AGUA Y LIBRE COMERCIO EN INGLÉS 1.pdf

7/27/2019 AGUA Y LIBRE COMERCIO EN INGLS 1.pdf

1/30


2/30

PRESENTATION Pg. 3

WHAT IS THE RELATIONSHIP BETWEEN FREE

TRADE AGREEMENTS AND TREATIES AND WATER

AND POTABLE WATER SERVICES? Pg. 5

HOW IS WATER TREATED IN FREE TRADE

AGREEMENTS AND TREATIES, IN WHICH

WATER IS CONCEIVED AS A COMMODITY?

Pg. 6

HOW DO THE FREE TRADE TREATIES AND

AGREEMENTS TREAT WATER IN TERMS OF

INVESTMENTS IN WATER RESOURCES AND

THE SERVICES DERIVED FROM USING THESE?

Pg. 9

HOW DO COUNTRIES NEGOTIATE ON THE

INCLUSION OF THEIR SERVICES IN THE WORLD

TRADE ORGANIZATION AND IN FREE TRADE

TREATIES? Pg. 13

WHEN SIGNING A FREE TRADE AGREEMENT OR

TREATY, DOES THE SIGNATORY COUNTRY GIVE

UP SOVEREIGNTY OR KEEP REMAINING

SOVEREIGNTY FOR JURIDICAL, JUDICIAL AND

REGULATORY ENDS? Pg. 16

HOW TO PLAN A NEGOTIATION IN A FREE

TRADE TREATY (FTT) OR A FREE TRADE

AGREEMENT (FTA)? Pg. 19

GLOSSARY OF TERMS AND ABBREVIATIONS Pg. 27

I N D E X G U I D E

1

2

3

4

5

6

7

Criteria and Suggestions for Negotiation Processes

CRITERIA AND

SUGGESTIONS FOR

NEGOTIATION

PROCESSES

1

Water and Free Trade


3/30

Criteria and Suggestions for Negotiation Processes2


4/30

The Social Vision of Water Project imple-

mented by the institution AGUA SUSTENT-

ABLE with support from the International

Development Research Centre (IDRC) has

developed several booklets and guides onthe topic Water and Free Trade. This was

done based on different studies carried out

mainly in Andean countries between 2004

and 2007. The purpose of these investiga-

tions was to systematize the way in which

water and drinking water services are

considered in Free Trade Agreements and

Treaties. The results of this research were

used to draft a series of didactic documents

mainly for public operations, state negotia-tors in free trade agreements, national and

international public authorities with

decision-making powers on this topic,

academicians and advisors, and civil

society representatives or leaders.

For preparing this Guide, several investiga-

tions performed under consultancies were

processed. The consultants were differentanalysts such as Pablo Soln, Denisse

Rodrguez, Carlos Crespo, Oscar Campa-

nini in Bolivia, Hildebrando Vlez Galeano

in Colombia, Juan Fernando Tern in Ecua-

dor and Guillermo Rebosio in Peru. The full

texts of this research have been compiled

in a book titled Water and Free Trade.

Impact and Implications of Free Trade

Agreements for Water and Water Services

and can be found also on

www.aguavisionsocial.org/lineasDocs.html.

A team of AGUA SUSTENTABLE has

systematized the above-mentioned investi-

gations in an abridged version, this Guide,

complemented and illustrated with addi-

tional data and information.

The central topic of this Guide titled Crite-

ria and Suggestions for Negotiation

Processes is the negotiations within the

context of free trade agreements or

treaties, considering water and waterservices as an axis for analyzing this topic.

In general, the document discusses the

implications of the agreements signed by

the different countries within the framework

of the World Trade Organization (the Gen-

eral Agreement on Tariffs and Trade, GATT,

and the General Agreement on Trade in

Services, GATS) and the Free Trade Trea-

ties that are being entered into on a

bilateral basis by the Andean countriesafter the multilateral FTAA (Free Trade

Area of the Americas) and Andean FTA

negotiations failed.

PRESENTATION1



5/30

Readers will note that the document refers

to the FTAA, the FTA per country, the GATT

and GATS, which is why the explanation

provided in the previous paragraph was

absolutely necessary. For understandingthe approach of this guide, it is important to

distinguish between free trade agreements

and free trade treaties. Agreements

normally cover specific trade issues

between countries, while treaties cover

topics such as investments, services,

markets, intellectual property, domestic

legislation and control mechanisms, the

institutionality of surveillance, sanctions,

control, conflict resolution etc.From our perspective, the failed agreement

on the Free Trade Area of the Americas

(FTAA) was in fact a big multilateral treaty.

Indeed, we found many of the FTAA provi-

sions and full chapters in the texts of the

likewise failed Andean FTA and of the

bilateral FTAs the US is negotiating sepa-

rately with the different countries of the

American continent. The Bilateral Invest-ment Treaties or Agreements (BITs) cover

legal issues of certain topics related to

investments and investors of the signatory

countries. Their thematic scope is much

more limited as compared to the famous

FTAs.

This Guide provides a brief overview of the

different FTAs, FTTs and BITs, and the

institutional juridical frame in which they are

set. In this sense, the text of the guide

includes quotes and references to different

official documents, explaining the positionsand commitments made by different coun-

tries in this regard.

In the first part, readers can find an intro-

duction on the relationship between water

and free trade, and a quick and succinct

description of the provisions considered in

the agreements and treaties. The second

part contains information and analyses of a

series of suggestions or recommendationsfor negotiations in the context of the

treaties. We believe that this second part is

fundamental as it reflects our vision and

institutional actions, which implies that we

do not adopt an attitude of opposition to the

agreements and treaties, but rather involve

ourselves with knowledge and skill in the

negotiation processes, aimed at transform-

ing these processes and at providing ourcountries with instruments for strengthen-

ing their internal institutionality and legality

as a way to protect their sovereignty in the

decisions they take on their present and

future in relation to water and water

services.



6/30

One of the most frequent questions

when talking about free trade agree-

ments is whether water and water

services are included, in other words,

whether upon signing a Free TradeAgreement (FTA), a Free Trade Treaty

(FTT) or a Bilateral Investment Treaty

(BIT) the countries are obliged to

permit the free trade of water and to

open the basic potable water service

market.

The fact is that water is part of the trade

agreements in different ways. Some-

times, water and water services are

expressly mentioned in the negotia-

tions on the trade of goods, services

and investments. But sometimes water

appears through indirect links to other

parts of the treaties, e.g. in the chapters

on Agriculture and Intellectual Property.See the draft texts of the FTAA or the

Andean FTA.

The table below shows that in the free

trade treaties, water is included in

different ways: sometimes as a good or

product, sometimes as a service or

investment. Investment also refers to

the rights associated with water use,

such as concessions, licenses, authori-

zations etc.

WHAT IS THE RELATIONSHIP BETWEEN FREE TRADE AGREEMENTS AND

TREATIES AND WATER AND POTABLE WATER SERVICES?2

Bottled water

Water exports

Potable water services

Environmental services

Water use for hydroelectricity

Water use for mining

Water use for the oil sector

Water use for tourism

Water use for agriculture

River transportation

Water rights

InvestmentsServicesGoods

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

X

Table 1: Intersections between FTTs and Water

Source: Soln, P. (2005, September) Los cruces de caminos entre el agua y el libre comercio (Intersections between water and

free trade). Presentation in the International Seminar on Free Trade Agreements and Public Services. Buenos Aires, Argentina.



7/30

CAREFUL WITH THE REFERENCE OTHER

There are several headings with the reference other, which apparently refer only to the

commodities that have not been mentioned under the 4 code-heading in the NANDINA

nomenclature and hence their interpretation would be limited by the description of the commodity

and in some cases, the specifications in complementary notes.

The ambiguity of the word other may lead to the inclusion of a series of goods or forms in which

these goods exist or are produced in the agreement or treaties. Water, for example, could

appear under this ambiguity in different forms of usage.

In their commodity trade relations in the

World Trade Organization (WTO) and

within the framework of FTTs, Andean

countries use the Common Tariff

Nomenclature of the Cartagena Agree-ment Member Countries (NANDINA), a

tariff classification similar to the US

Harmonized Tariff Schedule. In both

classifications, water is classified under

tariff codes 2201, 2202, 2501 and

2851.

HOW IS WATER TREATED IN FREE TRADE AGREEMENTS AND TREATIES, IN

WHICH WATER IS CONCEIVED AS A COMMODITY?3

SECTION V

MINERAL PRODUCTS: SALT, SULPHUR; EARTHS AND STONE; PLASTERING MATERIAL;

LIME AND CEMENT

22.01

2201.10.00.00

2201.90.00.00

22.02

2202.10.00.00

2202.90.00.00

25.01

2501.00.90.00

28.51

2851.00.30.00

NANDINA Code Description of Goods

- Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or

other sweetening matter nor flavored; ice and snow

- Salt (including table salt and denatured salt) and pure sodium chloride, whether or not in aqueous

solution or containing added anti-caking or free-flowing agents; sea water

Distilled or conductivity water and water of similar purity; liquid air and purified air

- Other inorganic compounds (including distilled or conductivity water and water of similar purity); liquid air

(whether or not rare gases have been removed); compressed air; amalgams, other than amalgams of

precious metals

- Waters, including mineral waters and aerated waters, containing added sugar or other sweetening

matter or flavored, and other non-alcoholic beverages, not including fruit or vegetable juices of heading

No. 20.09

- Mineral waters and aerated waters

- Waters, including mineral waters and aerated waters, containing added sugar or other sweetening

matter or flavored

- Other

- Other

- Other

Table 2:Common Nomenclature of the Cartagena Agreement Member Countries (NANDINA)

Source: Import Tariffs Bolivia, 2006.



8/30

In the lists of commodities per country

of the WTO General Agreement on

Tariffs and Trade (GATT), Bolivia, Peru,

Colombia, Ecuador and the US present

the headings analyzed above in differ-ent ways. Bolivia and Peru have

included as a package all their customs

headings on consumer goods, estab-

lishing in the case of Bolivia a consoli-

dated tariff or ceiling of 40% and in the

case of Peru a tariff of 30% ad valorem

(applicable on the trade value of the

price) for commodities involving water

contained in headings 2201, 2202,

2501 and 2851. In other words, all

forms of commodities in which water

is contained detailed in Table 1 are

included for import purposes, with a

certain tariff ceiling or a certain import

tariff.

Colombia has reached a compromise,listing every heading not in a package

like Bolivia and Peru, and has included

only headings 2201 and 2202 with a

consolidated tariff of 70%.

Ecuador only includes headings

2201.90.00 and 2202.10.00 with a

consolidated tariff of 30% and in the

definition of heading 2201.90.00, it isclarified that the description of other

will cover natural ordinary water, ice

and snow, not containing added sugar

or other sweetening matter or flavored.

Of what we have seen, in the WTO both

the Andean countries and the US treat

water as a common commodity; there

is no precise tariff definition delimiting

the scope of the liberalization commit-

ment, and no special treatment is fore-

seen.

In the case of the FTT between Peru

and the US, the negotiation was based

on eight-digit headings. Peru used its

own Customs Tariff (the Customs

Tariffs of Peru were prepared on the

basis of the Common Nomenclature of

the Cartagena Agreement Member

Countries - NANDINA) and the US

Harmonized Tariff Schedule (HTS). Inwater, only headings 2201.10.00,

2201.90.00, 2202.10.00 and

2202.90.00 (this last one exceptionally

by Peru) were considered. Sea water,

ice, natural unprocessed water are

also subject to negotiation, as we have

seen.

THE UNITED STATES OF NORTH

AMERICA AND WATER LIBERALIZATION

The US included headings 2201,

2201.10.00, 2201.90.00, 2202,2202.10.00, 2501.00.00 and

2851.00.00 in the WTO. This country

included the 4 groups of headings

containing water. As regards customs

tariffs, as opposed to the Andean coun-

tries, the US has established a fixed

consolidated tariff of 0.26 cents per liter

for heading 2201.10.00 and 0.2 cents

per liter for heading 2202.10.00.



9/30

Water is a limited natural resource and

a public good that is fundamental for

life and health. Still, the headings refer

to water as just another commodity, its

description is a cold definition of agood, when any commitment on water

is not exclusively limited to the

progressive elimination of tariff barri-

ers, but leaves open the door for water

trading companies regarding trade

decisions.

The different countries do not resolve

the interpretation of the heading other

in the same way. If a State has a

domestic norm regulating this topic, it

can introduce exceptions to the head-

ings involving water so as to permit the

State to institute or maintain - besides

duties, taxes or other charges prohi-

bitions or restrictions on the importa-

tion of any product of the territory ofany another contracting party

(contracting party is a country signing

a Treaty), or on the exportation or sale

for export of any product destined for

the territory of any other contracting

party which may be made effective

through quotas, import or export

licenses or other measures (Article

XI-1, General Agreement on Tariffs andTrade or GATT). If the States do not

have these domestic safeguards, they

will not be able to use this faculty

recognized by the GATT.

Most Andean countries do not have

any regulation in this topic and the

environmental exceptions that could

maybe be interposed are of a tempo-

rary nature, which may leave them

defenseless in case of application of

the treaties.

3



10/30

At present, there are three service clas-

sifications: i) the Sectoral Services

Classification List (W/120) adopted

within the framework of the negotia-

tions on the General Agreement onTrade in Services (GATS) during the

Uruguay Round; ii) the Provisional

Central Classification of Products

(Provisional CCP) of 1991; and iii) the

Central Classification of Products

(CCP) of 1997.

Potable water and sanitation services

are included as part of environmentalservices within the framework of the

GATS. Below, an overview is given of

the coverage of these services in each

of these classifications.

It is important to underline that, by

definition, basic sanitation also covers

potable water services. Heading 94390

of Table 3 could therefore open the

door to potable water services.

The liberalization of environmental

services follows the parameters of the

General Agreement on Trade in

Services (GATS) in the WTO and of the

chapters on cross-border services and

investments in the FTTs.

HOW DO THE FREE TRADE TREATIES AND AGREEMENTS TREAT WATER

IN TERMS OF INVESTMENTS IN WATER RESOURCES AND THE SERVICES

DERIVED FROM USING THESE?

4

1997 CCPProvisional CCP 1991W/120

A. Sewage Services (9401) 9401 Sewage services 941 Sewage services94110 Sewage treatment

94120 Tank emptying and cleaning

942 Refuse disposal service

94211 Non-hazardous waste collection services

94212 Non-hazardous waste treatment and

disposal services

94221 Hazardous waste collection

94222 Hazardous waste treatment and disposal

services

943 Sanitation and similar services

94310 Sweeping and snow removal services94390 Other sanitation services

949 Other environmental protection services not

elsewhere classified

9402 Refuse disposal services

9403 Sanitation and similar

services

9404 Cleaning services of

exhaust gases

9405 Noise abatement services

9406 Nature and landscape

protection services

9409 Other services not

elsewhere classified

B. Refuse disposal services

(9402

C. Sanitation and similar

services (9403)

D. Other services (9409)

Table 3:Classification of Enviromental Services



11/30

CONCEPT OF INVESTMENT IN THE

PERU-US FTT

In the FTT between Peru and the US, Art.

10.28 establishes that INVESTMENTS is

any asset that is the property of or that is

controlled by an investor, either directly or

indirectly, and that has the characteristics

of an investment, including characteristics

such as committed capital or other

resources, the expectation of obtaining

profits, or the assumption of risk, which can

be in the form of (a) a company; (e) ...

concession agreements, income-sharingagreements and other similar agreements;

(g) licenses, authorizations, permits and

similar rights granted in conformity with

domestic legislation etc. The wide scope

of this definition interprets contractual rights

as in the case of concession agreements,

the modality under which potable water

provision is authorized as a natural

element of investments, basically because

according to the commercial ideology,

public services can be supplied efficiently

only through market mechanisms.

Commitments in the environmental

services sector, which are considered

an investment in services, are also

subject to the provisions contained in

the investment chapter in a FTT. In theWTO the GATS in itself can be

conceived as a kind of framework for a

multilateral agreement on the promo-

tion and protection of investments in

services (ECLAC, Foreign Investment

in Latin America and the Caribbean,

2000, Santiago, Chile, p. 30).

The concept of investment laid down

in article 10.28 of the Peru-US FTT is

applied to concessions (through

which water sources have been

granted in Andean countries), not only

because of the concept of investment,

but because there are other references

in this chapter that clearly show the

scope as regards these services. Thus,article 10.1 paragraph 2 states that the

obligations of any Party (that is, one of

the Parties signing the agreement)

under this section will apply to any state

company or any other person when

executing any regulatory, administra-

tive authority or any other government

authority as may have been delegated

by that Party.

Provided that the concession is an

administrative act, the granting and

regulation of which is subject to govern-

ment control, it is said that this chapter

must be binding for the authorities that

have, in relation to the investors, regu-

latory, administrative or other attribu-

tions.

Another important provision in thePeru-US FTT, which expressly refers to

these services, is Art. 10.28 that states

that an investment agreement will be a

written agreement between any

national authority of one Party and a

covered investment or an investor of

the other Party, on which the covered



12/30

investment or the investor relies for

establishing or acquiring a covered

investment different from the written

agreement in itself, which grants rights

to the covered investment or the inves-tor: (b) with respect to the provision

of services to the public in representa-

tion of the Party, such as the generation

or distribution of energy, the treatment

or distribution of water, or telecommuni-

cations; or .

This article makes it fully clear that the

obligations of the investment chapterprevail in the states that authorize

investors to provide services concern-

ing water treatment or distribution.

As from this moment onwards, the

country will be involved in conflicts

because of the level of obligations

imposed by the investment chapter in aFTT. A tough job considering that the

typology of this part is similar to that of

a Bilateral Investment Treaty, and

considering that one of its characteris-

tics is an endless list of measures

favoring investors such as required

performance, expropriation and indem-

nity, national treatment, fair and equi-

table treatment, most-favored nationtreatment etc. Besides, non-

compliance automatically gives rise to

a demand before the International

Centre for Settlement of Investment

Disputes (ICSID).

FAIR AND EQUITABLE TREATMENT

An international minimum standard of

treatment; fair and equitable treatment is a

principle of absolute international law. Itscontent refers to transparency, due

process of law, the right to defense and

justice, besides a fair and equitable

treatment. It is related to the subjective

standard of the legitimate expectations of

investors. In water, any modification of the

conditions of the rights, including tariffs (for

example, potable water service tariffs)

which were unforeseen at the moment of

the investment, could be considered a

violation of the standard. (Miguel Solanes,

Introduction to the Book. Water and Free

Trade. Impact and Implications of Free

Trade Agreements for Water and Water

Services,

(www.aguavisionsocial.org/lineasDocs.html)

Criteria and Suggestions for Negotiation Processes 1


13/30

PRINCIPLES OF NATIONAL TREATMENT AND MOST-FAVORED

NATION TREATMENT

Two important principles that appear in a virtually standardized manner

in FTAs, FTTs and BITs are the National Treatment (NT) and

Most-Favored Nation (MFN). In the case of GATS, the texts on these

topics are as follows:

Article XVI Market Access: With respect to market access each

Member shall accord services and service suppliers of any other

Member treatment no less favorable than that provided for under the

terms, limitations and conditions agreed and specified in its Schedule.

Article XVII National Treatment: In the sectors inscribed in its

Schedule, and subject to any conditions and qualifications set out

therein, each Member shall accord to services and service suppliers of

any other Member, in respect of all measures affecting the supply ofservices, treatment no less favorable than that it accords to its own like

services and service suppliers.

The Principle of Most-Favored Nation Treatment implies that a

country must grant the investor from another country that signed the

treaty or agreement, the same treatment it grants to investors coming

from the country with which it has the most favorable agreement on a

certain topic. The formal text of this principle is as follows: Each Party

shall accord to investors of the other Party, treatment no less favorable

than that it accords to the investors of any non-Party, in like

circumstances, with respect to the establishment, acquisition,

expansion, management, conduct, operation, and sale or other

disposition of investments in its territory.



14/30

Negotiations of services sectors are

based on lists, positive lists in the WTO

and negative lists in a FTT.

In negotiations on positive lists, a coun-try voluntarily lists a certain number of

services sectors and after identifying

the sector, it mentions the type of

access and treatment for each one and

for each supply mode it is willing to

contractually offer to service providers

from other countries.

In the type of access and treatment, the

country can describe the restriction

why its institutional juridical framework

makes it impossible to comply with the

principle; for example, it can state

NONE in case there are no limitations

to Market Access or National Treat-

ment, or it can say WITHOUT CON-

SOLIDATION when the state wants tobe free to introduce all measures as it

may judge necessary, even if these are

inconsistent with the obligations of

Market Access and/or National Treat-

ment.

In the negative lists, the comprehen-

sive inclusion of all services sectors is

automatic, unless otherwise specifiedin the list of reservations (called the

Non-Conforming Measures) based on

the specific disciplines of the chapters

on services and investments that go

beyond the categories of access and

treatment.

HOW DO COUNTRIES NEGOTIATE ON THE INCLUSION OF THEIR SERVICES

IN THE WORLD TRADE ORGANIZATION AND IN FREE TRADE TREATIES?5

TYPES OF LISTS FOR INCLUSION IN

FREE TRADE AGREEMENTS

Positive ListsThe positive-list approach that is also

known as the bottom-up approach consists

of a list of the services intended to be

liberalized, whereby the rest of the universe

is protected. This approach, based on the

notion of progressivity, arose in the

Uruguay Round as an instrument intended

not to affect the sensitivity of many

developing countries, and in which the

specific commitments are the keyelements.

Negative Lists

The negative-list approach that is also

known as the top-down or verticalist

approach consists of the drafting of lists of

services that are not the object of

liberalization; in other words, in this

approach all services are liberalized,

unless they are mentioned on the lists. This

explains why these lists are called negativelists. The logic behind a negotiation on a

negative list is what is known as the list or

loose it, i.e. all incompatible measures not

listed in the reservations must be

derogated. The key elements in this

approach are the general commitments.

(ALADI, Situacin de las negociaciones y el

comercio de servicios regional e

internacional (Situation of the negotiationsand regional and international services

trade), 2004, p. 36)



15/30

NON-CONFORMING MEASURES

In the FTTs, the lists in which reserva-

tions are included with respect to the

treaty clauses are called Non-Conforming Measures. A non-

conforming measure is any law, regula-

tion, procedure, requirement or practice,

a non-conforming measure is therefore

a national decision which violates the

requirements of Market Access, Local

Presence, National Treatment, Perfor-

mance Requirements established in the

FTT. For example, the General Labor

Law of Bolivia (article 3) establishes thatcompanies cannot hire more than 15% of

foreign personnel on their payroll. This

provision is contrary to the principle of

market access.

JURIDICAL RESERVATIONS FOR

REGULATORY SOVEREIGNTY

If a country does not have a law in the

sector of basic services, for example,

which permits it to indicate its

non-conformity with some of the treaty

requirements at the moment of the

negotiation, it could prepare a list with

reservations, thus reserving the right to

institute the conditions for provision of

water services in its country.

Non-conforming measures of the water

and sewage supply services must

contain reservations regarding the

obligations of the services and invest-ment chapters. As this is a negotiation

with negative lists, this must be set out

necessarily, as otherwise the interpre-

tation would be that this sector is open

and that henceforward the State receiv-

ing the investor would no longer be

able to impose requirements against

the commitments established in the

treaty.

This form of negotiation conspires

against countries with liberal regimes

for the trade in services on the basis of

unilateral openness, because when

consolidating the current situation

through the negotiation under the

stand-still clause (clause on a status

quo or the prohibition to create new

obstacles to the trade in services), an

unbalanced situation crystallizes as

compared to the countries that havenot liberalized their services sector,

thus generating a situation with an

unequal exchange of concessions in

terms of binding commitments.



16/30

NEGOTIATIONS WITH POSITIVE LISTS

WHEN THE COUNTRY HAS WEAK POLICIES AND REGULATIONS

Insofar as a country does not have policies and regulations in most services sectors and noclear national objectives have been defined, the negotiation based on positive lists could be

more advantageous for the country. In addition, this would guarantee the countrys freedom

to introduce new restrictive regulations in the sector that are not part of the specific

commitments, as this does not necessarily imply a general stand-still obligation.



17/30


18/30

REGULATION AND NATIONAL REGULATORY ENTITIES

Regulations are measures adopted by the governments or regulatory entities created by States,

at the national or local levels, i.e. which the State normally uses for administering resources,

services, the access thereto and the use thereof, as well as the provision of services, for example

potable water. As regards the regulation of basic services, we see that in Peru, Bolivia and Chile

there are institutions called Superintendencies; in the case of Argentina, the provincial

governments have regulatory attributions; in many cases, just like the mentioned ones, local

governments (municipalities, for example) have certain regulatory attributions.

RESTRICTIONS ON COUNTRIES SO THEY WOULD NOT LIMIT TRADE

Article 11.7 of the Chapter on Cross-Border Services and article VI of the GATS related to

Domestic Regulation mentions the obligations of each Party to ensure that measures

relating to qualification requirements and procedures, technical standards and licensing

requirements do not constitute unnecessary barriers to trade in services. Furthermore, articles

11.7-2 b) and art. XVI.4 b) known as the proof of necessity stipulate that requirements should

be not more burdensome than necessary to ensure the quality of the service. This merely refers

to the quality of the service and not the quality of the access, i.e. it does not refer to, for example,

the conditions in which users access and use the service (tariffs, price of connection etc.).

PROGRESSIVE LIBERALIZATION OF THE COUNTRIES

According to art. XIX of the GATS on the Negotiation of Specific Commitments, the countries start

bilateral negotiations with the purpose of being more liberal, which means that any retroactive andrestrictive action is not permitted.

ARTICLE XIX GATS

1. In pursuance of the objectives of this Agreement, Members shall enter into successive rounds

of negotiations, beginning not later than five years from the date of entry into force of the WTO

Agreement and periodically thereafter, with a view to achieving a progressively higher level of

liberalization. Such negotiations shall be directed to the reduction or elimination of the adverse

effects on trade in services of measures as a means of providing effective market access



19/30

INSTITUTIONAL AND LEGISLATIVE CAPACITY FOR DOMESTIC REGULATION

LESSONS LEARNED FROM THE NEGOTIATIONS OF ANDEAN COUNTRIES

ON THE FTT WITH THE US

The results of the negotiations of Andean countries on the environmental services sector in the FTT

with the US have yielded the following lessons learned:

1. The country with optimum norms for regulating its services reflected the requirements ofits norms in its reservations.

2. The country with a federal system listed in a measure the regulatory autonomy of its

states, i.e. without specifying the state conditions for the provision of the service, therefore

protecting public providers.

3. The country with scanty norms raised future reservations, even though the setting out

thereof was negotiated and subordinated to approval by the other party. (The other party

is the country of origin of the investor or investing company).

4. The country with or without normative bases established future measures, reserving the

right to adopt or maintain any measure that is not incompatible with that countrys

obligations in conformity with article XVI of the GATS..

5. The country with domestic liberal provisions did not raise any reservation as its juridical

regime is open.

6. The country that opened a sector (environmental services, for example) at the level of the

WTO did not mention a bilateral measure in that sector as the openness is automatic.



20/30

For negotiation purposes, we could

propose a strategy on three levels:

I) trade negotiations,

II) multilateral negotiations,III) domestic regulation.

I) TRADE NEGOTIATIONS

This section will describe some

proposals that could be used by the

countries in future trade negotiations.

A)As regards GoodsThe following negotiation alternatives

could be applied:

1. At the bilateral level

There are three alternatives in bilateral

negotiations:

First: a proposal could be submitted for

replacing the description other byanother one specifying the

goods/commodities in the heading.

Second: if this were impossible, then

the concession list should contain a

comment on this heading incorporated,

for example, in complementary notes,

aimed at limiting possible interpreta-tions.

Third: a measure must be established

for the water regulation even if water

is considered a commodity to comply

with provisions contained in national

norms even though these provisions

may be incompatible with the obliga-

tions related to import and export

restrictions.

2. At the level of the Andean Region

At the level of the Andes Community of

Nations (CAN), taking into account that

articles 5 and 6 of Decision 507 estab-

lish that the Secretary General can

propose, at the request of any Member

Country or at his own initiative, modifi-

cations to the NANDINA, aimed at,

among other things, incorporating the

modifications required for a betteradaptation to regional and hemispheric

integration processes. An amendment

could be submitted to definitely

exclude water from the commodities

negotiations when the commercializa-

tion thereof goes against the environ-

ment, sustainability of the resources or

privatization as a basic input etc.

3. At the multilateral level

As one of the tasks of the World Cus-

toms Organization (WCO) is to periodi-

cally revise the customs nomenclature

so as to examine possible errors in the

customs nomenclature, the proposed

amendment in the CAN on the exclu-

sion of some water usages could be

presented. This proposal was men-

tioned in the previous paragraph.

The Customs Tariff System (CTS) is

updated periodically (in general every

4 to 5 years). So far, three amend-

ments have been made (in 1992, 1996

and 2002). Taking advantage of a

HOW TO PLAN A NEGOTIATION IN A FTT OR FTA?7



21/30

revision, a proposal could be submit-

ted to reconsider the treatment of

water as a commodity.

The importance of concretizing achange at this level is without any

doubt the subrogation of these results

in the WTO, i.e. introducing them into

the WTO debate, for incorporation into

the latters internal norms.

B) As regards Services

The following negotiation alternatives

could be applied:

1. At the bilateral or regional level.

If the negotiation of this sector is

unavoidable, three alternatives could

be proposed:

First: Propose that the negotiationstake place under positive lists

because negotiations based on nega-

tive lists tend to favor those parties

(i.e. the contracting countries) that

have a better-developed regulation

system in the field of services and that

have clearly identified the limitations

they must maintain according to their

national policy objectives.

This type of lists requires a compre-

hensive revision of all measures

affecting the services of a country;

therefore, they require more prepara-

tion as many sectors are subject to

revision.

DECISION 507

UPDATE OF THE NANDINA

NOMENCLATURE

Article 5.- The Secretary General of the

Andes Community can:

a) Propose to the Commission, at the

request of any Member Country or at his

own initiative, modifications in the

NANDINA, among other things to:

i. incorporate the amendments

introduced by the Customs Cooperation

Council in the Harmonized System;

ii. incorporate in the NANDINA the

modifications required for a better

adaptation to regional and hemispheric

integration processes; and

iii. satisfy the needs inherent in the

development of foreign trade and of the

productions of Member Countries.

b) Approve, through Resolutions, subject to

the prior opinion of the Andean Committee

of Customs Matters, the following auxiliarytexts, facilitating the correct interpretation

and uniform application of the NANDINA:

i. Complementary Explanatory Notes;

ii. An index of chemical substances

classified according to NANDINA;

iii. Binding criteria for the classification

of commodities; and

iv. Any other auxiliary text considered

necessary.

Article 6.- The NANDINA will be updated to

introduce the modifications of a subregional

interest, as well as the ones derived from the

Recommendations of the Customs

Cooperation Council or international

commitments and in all cases the pertinent

correlation will be elaborated.



22/30

Insofar as a country does not have

policies and regulations for most

service sectors and does not have any

clearly defined national objectives, the

negotiations based on positive lists willbe more beneficial for the country. In

addition, this way there can be a ceiling

of commitments in which the countries

can indicate the limitations of national

treatment and market access that is not

part of the current regulation regime,

and hence it enables maintaining a

gap.

Despite the drawbacks in transparency

with positive lists, they are preferable to

ensuring the elimination of access and

national treatment restrictions in the

sectors in which no reservations have

been registered, or the new services

that could be developed in the future in

the market.

Second:

a) If a negotiation based on negative

lists is inevitable, a possibility must

be foreseen to establish future reser-

vations in a parallel way to present

reservations. These lists should

expressly point out in the horizontalobligations that in the country, the

services considered as public

service companies on the national or

local level, can be subject to public

monopolies or to exclusive rights

granted to certain service providing

agents, for example social service

providers such as cooperatives,

water boards, joint public-social

entities etc. With this measure, the

country reserves the right to restrict

the access to markets in the sectorof public companies or social

entities.

b) A truly wide definition can be

given of public companies subject to

the obligations imposed by the

State. As the public entities and

social entities usually also exist on

the national, local, regional etc.levels, it would not be practical to

make a detailed and exhaustive

specific list of the sector. This way,

many public activities are not explic-

itly included in this list of exceptions,

but are not explicitly excluded either.

In case of a request for more preci-

sion, it will be assumed that thisdefinition is limited to the previous

list of examples, with the result that

the other services will remain

outside the public companies or

social service providers, but within

the coverage of the chapter or

agreement.

c) Reservations can be establishedregarding the Principle of National

Treatment, excluding subsidiaries of

companies that are not incorporated

in conformity with the laws of a

Member State. The subsidiaries set

up according to the laws of a

Member State, which only have their



23/30

goals of the developing countries will

be significantly reduced, as only one of

the consequences.

2. At the multilateral level. The coun-tries can withdraw their commitments

and offers.

As regards commitments, a country -

for example Ecuador strictly abiding

by the provisions contained in Art. XXI

of the GATS, could withdraw or modify

its commitments in the environmentalservices sector, three years after the

date on which a commitment entered

into effect. (In the absence of urgent

safeguard measures, still in negotia-

tion, this waiting period is reduced to

one year in certain conditions.)

registered office in those countries,

can be treated in a less favorable

manner, unless it is shown that they

have an effective and permanent link

with the economy in those States.

Third: As any agreement at the

regional level is obliged to respect the

commitments of the WTO, it will be

important to negotiate establishment of

the principle of special and differenti-

ated treatment and non-full reciprocity,

confirmed at the multilateral level. This

way, without giving up the negotiation,

the obvious asymmetry between coun-

tries is acknowledged and a flexible

environment is generated for the devel-

oping countries without the pressure of

immediate openness or the adoption of

other obligations to the same extent as

the industrialized countries. On the

contrary, an equitable treatment ofparties with different capacities will

most probably generate unfair results

or incompliance.

In the WTO, even in matters that are

already regulated (for example, intel-

lectual property and services), develop-

ing countries have flexibility mecha-

nisms and options to interpret andimplement their obligations. In the free

trade agreements and treaties (see for

example the texts of the failed FTAA

and Andean FTT), an attempt is made

to eliminate this flexibility for the devel-

oping countries. If these attempts pros-

per, the socio-economic development

ARTICLE XXI OF THE GATS

Modification of Schedules

A Member may modify or withdraw

any commitment in its Schedule, at any

time after three years have elapsed from

the date on which that commitment

entered into force



24/30

3. Safeguards and subsidies

The negotiation of safeguards and

subsidies in services must continue.

This means that the country can deny

third-country companies and physicalpersons the right to national treatment

in the case of subsidies, expressly

emphasizing that the provision of a

service, or the subsidy granted, within

the public sector, does not infringe this

commitment.

The bilateral agreements (bilateral

FTTs or BITs) have excluded subsidies

from their coverage, as they are within

the scope of the GATS. The economic

rationality backing the disciplines on

subsidies, in the case of goods, have

full validity for the case of trade in

services.

In the potable water services sector,subsidies can be granted for invest-

ments or tariffs through monetary

mechanisms (grants for investments or

pro-poor tariffs etc.) or social support

programs with equipment and building

materials.

Chile and Argentina have already

implemented programs to subsidizeinvestments and potable water and

sewage tariffs.

4. Collective claim in the WTO

The widest-scope proposal is the

collective claim which members of the

WTO can collectively file as a measure

to reduce the scope of the GATS,

creating additional instruments such as

treaties or changing the agreement

SUBSIDIES IN THE GATS

Article XV of the GATS says the following

on subsidies:

1. Members recognize that, in certain

circumstances, subsidies may have

distortive effects on trade in services.

Members shall enter into negotiations with a

view to developing the necessary

multilateral disciplines to avoid such

trade-distortive effects. The negotiationsshall also address the appropriateness of

countervailing procedures



25/30

the investors. On the other hand, those

norms should recognize the right of

governments to regulate all sectors of a

public interest, including the investment

sector, public services and the stateproperty sector.

3. Renegotiate concession agree-

ments with the companies

Many concession agreements are the

only law existing between the parties

due to a lack of a framework law that

regulates potable water supply in thehost country. In many cases, these

agreements are not related to the

procedure for solving controversies to

be adopted in case of a conflict, and

they do not expressly mention the

applicable law when there is a treaty

entered into by both countries. In other

cases, it is not mentioned that an

administrative entity on behalf of thestate, either a superintendency or other

entity, has the power to regulate and, if

necessary, enforce measures to ensure

compliance on behalf of the company.

When there is this type of gaps and

there is a Bilateral Investment Treaty in

the middle, it is a good idea to renegoti-

ate the concession agreement, aimed

at avoiding a demand in an interna-

tional court of arbitration or in the direct

negotiations prior to the arbitration.

II) MULTILATERAL NEGOTIATIONS

If the foregoing alternatives are inter-

C) As regards Investments

The following negotiation alternatives

could be applied:

1. Denounce the treatiesThe treaties include a denunciation

mechanism, which implies that one of

the parties tells the other party that it

does not want to continue with the

Treaty. The denunciation can be made

at any moment during effectiveness of

the Treaty, though in general its effects

are suspensive, i.e. that the Treaty

stops having an effect once a certain

time has elapsed after the denuncia-

tion.

The most direct remedy consists of

informing the other party on ones will to

terminate the Treaty when the date on

which effectiveness of the treaty

concludes comes near, so as to avoidthe so-called Tacit Renewal (which

implies that the Treaty automatically

continues in effect for another period of

time, which is generally equal to the

first period of time).

2. Renegotiate bilateral investment

treaties, to recover regulatory sover-

eigntyThe new investment norms should only

govern direct foreign investment and

exclude financial currents and portfolio

investments, enable sustainable devel-

opment and the promotion and protec-

tion of social policies, through enforce-

ability, and obligations enforceable on



26/30

preted as non-compliance with interna-

tional commitments or have to overco-

me many obstacles before being

applied, a final alternative consists in

establishing an International WaterConvention within the framework of the

United Nations (only the United Nations

could be above any other forum of a

strictly commercial nature), which limits

the different variants and forms of water

trade in the free trade treaties.

The international water convention

would generate a strategy to compen-

sate the privatizing trend. The principal

objective of the water convention would

be to consolidate and protect the

human right to water so as to guaran-

tee water for all. The human rights are

formulated by virtue of the rights of

individuals and are not based on the

rights and obligations of States towardsinvestors.

A convention could merge the three

principal water currents, namely social

development, the environmental

ecosystem and human rights in only

one and powerful river. A sustainable

and long-term approach to defend the

right to water can never be separatedfrom the water issue of the origin of

fresh water. Neither should it be sepa-

rated from the important role of healthy

ecosystems to ensure fresh water in a

sufficient quantity and of a sufficient

quality for satisfying basic human

needs, for socio-economic develop-

ment and for poverty reduction.

The Convention could ensure that

water continues to be a public good

and not a mere commodity or econo-mic resource administered by interna-

tional water companies.

III) DOMESTIC REGULATION

The best protection is to work on

domestic regulation in all sectors, parti-

cularly in water and the implicit sectors

because of the high impact of this

sector on the standard of living. The

non-compliance with commitments is

an action the government could take

but it will never be the most ideal solu-

tion.

With a view to future negotiations,

State efforts should concentrate onmore intervention through active secto-

ral policies. This is the only way to

ensure long-term protection at all

levels. This implies the implementation

of a general water legislation, specific

laws on potable water and sewage

services, on consumer and non-

consumer use, on water contamination

etc. Thereto, institutional and regula-tory frameworks should be defined, as

well as mechanisms for the positive

discrimination of certain service provi-

ders (public and social ones, for exam-

ple). Priority must be given to the use

of water for human consumption, agri-

culture, animal husbandry and forestry



27/30

human, social, cultural, economic and

citizen rights in general, creating

national sovereignty in this respect.

linked to food security, water for the

environment etc. These legislative

provisions are fundamental to back



28/30

BIT- Bilateral Investment Treaty

CAN - Andean Community of Nations

CCP - Central Classification of

Products

CTS - Customs Tariff System

Dec. 291 - Common Regime on

Treatment of Foreign Capitals and on

Trade Marks, Patents and Royalties

Dec. 292 - Uniform Regime for

Andean Multinational Corporations

Dec. 510 -Adoption of the Inventory of

Measures that Restrict Trade in

Services

Dec. 634 - Modification of the terms

specified in Decision 629

Dec. 507 - Update of the NANDINA

Nomenclature

FDI - Foreign Direct Investment

FTT - Free Trade Treaty

GATS - General Agreement on Trade

in Services

GATT - General Agreement on Tariffs

and Trade

HTZ - US Harmonized Tariff Schedule

ICSID - International Centre for

Settlement of Investment Disputes

MIA - Multilateral Investment

Agreement

NAFTA - North American Free Trade

Agreement

NANDINA - Common Nomenclature of

the Cartagena Agreement Member

Countries

TRIPS - Agreement on Trade Related

Aspects of Intellectual Property Rights

UNCITRAL - United Nations

Commission on International Trade

Law

W/120 - Sectoral Services

Classification List

WTO - World Trade Organization

GLOSSARY OF TERMS AND ABBREVIATIONS



29/30


WATER AND FREE TRADE Guide n1: Criteria and Suggestions for Negotiation Processes

Publisher: Agua Sustentable (www.aguasustentable.org) Translation: Sophie Van Renterghen

Cover: Pedro Guereca - Visual design: Pedro Guereca (www.taller64.com)

Photographs: Pedro Guereca (except: p. 8,16 and 17 Helena Cordero; p. 3 and 4 Aldo Cardozo and p.18 repertoire)


30/30

It is a publication of:

with the support of:

1

WAT

ERAND

FREET

RADE

WWW.AGUAVISIONSOCIAL.ORG

AGUA Y LIBRE COMERCIO EN INGLÉS 1.pdf

Documents

Transcript of AGUA Y LIBRE COMERCIO EN INGLÉS 1.pdf