discrimination between two foreign suppliers
  or services
• covers both explicit and de facto discrimination
  
• applies to all Members and all services
• whether or not service sector is scheduled
• unless exemption obtained on joining WTO
• example
• acceptance of accountants only from a closed list
  of countries

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Market Access (Art XVI)

• no quantitative-type restrictions
• whether discriminatory or not
• no limitations on
• number of service suppliers
• total value of service transactions or assets
• number of service operations or output
• number of persons that may be employed
• form of legal entity used to supply service
• maximum foreign investment permitted
• but, does not cover measures resulting in de
  facto quantitative limitations
• applies only to extent listed in a countrys
  Schedule

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National Treatment (Art XVII)

• no discrimination between national and foreign
  suppliers
• covers both formal and de facto discrimination
• examples
• citizenship requirement formal national
  treatment inconsistency
• residence requirement de facto national
  treatment inconsistency
• applies only to extent listed in a countrys
  Schedule

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Additional Commitments (Art XVIII)

• any other undertaking that a Member may wish to
  take on
• Example regulatory undertakings on
• transparency
• maintenance of pro-competitive market
• future phase-ins

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Example Schedule of Georgia
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Example MFN Exemption List of Dominican Republic

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Mutual Recognition Agreements (MRAs) (Art VII)

• a Member may recognize qualifications or
  experience granted in a particular foreign
  country
• through harmonization or otherwise
• through agreement or autonomously
• Provided
• not in discriminatory way and not a disguised
  restriction on trade in services
• adequate opportunity is given to other Members be
  similarly recognized
• where appropriate, based on international
  standards
• 1997 Guidelines on MRAs in Accountancy (S/L/38)
• practical guidelines on how to negotiate MRAs

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Trade Barriers and GATSMain provisions adequate?

• MFN
• discriminatory measures
• National Treatment
• discriminatory measures
• Market Access
• quantitative restrictions
• Additional commitments
• any other undertakings

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Needed Disciplines on Domestic Regulation (Art
VI)

• MFN
• discriminatory measures
• National Treatment
• discriminatory measures
• Market Access
• quantitative restrictions
• Additional commitments
• any other undertakings

• Disciplines on Domestic Regulation
• good governance
• qualitative requirements
• qualifications
• technical standards
• licensing

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Domestic RegulationGood Governance Obligations

• In all sectors
• Review of administrative decisions must be in
  place for decisions affecting trade in services
  (Art VI2)
• In sectors where commitments undertaken
• Administration of measures of general
  application must be reasonable, objective and
  impartial (Art VI1)
• Decisions on applications must be given in
  reasonable period (Art VI3)
• Verification of competence of professionals must
  be adequate procedures (Art VI6)

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Domestic RegulationNegotiation of further
disciplines (Art VI4)

• Purpose to ensure that measures relating to
• qualification requirements and procedures
• technical standards and
• licensing requirements
• do not constitute unnecessary barriers to trade
• Negotiating mandate to develop disciplines to
  ensure that these measures are
• based on objective and transparent criteria
• not more burdensome than necessary to ensure the
  quality of the service
• in the case of licensing procedures, not in
  themselves a restriction on supply

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Result 1998 Accountancy Disciplines

• Necessity test
• Accountancy measures may not be more
  trade-restrictive than necessary to fulfil a
  legitimate objective
• the protection of consumers
• the quality of the service
• professional competence
• integrity of the profession
• Does not cover
• Measures within scope of GATS Articles XVI
  (market access) and XVII (national treatment)
• Implementation
• Applies to all Members with accountancy
  commitments
• Takes effect at end of the current trade round
• In the interim, no Member to take new measures
  contrary to these principles

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1998 Accountancy DisciplinesMatters covered

• transparency of regulations (paras 3-7)
• residency requirements (para 9)
• membership of professional organizations (para
  10)
• use of firm names (para 11)
• administrative fees (para 13)
• licensing procedures (paras 14-18)
• equivalency and verification (paras 19-24)
• use of international standards (para 26)

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Current Doha Round Negotiations Issues in
Accountancy Services

• Improved specific commitments
• Better access for online services
• Better access for natural persons (mode 4)
• Necessity test
• What are legitimate policy objectives?
• When are less restrictive trade measures
  reasonably available?
• Transparency
• beyond those already in GATS Article III?
• Equivalence
• Members to take account of requirements
  fulfilled in other countries?
• International standards
• presumption in favour of, or requirement to base
  regulation on, international standards?

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Developing countries, SME/ SMPs and the GATS

• Request-Offer procedure
• Respect for the following principles
• progressive liberalization
• increasing participation of developing countries
• appropriate flexibility for individual developing
  countries
• special priority for least-developed countries
• consideration for needs of small services
  suppliers especially from developing countries
• (GATS Arts IV, XIX Negotiating Guidelines
  (S/L/93, March 2001) Modalities for the Special
  Treatment of Least Developed Countries (TN/S/13,
  Sept. 2003))

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The way ahead ...

• May 2005 Submission of revised services offers
• Dec 2005 Hong Kong Ministerial Conference
• End 2006 Conclusion of Doha Round?