Professional Documents
Culture Documents
GATS Art. 5
GATS Art. 5
1 ARTICLE V ................................................................................................................... 1
1.1 Text of Article V .......................................................................................................... 1
1.2 Article V:1 .................................................................................................................. 2
1 ARTICLE V
Article V
Economic Integration
1. This Agreement shall not prevent any of its Members from being a party to or entering
into an agreement liberalizing trade in services between or among the parties to such an
agreement, provided that such an agreement:
2. In evaluating whether the conditions under paragraph 1(b) are met, consideration
may be given to the relationship of the agreement to a wider process of economic
integration or trade liberalization among the countries concerned.
3. (a) Where developing countries are parties to an agreement of the type referred to
in paragraph 1, flexibility shall be provided for regarding the conditions set out in
paragraph 1, particularly with reference to subparagraph (b) thereof, in accordance with
the level of development of the countries concerned, both overall and in individual sectors
and subsectors.
6. A service supplier of any other Member that is a juridical person constituted under the
laws of a party to an agreement referred to in paragraph 1 shall be entitled to treatment
1
WTO ANALYTICAL INDEX
GATS – Article V (Jurisprudence)
7. (a) Members which are parties to any agreement referred to in paragraph 1 shall
promptly notify any such agreement and any enlargement or any significant modification
of that agreement to the Council for Trade in Services. They shall also make available to
the Council such relevant information as may be requested by it. The Council may
establish a working party to examine such an agreement or enlargement or modification of
that agreement and to report to the Council on its consistency with this Article.
(b) Members which are parties to any agreement referred to in paragraph 1 which
is implemented on the basis of a time-frame shall report periodically to the Council for
Trade in Services on its implementation. The Council may establish a working party to
examine such reports if it deems such a working party necessary.
(c) Based on the reports of the working parties referred to in subparagraphs (a)
and (b), the Council may make recommendations to the parties as it deems appropriate.
8. A Member which is a party to any agreement referred to in paragraph 1 may not seek
compensation for trade benefits that may accrue to any other Member from such
agreement.
1. The Panel in Canada – Autos, in a finding subsequently not addressed by the Appellate
Body, considered that, with respect to an import duty exemption available to only a limited
number of firms, Canada could not claim an exemption from its MFN obligation under Article II by
invoking Article V:1. The Panel noted that the Canadian measures at issue did not grant more
favourable treatment to all services and service suppliers of members of NAFTA:
"Even assuming that the [Canadian measures at issue] could be brought within the
scope of the services liberalization provisions of NAFTA, we note that the import
duty exemption under the [measures at issue] is accorded to a small number of
manufacturers/wholesalers of the United States to the exclusion of all other
manufacturers/wholesalers of the United States and of Mexico. The [measures at
issue], therefore, provide more favourable treatment to only some and not all
services and service suppliers of Members of NAFTA, while, according to
Article V:1(b), an economic integration agreement has to provide for 'the absence
or elimination of substantially all discrimination, in the sense of Article XVII', in
order to be eligible for the exemption from Article II of the GATS.
Moreover, it is worth recalling that Article V provides legal coverage for measures
taken pursuant to economic integration agreements, which would otherwise be
inconsistent with the MFN obligation in Article II. Paragraph 1 of Article V refers to
'an agreement liberalizing trade in services'. Such economic integration
agreements typically aim at achieving higher levels of liberalization between or
among their parties than that achieved among WTO Members. Article V:1 further
prescribes a certain minimum level of liberalization which such agreements must
attain in order to qualify for the exemption from the general MFN obligation of
Article II. In this respect, the purpose of Article V is to allow for ambitious
2
WTO ANALYTICAL INDEX
GATS – Article V (Jurisprudence)
liberalization to take place at a regional level, while at the same time guarding
against undermining the MFN obligation by engaging in minor preferential
arrangements. However, in our view, it is not within the object and purpose of
Article V to provide legal coverage for the extension of more favourable treatment
only to a few service suppliers of parties to an economic integration agreement on
a selective basis, even in situations where the maintenance of such measures may
explicitly be provided for in the agreement itself."1
___
1
Panel Report, Canada – Autos, paras. 10.269-10.272.