Regulation of services traded electronically WTO Symposium on

Regulation of services traded electronically WTO Symposium on Cross-Border Supply of Services Geneva, 28 -29 April 2005 Massimo Geloso Grosso Trade Directorate, OECD 1

Overview n n n Scope of the presentation Enhanced trade opportunities Regulatory environment § Examples of market access and national treatment measures § Examples of domestic regulatory measures n n Impact on electronic supply Existing good regulatory practices § Transparency § General simplification of regulatory requirements § Recognition and regulatory cooperation 2

Scope of the presentation n Do services traded electronically face particular problems from cross-border services restrictions and regulations? § Focus only on services traded electronically § Existing restrictions on modes 1 and 2 § MA, NT and domestic regulatory measures n It does not cover: § Regulations designed to govern the conduct of e-supply (privacy, security) § Measures affecting enabling services for e-supply (such as telecom) 3

Enhanced trade opportunities n High-speed, real time and capacity to carry “rich data” of Internet greatly increases the extent and types of services that can be traded § Business services (legal, accounting, architectural, § § § advertising, real estate, computer and related…) Distribution services (wholesale and retailing) Financial services (lending, trading in securities) Health services (hospital services) Education services (post-secondary and adult) Tourism (travel agencies) 4

Enhanced trade opportunities (cont. ) n Internet has increased efficiency and opportunities for supply via modes 1 and 2, in many cases providing alternatives for modes 3 and 4 § Can be critical for developing countries in light of limited capital and slow progress on mode 4 n By reducing transaction and other costs of trading over distance, Internet also increases the range of traders § SMEs – can again benefit particularly developing countries 5

Regulatory environment n n n The question remains as to the extent to which regulatory environments allow trade to occur These services are highly regulated to achieve a range of public-policy objectives A review of Members’ schedules reveals use of several restrictions and regulatory measures § Although there is often a gap between commitments and actual regimes n There is also a variety of domestic regulatory measures § Not barriers to trade per se but can become so in the way they are administered § Given the range of possible measures falling under Art. VI, the focus here is on those under Art. VI. 4 6

Examples of market access and national treatment measures (modes 1 & 2) Commercial presence requirements Professional, advertising, financial, distribution, real estate and travel agencies Protection of consumers, (consumer redress, ensuring jurisdiction of host -country courts) Nationality requirements Professional, education Ensuring professional competence and knowledge of local rules Residency requirements Professional, financial, education, distribution Protection of consumers, knowledge of local rules, ensuring proximity to client Limitation on foreign firms activities Professional, education, computer and related Protection of “public function”, protection of consumers, data privacy Exemptions from public funds Education, health Limit public funds 7

Examples of domestic regulatory measures (Art. VI. 4) Qualification requirements Local degree required to practice, local experience requirements Qualification procedures Periods of time to submit applications, intervals for examinations, administrative fees Licensing requirements Residency requirements, zoning and opening hours, indemnity insurance requirements Licensing procedures Duration of license, number of documents, points for application Technical standards Requirements to follow specific headings and codes for documents (e. g. financial statements), technology for digital signature 8

Impact on electronic supply n These restrictions seem to pose no special problems to on-line suppliers § E. g. limitations on foreign firms activities § It could be argued that they are more difficult to enforce n In some cases may become non-applicable in the digital world § Restrictions on opening hours for retailers § May create distortion of competition between on-line and off- line trade § Or benefits as e-supply develops? 9

Impact on electronic supply (cont. ) n The perception of the impact of regulations seems greater by virtue of the enhanced trade possibilities § Commercial presence/residency requirements can have a greater impact on e-supply in light of its scale § Absence of recognition in many jurisdictions places particular burden on the on-line trader § Lack of transparency and delays may cause greater problems for electronic supply given that speed is one of the expected benefits n In some cases on-line suppliers may face particular problems § Licenses must be applied for in person or electronic versions of documents are not accepted § Favour a certain digital signature but not others 10

Existing good regulatory practices n Essentially approaches for ensuring that regulations are not overly burdensome are the same in the online and off-line environments § Greater transparency § General simplification of regulatory requirements § Recognition and regulatory cooperation 11

Transparency n E-supply increases the need for transparency § Firms must know which rules and regulations are applicable in the variety of jurisdictions n The Internet can help governments in ensuring transparency by channelling information to the players § It can provide an accessible, one-stop shop to all regulations affecting services traded electronically § Especially helpful to individual entrepreneurs and SMEs n Transparency also requires financial and administrative resources § International assistance § After the initial investment Internet can reduce the cost of making information available (compared to traditional means) 12

General simplification of regulatory requirements General consumer protection and public interest Maintenance of “professional address” to receive clients and official notices, appoint an agent for receipt of official communications Consumer redress Maintain a bond or professional liability insurance (or private contractual arrangements in B-2 -B? ) Ensuring jurisdiction of host-country courts Appointment of representative resident authorised to accept service of summons and other notices Ensuring professional competence and local knowledge Requirement to collaborate with locals, competency-based testing, membership in local professional associations 13

General simplification of regulatory requirements (cont. ) n Internet can help minimising the trade-restrictive effect of regulations § Regulations for hard copy documents and in person signature (e. g. for accountants) could be replaced by electronic submissions of returns and digital signatures § Cumbersome registration procedures which require personal attendance over extended periods could be replaced by creation of on-line registration procedures § Local experience requirements could be reduced with other means of familiarisation, such as bridging courses available on-line 14

Recognition and regulatory cooperation n Internet can: § Make it more difficult to make recognition of qualifications a condition for market entry § Make recognition easier if governments exploit its potential fully n The Web could help create the basis for MRAs § Foster cooperation between regulators in different countries § Facilitate collaboration between private bodies with delegated authority • University accreditation bodies • Professional bodies 15

Recognition and regulatory cooperation (cont. ) Internet can help authorities “take account” of foreign qualifications and need of additional requirements n n A customised process that is very information intensive Need to evaluate foreign systems and the specific path followed by the candidate for access n n Common comparative databases of certifying institutions Curriculum content, training requirements and accreditation conditions on the Web Provide the foundation for electronic accreditation bodies giving a right of entry for electronic delivery International assistance 16

Main sources n n n OECD (2002), “Regulation of Services Traded Electronically”, document TD/TC/WP(2002)13/FINAL OECD (1997), International Trade in professional Services: Assessing Barriers and Encouraging Reform Drake, W. and K. Nicolaidis (2000), “Global Electronic Commerce and the General Agreement on Trade in Services: The ‘Millennium Round’ and Beyond” Wunsch-Vincent, S. (2001), “Electronic Services: Its Regulatory Barriers and the Role of the WTO” Primo Braga, C. (2003), “E-Commerce Regulation: New game, New Rules? ” 17