National Treatment and Additional Commitments: Articles XVII and XVIII

In one line

Under GATT every product gets national treatment automatically; under the GATS a service gets it only if the member wrote it into its Schedule.

In exam wording: Article XVII of the GATS requires a member, in the sectors inscribed in its Schedule and subject to the conditions and qualifications set out there, to accord to services and service suppliers of any other member treatment no less favourable than it accords to its own like services and service suppliers; and Article XVIII permits members to negotiate commitments on measures not subject to scheduling under Articles XVI or XVII.

The reversal, and why it happened

Article III of GATT applies to every product without exception and cannot be declined. Article XVII of the GATS applies only where scheduled, sector by sector, mode by mode, subject to whatever conditions and qualifications the member recorded.

That is the single most important structural difference between the two pillars, and it exists because services regulation is domestic regulation of the deepest kind. A general national treatment obligation across every services sector would have required every member to open banking, insurance, telecommunications, health, education, transport and the professions on the same day, and no membership would have accepted it.

The consequence is that the real obligation of any member is a matter of its own Schedule, not of the Agreement, and a question about what a member owes cannot be answered from the treaty text alone.

The obligation

Article XVII:1. 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 of services, treatment no less favourable than that it accords to its own like services and service suppliers.

Article XVII:2 provides that a member may meet that requirement by according either formally identical or formally different treatment.

Article XVII:3 is the operative test, and it is the GATT standard imported. Formally identical or formally different treatment shall be considered to be less favourable if it modifies the conditions of competition in favour of services or service suppliers of the member compared to like services or service suppliers of any other member.

A footnote adds an important limit. Specific commitments under this article shall not be construed to require any member to compensate for any inherent competitive disadvantages which result from the foreign character of the relevant services or service suppliers. So a foreign bank cannot complain that it lacks a branch network, only that the law makes building one harder for it than for a domestic bank.

Likeness in services

Argentina: Measures Relating to Trade in Goods and Services, WT/DS453/AB/R, adopted 9 May 2016. Facts. Argentina applied eight financial, taxation and registration measures adversely to services and suppliers from countries it classified as not cooperating for tax transparency purposes. Panama complained. Held. Where the origin of the service or supplier is the only factor distinguishing those being compared, likeness may be presumed, so no separate likeness analysis is needed; the Appellate Body also clarified the relationship between Article II and Article XVII, and reversed certain of the panel's findings on defences. Panama won in part. Why it matters: proving likeness across intangible services on physical characteristics and consumer preferences is far harder than for goods, and the presumption is what makes an origin based measure challengeable at all.