QUANTIFYING RESTRICTIONS UNDER GATS: INTERPRETING MARKET ACCESS

Amay Kapil Bahri

INTRODUCTION

The crucial obligations under GATS are the MFN, transparency, market access, and the national treatment obligation. There is a lot of confusion around the interpretation of market access obligation under GATS. It has been repeatedly argued by authors, especially in the context of data localisation laws, that the phrase “in the form of numerical quotas” under Article XVI:2 of GATS refers to the requirement of the restriction to be expressed in form of a number. This interpretation has been used to argue that a data localisation measure would not violate Article XVI (a) or (c). I disagree with this interpretation and argue that the interpretation is flawed as it fails to take into account the GATT jurisprudence which is extremely relevant to the interpretation of GATS provision.

MARKET ACCESS OBLIGATION

Market access obligation is a specific commitment made by member states and applies to only those services where the commitment has been undertaken. It was introduced to ensure that certain restrictions to trade are not applied if a member state has taken a commitment of not introducing measures to restrict trade in that particular service. This ensures that there is certain amount of predictability in trade policies of countries. In event where a member state has made the commitment of not introducing any restriction to a service, then any policy of that member state, which would cause any restriction as mentioned under Article XVI of GATS, would be in violation of the treaty.  Article XVI:2 comprises of 6 sub paragraphs. Sub paragraphs (a)- (d) are quantitative restriction, while sub paragraphs (e) and (f) are relating to manner of incorporation. A violation of any one of them will constitute a violation of market access obligation.

INTERPRETATION OF ARTICLE XVI:2 (A)–(D) GATS

The words “numerical quota” under the treaty is argued to suggest that the limitation should have a numbered effect. I argue that this is an incorrect understanding of the provision as adopting this interpretation would run contrary to the intention of trade liberalisation as well as the intention behind market access obligation by hampering predictability of trade restriction. Such an interpretation would further also fail to understand the complexity involved in the trade of services. Arguing that there is a requirement of number or something in numerical terms would support a conclusion where a measure causing a limitation that can be expressed in numbered form, will be held to violate market access obligation; however, a similar measure causing greater limitation which cannot be expressed in the numbered form will be held to not violate the market access obligation. This conclusion cannot be the intention when drafting the provision. To support their narrow interpretation, authors rely on the holding of the Appellate Body (AB) in US Gambling and China- Audiovisual where the AB held that the challenged measure violated market access obligation as a total prohibition is a restriction which has a zero quota effect on services where zero comprising a numerical quota. This argument is flawed because in these cases the measure challenged was relating to absolute prohibition. Such prohibition can be expressed in numeric form, thus the issue raised in this article was neither questioned nor deliberated by the AB. 

Further, though the question on interpretation was not argued, the AB in the US- Gambling case still noted its concerns over the interpretation of the numbered requirement. It explained that such an interpretation would leave measures where there is a limitation to the majority of the service, but not expressed in numbered form, out of the market access obligation. The GATS understanding is largely developed from GATT jurisprudence. The WTO has repeatedly referred and affirmed GATT provisions for clarifying the understanding of GATS provision, thus GATT jurisprudence can be applied to understand GATS provision. This application, however, has to be done by taking into consideration the differences in trading between goods and the trading between services.

To understand the interpretation to market access obligation of GATS, we can also refer to Article XI of GATT which is relating to quantitative restrictions to the trade of goods. Article XI of GATT prohibits member states from applying any form of quantitative restrictions on the trade of goods. This is similar to the sub-clauses (a) – (d) of market access obligations that are quantitative restrictions on trade in services to which specific commitment has been made. The AB has clarified through various cases that though the heading “quantitative restriction” of Article XI of GATT suggests numbered limitation, the same is not the correct interpretation of the provision.  The provision in GATT seeks to prevent any form of restriction on trade, irrespective of it having a specified numeric effect. Further, the fact that trade in service cannot be counted or quantified like goods goes on to buttress the argument that a strict numbered requirement cannot be placed on restrictions to trade in services. 

CONCLUSION

Relying on the jurisprudence developed through the GATT cases on quantitative restriction, we see that the numeric quota mentioned in sub-paragraphs (a)-(d) of market access provision under GATS is not to be interpreted as requiring the limitation by the measure to have a specified numbered effect, but suggests that there has to be an limitation as per required by the sub-paragraphs. The fact of being expressible in numbers does not affect market access obligation. Interpreting Article XVI GATS to mean requiring a numbered effect would be contrary to all notions of rationality and also would be to disregard GATT jurisprudence developed over the years.

Amay Kapil Bahri is a third year law student at National Law University, Delhi.

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