Services and the Pacific Alliance: Critical Perspectives

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by Eric Leroux

The objective of the Pacific Alliance with respect to trade in services is to “build in a participatory and consensual way an area of deep integration to move progressively towards the free movement of […] services.” The key word in this sentence is “progressively”, and the missing, but (at least) equally important, one is “seriously”.

If one were to speak of the Pacific Alliance’s achievements in the services area in speed terms, one would say that it still is in first gear. Not that this is any different from what is taking place under other trade-liberalizing agreements; to the contrary, the Pacific Alliance is dutifully espousing the existing models reflected in, on the one hand, the NAFTA, and on the other, the GATS. The Pacific Alliance’s services disciplines negotiated thus far draw on both models, using, presumably, what is considered to be the best of both models. The problem is that those two models are now flawed: they no longer reflect the reality of the marketplace, nor truly tackle head-on those issues that will be determinative of real, significant, liberalization of services trade in the coming decades.

Darwinism teaches us that if one does not adapt to, nor evolves together with, changing circumstances, the future is bleak. Twenty years plus after the NAFTA and the GATS, which were watershed events in their own right, it is now time to re-assess the principles of market access and non-discrimination as the key drivers of future trade liberalization in services, because, to a large extent, they no longer are. To be sure, these principles remain relevant and useful in the context of services supplied through a commercial presence in the host State. To a significant extent, however, the future liberalization of trade in services is intrinsically linked to cross-border trade, more specifically E-Commerce, where market access and non-discrimination do not reflect the key barrier that one really is faced with.

Indeed, the main obstacle to cross-border trade in many services sectors, e.g. financial services, no longer pertains to quantitative restrictions and discrimination so much as it relates to legitimate concerns about qualifications obtained in another country and one’s inability to exercise regulatory oversight outside its borders. The solution to further, significant, trade liberalization in the coming decades therefore depends more on the recognition and harmonization of regulations than the negotiation of commitments in accordance with standard market access and non-discrimination principles, which do nothing to address the main stumbling block.[1]

It is high time to start thinking outside the confines of existing models and negotiate further trade liberalization in accordance with revamped principles that reflect the new, fast-evolving, reality of the services marketplace. Otherwise, further trade liberalization, and certainly the achievement of a free-movement-of-services objective in the context of the Pacific Alliance, can only remain, for the most part, elusive. Similar to what the NAFTA countries did more than two decades ago, Pacific Alliance countries have an opportunity to show the world how services trade integration and liberalization is done in the 21st century. This requires creativity, innovation and anticipating the way forward, not staying behind the crowd and espousing old models of liberalization.

[1] The concept of “harmonization”, as used in this post refers to the harmonization of the substantive aspects of laws, regulations, etc. Similar or equivalent requirements, conditions, etc., can naturally be enshrined in legal instruments that will vary in form from one country to another, depending on each country’s legal system. What matters for mutual recognition to take place is not the form of the legal instruments being used, but rather the similarity or equivalency of substantive legal norms applied in respect of a given subject-matter.

Summary of a paper presented at the Conference : ‘The Pacific Alliance in a World of Preferential Trade Agreements’ in Bogotá, Colombia, November 2015.

H. Leroux Associates
Professor of International Trade Regulation and International Investment Law
Panamerican University, Mexico City
[email protected]
[email protected]

Photocredits: khunaspix/FreeDigitalPhotos.net