GATS and Public Service Systems

Ministry of Employment and Investment

British Colombia

Introduction and Overview

This paper on the "exercise of governmental authority" considers the extent and range of interpretation of an important exclusion in the General Agreement on Trade in Services (GATS). To the best of our knowledge, there are no other papers that discuss the meaning of this important exclusion in any detail. In the absence of more exhaustive interpretive materials, as well as a lack of decisions by trade panels on the meaning of the governmental authority exclusion, it is not possible to determine how broadly or narrowly this provision might be interpreted. Since the Canadian government has signed onto the GATS in 1995, it is important to understand how governments might be affected by its obligations. An important part of understanding the GATS is to have clarity about what types of measures governments can exclude from coverage of the agreement.

The GATS is an important agreement since services represent anywhere from 60%-80% of the gross domestic product (GDP) of WTO member nations. The GATS also has a built-in agenda that requires on-going negotiations. Negotiations to broaden and deepen the GATS have been taking place since January 2000. There is no agreed-to completion date but typically such negotiations last for several years.

There is no definition for "services" in the agreement. It has often been said that a service is anything that cannot be dropped on your foot.

It is hard to imagine a good that is not connected to a series of services. Obviously, each good contains labour services but often also requires a series of services in order to allow for use/consumption of that good. For example, computers have to be transported, distributed, advertised, sold, have software installed, provide education on software use, repaired and guaranteed. All of these services are essential to bring a good to market and to ensure that the good is sold and consumed.

Many services have a strong public policy dimension to them, including health care, education, water treatment, tobacco advertising, alcohol distribution, electricity distribution, information services, among others. Knowing the importance of some of these services to Canadians, the federal government has given assurances that it will not negotiate the inclusion of "public" health, education and social services.

In an effort to enhance trade in services, and to otherwise open up services markets, the GATS contains rules which "discipline" or restrict government action (measures).

The scope of the agreement is extraordinarily broad because it potentially covers everything that governments do which affect trade in services and, it potentially covers all levels of governments. Government measures include legislation and regulation as well as requirements, procedures, practices or other actions.

WTO trade panels have recently ruled that government measures which cover goods, but which "affect" trade in services, are also covered by the GATS rules. WTO trade panels also ruled that measures designed to cover services, but which affect trade in goods, are covered by the General Agreement on Tariffs and Trade (GATT). This adds another layer of complexity for governments and their citizens when attempting to assess whether or not new measures will be trade consistent.

The GATS is structured to include parallel but interrelated sets of rules. One set of rules is found in Part II "General Obligations and Disciplines". These rules apply to all service sectors unless they are explicitly excepted. This is known as the "top down" approach; and in principle, every service is covered unless explicitly exempted. Negotiations taking place at present are designed to "deepen" the existing obligations in this part of the GATS, that is, to increase the number of rules which apply to government measures.

Part III of the GATS contains an additional and more demanding set of rules that are "bottom-up", that is, these rules only apply to service sectors where governments make commitments. Negotiations are aimed at increasing the number of services that will be covered by this part of the GATS.

Because the GATS already contains a top down set of rules in Part II, it is possible that such sensitive service sectors as health and education may already be covered by these rules. The federal government, as well as senior WTO services officials, have asserted that citizens and their governments need not be concerned that such vital services will be brought under WTO rules. They indicate that services provided "in the exercise of governmental authority" are excluded from the agreement.

The GATS exclusion for services in the "exercise of governmental authority" is thus of critical importance. If health care, education or other critical and sensitive services are already covered by Part II GATS rules, then these rules could decrease government decision-making authority over these sectors. Similarly, where more stringent GATS provisions apply, it is important for governments to have complete confidence in the scope of any specific commitments they make in sensitive sectors. A major objective of the GATS is to facilitate international trade in services by ensuring an increasing number of service sectors are opened up to prospective service providers - whether these providers are public or private, for-profit or non-profit.

While there is an on-going debate about whether services are best delivered publicly or privately, most British Columbians would agree that decision-making authority over these issues should continue to rest with their respective federal, provincial, municipal, regional or first nations governments.

The federal government has recognized, in a variety of fora, that it sees a need to protect "publicly" delivered health and education services and believes that this objective can be accomplished through the use of the existing language relating to the exercise of governmental authority.

To date much of the discussion has focused on the need to protect those services which are "publicly" delivered. An alternative perspective characterizes the issue as requiring the protection of government decision-making authority in sensitive service sectors. What would happen, for example, if governments wanted to move into new areas of social service delivery, such as child care, and regulate in a manner that would increase the use of public and/or non-profit forms of child care? What would happen if a government decided to alter the delivery of health care and regulate in such a manner as to increase the use of public and/or non-profit service delivery?

The government of BC wants to ensure that British Columbians can decide for themselves how present and future governments will deliver services and will be able to have their views implemented even in changing circumstances.

This paper is designed to raise important issues for discussion. It does not necessarily reflect the position of the government. Indeed, one of the purposes of the paper is to encourage discussion and increase public awareness on these important issues.

We have also included on our Web Site the views of Michael Moore, the director general of the World Trade Organisation, as he expressed them in an article published recently in The Globe and Mail and would suggest that readers consider his view as well to gain a greater appreciation of different perspectives. Finally, the Government of British Columbia welcomes your views on these important issues. Please contact us with your perspectives, questions and comments.

Summary

The General Agreement on Trade in Services (GATS) contains an exclusion that, at first, appears to broadly protect public service systems and the authority of member governments to regulate such systems. However, this exclusion for "services provided in the exercise of governmental authority" is defined very narrowly. As a result, the GATS appears to bring many public service systems -- and their regulation -- within the sphere of WTO authority.

The scope of the GATS is very broad. Under the agreement, most government measures "affecting" services with an international component are subject to the GATS rules, in certain instances, even if such measures are non-discriminatory and have little or no impact on international trade. As a result of the agreement's broad coverage and narrow exclusion, GATS obligations that apply 'across-the-board' (including most favoured nation treatment and transparency) already apply to most public services and their regulation. More restrictive GATS obligations (e.g. national treatment, market access) also apply to many public services and to government regulatory measures in sectors where member governments have made specific commitments.

In Europe, a "similar" exclusion in the EC Treaty has failed to protect the services in dispute every time it has been tested.

A close examination of statements made by WTO officials and bodies tends to confirm and reinforce concerns that GATS obligations already apply to many public service systems.

In Canada, as in most other WTO countries, "public services" are rarely delivered exclusively by government. Instead, vital public services are delivered to the population through a mixed system that is funded and regulated by governments at the federal, provincial and local levels. Health, education, and other social service systems, for example, consist of a complex, continually shifting mix of governmental and private funding and governmental, private not-for-profit and private for-profit delivery. An effective exclusion for "public services" must therefore be broad enough to protect governments' ability to deliver services through the mix that they deem appropriate and to preserve their regulatory authority over all aspects of these mixed systems.

There has been very little public discourse on the narrowness of the governmental authority exclusion, and a detailed analysis of its significance on governments' regulatory authority is warranted. In light of the negotiations now underway in Geneva to broaden and deepen the GATS, some governments may consider such an assessment to be an urgent priority.

The governmental authority exclusion appears likely to become a priority issue during GATS re-negotiations where governments will seek to ensure that the exclusion is strengthened and that its protection of public service systems is rendered both fully effective and permanent.

1. Background

GATS coverage is very broad

The scope of the GATS is very broad. In principle, it covers any measure, taken by any government, at any level, which affects the supply of a service.1

The GATS contains no broad exclusion for public services, for public service systems or their regulation, or for non-profit service providers or delivery

Except for Article I:3, the agreement contains no exclusion for public services, for public service delivery, or to protect governmental regulatory authority associated with public service systems.2 It also treats public and private service providers and delivery as "like".3 Similarly, the GATS treats private non-profit and private for-profit service providers and delivery identically.4

The GATS preamble provides little substantive protection

The preamble provides little substantial protection for governments' regulatory authority. In the preamble, Members have noted their recognition of "the right of Members to regulate, and to introduce new regulations, on the supply of services within their territories in order to meet national policy objectives..." However, this general, preambular language is non-binding and subordinate to the more specific, binding obligations that are contained in the text of the agreement itself.

GATS general exclusions are few and, except in one instance, limited

There are few general exceptions or exclusions to the agreement's broad coverage.

Among these are:

an exemption to protect "essential security interests" (Article XIVbis), which, uniquely, is self-defining and very broad,

other exceptions, each of which are subject to strict limitations. These include, for example, exemptions to "maintain public order" and to "protect human, animal or plant life or health" (Article XIV),

an exclusion for services that are supplied "in the exercise of governmental authority" (Article I:3).

The last of these -- the critical "governmental authority" exclusion -- is the subject of this paper.

2. The GATS "governmental authority" exclusion

Article I:3 of the agreement states:

"For the purposes of this Agreement… (b) 'services' includes any service in any sector except services supplied in the exercise of governmental authority; (c) 'a service supplied in the exercise of governmental authority' means any service which is supplied neither on a commercial basis, nor in competition with one or more service suppliers." (emphases added)

The "governmental authority" exclusion is very narrow

This exclusion is far narrower than it may at first appear.

Firstly, in order for a service to be excluded, both criteria must apply. That is, in order for the exclusion to apply, a service must be supplied on a non-commercial basis and its delivery must not be in competition with another service supplier. Thus, the exclusion does not apply to services that are supplied on a non-commercial basis but which are supplied in competition with another service provider. Similarly, the exclusion does not apply to services that are supplied on a commercial basis even where these services are supplied in the absence of competition with any other service supplier. Hence, only a small sub-set of services -- those that are provided by completely non-commercial, absolute monopolies -- appear to be protected by this exclusion.

Secondly, the exclusion is narrow by virtue of the ordinary definition of its terms. The agreement does not define the phrases "on a commercial basis" and "in competition with one or more service suppliers". However, the ordinary definitions of these terms are broad, making the set of services that they describe very large, and the set of services that falls outside them -- and hence outside the scope of the agreement -- quite small.

"Commercial" is defined variously as: "Engaged in commerce; trading"5; "Of or pertaining to commerce or trade"6; "Of, engaged in, or concerned with, commerce"7; or "concerned with commerce"8 (emphases added). The definition of "commerce" includes: "financial transactions, esp. the buying and selling of merchandise, on a large scale"9, "the exchange of goods"10 or "buying and selling together; trading; exchange of merchandise"11. The definition of "trade" includes: "the business of distribution, selling and exchange"12, "buying and selling … buying and selling conducted between nations etc.; the exchange of goods between peoples"13 and "the buying and selling or exchange of commodities for profit; commerce, traffic, trading"14. "Competition" is defined as: "Rivalry in the market, striving for custom between those who have the same commodities to dispose of"15; "the act or an instance of competing or contending with others (for supremacy, a position, a prize, etc.)."16 "Compete" is defined as: "to try to get what others also seek and which all cannot have, to compete for export markets".17

Most so-called public services -- which are normally supplied through a complex mixture of public and private suppliers, or which frequently include certain commercial aspects -- appear to fall, at least in part, under these broad definitions. They would thus fall outside the protective exclusion.18

Thirdly, wherever there are uncertainties about its scope, the exclusion will almost certainly be interpreted narrowly.19 Moreover, in the absence of a clear definition within the agreement itself, the scope of the exclusion in any particular case will be determined not by member governments,20 but by dispute panels that operate according to international law 21 in processes that are closed to public scrutiny and debate. These panels can be expected to define these phrases so that the resulting "governmental authority" exclusion has a very narrow practical application.22

Important GATS obligations now apply to services that fall outside the narrow "governmental authority" exclusion

The GATS obligations of general application apparently already apply to most public service systems and to the government regulations pertaining to these systems. These obligations include the most-favoured-nation treatment obligation (Article II),23 obligations concerning transparency (Article III),24 and certain domestic regulation provisions (Article VI).25 In addition, in sectors where members have made specific commitments, more restrictive GATS obligations, including national treatment (Article XVII)26 and market access (Article XVI),27 also apply to services and to government regulatory measures within members' public service systems. Negotiations that are now underway to expand the agreement are likely to subject public service systems and government regulations to even greater GATS exposure.

3. A similar exclusion in the European Communities treaty has been interpreted very narrowly

Since no WTO panel has yet ruled on the "governmental authority" exclusion, it cannot be predicted with certainty what the outcome of such a ruling would be. However, there have been cases involving a similar provision -- the so-called "official authority" exclusion -- that is contained in the EC Treaty. Judging from statements made in WTO meetings, it seems that EC representatives believe that the interpretation of the WTO exclusion may not differ markedly from that of its European counterpart. In this context, it is significant to note that the original Uruguay Round proposal for the governmental authority exclusion reportedly came from the EU.28 The European exclusion -- upon which the GATS exclusion appears to be based -- has, without exception, been interpreted narrowly.

The EC "official authority" exclusion

Article 55 of the EC treaty states that:

"the provisions [of the chapter on right of establishment] shall not apply, so far as any given Member State is concerned, to activities which in that State are connected, even occasionally, with the exercise of official authority." (emphasis added)

At the WTO, the European Communities have formally indicated that they view this exclusion as "similar" to the GATS "governmental authority" exclusion:

These provisions [Article 55 of the EC treaty] are similar with those of Article 1.3.(b) of GATS which excludes from its scope services "supplied in the exercise of governmental authority."29

The European Communities point out that the European Court of Justice "has taken a restrictive interpretation of the scope of Article 55."30 The Court of Justice has ruled that "the derogation provided for in Article 55 must be restricted to activities which in themselves are directly and specifically connected with the exercise of official authority" (emphasis in original)31 In fact, "[t]here are no examples in the European Court of Justice jurisprudence where the Court found that an activity would fall under the scope of Article 55" (emphasis added).32 The Court has, however, found that the following activities are not covered by the "official authority" exclusion:

activity as an intermediary between supply and demand in employment relationship in Italy…

the concession for the computerisation system for the Italian lottery…

the activities of traffic accident experts in Greece…

the activities concerning the design, programming and operation of data-processing systems for the public authorities in Italy…33

These interpretations of the European "official authority" exclusion have been universally restrictive. They provide supplementary evidence that the prospects for a broad interpretation of the GATS' "governmental authority" exclusion are remote. Indeed, the European experience strongly suggests that the GATS exclusion is also likely to be given a very restrictive interpretation.

4. WTO explanations and statements about the governmental authority exclusion reinforce concerns that GATS coverage is broader than commonly understood

There are relatively few instances where the meaning of the GATS governmental authority exclusion has been described or explained. Where the WTO Secretariat, WTO officials or WTO committees have considered the issue, their elaborations generally confirm and reinforce concerns about lack of clarity or narrowness of scope.34 It is useful to examine some of these references in detail.

Some WTO explanations merely reiterate the original text

Some statements made by WTO officials that appear to provide a strong reassurance about the exclusion simply repeat the agreement's text. For example, in response to questions posed to him about the coverage of public services, the Director of the WTO Trade in Services Division stated in a letter that was circulated publicly in June, 2000 35 that:

"Article I of the GATS makes it clear that there is a complete exemption from the GATS for all services supplied 'in the exercise of governmental authority', which means any service which is supplied neither on a commercial basis nor in competition with one or more service suppliers. Such services are not subject to any GATS disciplines -- they are simply outside its scope."

A pamphlet published by the WTO in mid-March 2001 36 uses similar language:

"The first Article of the Agreement excludes from its coverage all services provided in the exercise of governmental authority, which are defined as those supplied neither on a commercial basis nor in competition with other suppliers. These services are not subject to any GATS disciplines, they are not covered by the negotiations and commitments on market access and national treatment do not apply to them."

In effect, these statements merely reiterate the text without either elucidating the scope of the exclusion or substantively addressing concerns about potential GATS impacts on public service systems.

Some WTO explanations employ a very narrow definition of "public services"

The WTO Services Division was asked on another occasion about the ability of governments to protect public services. In reply, the director of that division defines "public services" very narrowly -- as being identical in scope to the GATS "governmental authority" exclusion:

Question: "What protection is there for a government which allows both a private services provision and a public provision but wants to ring-fence the public component?" Answer: "[I]f the public component, as you put it, consists of services supplied in the exercise of governmental authority, it is outside the scope of the GATS, by virtue of Article I."37

Similarly, in response to a question about the application of national treatment to the supply of subsidies, the WTO director of services states: "In answering this question I have again taken your 'public provision of a service' as meaning governmental services as defined in Article I."38

In both of these instances, the answers supplied by the WTO Services Division do not employ the ordinary meaning of the term "public services" used in the questions but instead refer to a far more restricted meaning. In the Division's usage, "public services" are, by definition, excluded from the agreement. The Division's responses thus avoid the substance of the original questions and leave those important concerns about "public services" -- defined in the ordinary sense -- un-addressed.39

Some WTO explanations provide examples that suggest the exclusions are quite limited

The illustrative examples of excluded services provided by the WTO 40 in its GATS Training Package are quite limited. The package states that "services supplied in the exercise of governmental authority" include

"the activities of central banks and other monetary authorities, statutory social security and public retirement plans, and public entities using government financial resources. (emphasis added)"41

While even these examples are of doubtful relevance,42 the list is noteworthy for its limited scope.43 It does not include health care and education, for example, and many other key services that are of primary interest to the public and which many citizens, organizations and governments apparently now believe to be excluded from the agreement.

A number of WTO references explicitly acknowledge the narrowness of the exclusion and/or its lack of clarity

WTO Director General asserts GATS excludes "services supplied by governments"

In a recent article, WTO Director General Michael Moore states that "GATS explicitly excludes services supplied by governments."44 It seems reasonable to assume that Mr. Moore is referring here to the governmental authority exclusion. However, the basis for this broad statement remains unclear, and the statement itself may raise new questions. For example, the text of the agreement indicates that only a subset of those "services supplied by governments" may safely be considered excluded from the agreement, and that subset would be restricted to those services supplied "neither on a commercial basis, nor in competition with one or more service suppliers." (Article I:3(c)

Concerns about the exclusion's lack of clarity have been raised at the WTO on numerous occasions

In late 1998, the European Community raised the question "of whether the GATS definition [of 'services supplied in the exercise of governmental authority'] … was sufficiently clear in relation to government procurement of services."45 A subsequent note from the same GATS working group indicates that "the Chairman wondered whether it was necessary to further specify services not falling under the GATS, i.e. 'services supplied in the exercise of governmental authority' as stated in Article I:3."46

For its part, the WTO Secretariat has pointed to a number of specific ways in which the scope of the "governmental authority" exclusion is unclear or where it intersects with other GATS provisions or other WTO agreements.

As noted above, the term "commercial basis" -- one of the two determining features of the "governmental authority" exclusion -- is not defined in the agreement. The WTO Secretariat frankly acknowledges that the meaning of "commercial basis" is not clear and that it could capture certain public service functions provided by publicly owned service providers. In its background note on Environmental Services 47 the WTO Secretariat discusses limitations on sectoral coverage under the existing agreement, noting that "several Members have specified that their commitments do not include public service functions whether owned and operated or contracted out by the local, regional or central government." In such cases, the Secretariat asserts,

"the question does arise of when public service functions fall within the scope of GATS disciplines and when they do not. A key issue is whether sales are made on a commercial basis. To begin with, it is not completely clear what the term 'commercial basis' means" (emphasis added).48

The Secretariat paper continues with the observation that, whatever the definition, determining a service to be commercial would result in both private and public service entities being subject to GATS provisions:

"Nevertheless, if services were deemed to be supplied on a commercial basis, then, regardless of whether ownership was in public or private hands, the sector would be subject to the main GATS disciplines and to the negotiation of commitments under Articles XVI and XVII."

The Secretariat also indicates that it may not be clear what environmental services fall within the "governmental authority" exclusion. Indeed, the Secretariat lists this issue as one of a series of questions warranting further consideration:

"Would it be useful to clarify when an environmental service is to be considered as being supplied in the exercise of governmental authority?"49

Similarly, the Secretariat acknowledges that it is not clear where "governmental authority" ends and "procurement" begins when it asks:

"Is there need to clarify the scope of government procurement (as referred to in GATS Article XIII) in relation to services supplied in the exercise of governmental authority (covered by GATS Article I:3)?"50

The Secretariat also notes the lack of clarity with respect to core environmental services, the "governmental authority" exclusion and government procurement:

"[W]ith regard to the core environmental services, sewage and refuse disposal, it does not seem to be completely clear how much falls within the scope of Article I:3 (services supplied in the exercise of governmental authority) and Article XIII (government procurement), and how much is subject to the main GATS disciplines."51

The Secretariat raises still other questions about the intersection of the "governmental authority" exclusion with the GATS government procurement provisions. According to the Secretariat, such an intersection arises where governments have "privatized certain services as local monopolies and the private firms receive payment from the government rather than from individual users." And in these cases, the border is far from clear. As the Secretariat puts it52:

"One view could be that these are still services supplied in the exercise of government authority, as defined by GATS Article I:3 – since they are not supplied on a commercial basis to individual users and they continue to be (local) monopolies – and, therefore, do not fall within the scope of GATS disciplines. Another view could be that these services are being procured by the government and, therefore, the manner of purchase per se would fall within the scope of GATS Article XIII and any future disciplines on procurement."

It is disconcerting that, when considering specific and fairly straightforward examples of core governmental services, the WTO Secretariat acknowledges that such a fundamental aspect of the existing agreement remains unclear. That the matter remains unresolved in the face of ongoing negotiations to expand the agreement is of grave concern.

The Council for Trade in Services indicates the "need" for the exclusion to be interpreted narrowly

The record of discussions in the WTO Council for Trade in Services supports the view that a narrow interpretation is almost certain. When the council considered the exclusion in the context of sensitive health and social services sectors, negotiators asserted that even here the exclusion "needed to be interpreted narrowly":

"Members drew attention to the variety of policy objectives governing the provision of health and social services, including basic welfare and equity considerations. Such considerations had led to a very substantial degree of government involvement, both as a direct provider of such services and as a regulator. However, this did not mean that the whole sector was outside the remit of the GATS; the exceptions provided in Article I:3 of the Agreement needed to be interpreted narrowly" (emphasis added).53

Many WTO references raise other specific concerns

A close examination of other WTO documents and records reinforces concerns about the limited application of the "governmental authority" exclusion. Such an examination also raises new concerns that the potential impacts of GATS coverage may be far more significant than is commonly understood.

MFN applies to the health sector

The Director of the WTO Services Division has stated that while "a government which makes … no [specific] commitments in the health sector, for example, is free to prohibit foreign supply of health services altogether or to subject them to any conditions it chooses …[I]n the absence of commitments … the most-favoured-nation obligation" would still apply.54 Put more directly, the director confirms here that the GATS most-favoured-nation obligation already applies to the health sector -- even where individual members have not made any specific commitments in the sector.

The "governmental authority" exclusion may apply in the health sector only in exceptional circumstances, for example, where services are provided "directly through the government, free of charge".

The Secretariat's background paper on health and social services 55 indicates that the "institutional arrangements governing the provision of health, medical and social services may vary widely, from complete government ownership and control to full market orientation." It notes that:

"there is the possibility of services being provided "in the exercise of governmental authority", meaning, according to Article I:3.(c) of the GATS, that they are supplied neither on a commercial basis nor in competition. A case in point of such activities - not covered by the GATS - is the provision of medical and hospital treatment directly through the government, free of charge."

After describing contrasting systems that "allow for full private participation without access controls", the paper acknowledges that "[s]uch prototypical arrangements are likely to be the exception rather than the rule." The application of the GATS to the vast range of institutional arrangements for providing public health services that falls between these contrasting types is left unaddressed.

The paper then raises the "governmental authority" exclusion as an issue for discussion56:

"How do Members interpret the criteria contained in Article I:3 (services supplied neither on a commercial basis nor in competition): Would the levying of a charge or the existence of private hospitals preclude cover?"

"Governmental authority" exclusion may not apply to "the hospital sector in many countries"

The WTO Secretariat's background paper on health and social services strongly reinforces concerns about the limited nature of the "governmental authority" exclusion, arguing that its application in the hospital sector "seems unrealistic"57:

"The hospital sector in many countries, however, is made up of government- and privately-owned entities which both operate on a commercial basis, charging the patient or his insurance for the treatment provided. Supplementary subsidies may be granted for social, regional and similar policy purposes. It seems unrealistic in such cases to argue for continued application of Article 1:3 and/or maintain that no competitive relationship exists between the two groups of suppliers or services."

Basic education "may be" excluded

The WTO Secretariat's background paper on education services 58 does not discuss the application of the "government authority" exclusion in the education sector. It merely indicates that:

"Basic education provided by the government may be considered to fall within the domain of, in the terminology of the GATS, services supplied in the exercise of governmental authority (supplied neither on a commercial basis nor in competition)." (emphasis added)

This vague statement is noteworthy in that it does not deny the possibility that basic education may not, in fact, fall within the "governmental authority" exclusion. The paper notes that its primary focus is not on those segments of the education sector that are excluded but "where a small, but possibly growing, number of countries allows for effective private participation."

The GATS national treatment obligation may apply to subsidies given to public entities

In the case of the hospital sector noted above, the WTO background paper indicates that

"In scheduled sectors, this suggests that subsidies and any similar economic benefits conferred on one group would be subject to the national treatment obligation under Article XVII [National Treatment]."59

The WTO Services Director also considers this issue in correspondence. In discussing concerns about private service providers seeking a share of public subsidies currently provided only to public services, the director asserts that a public service would not be excluded if the government were "simply to own a service provider operating in competition with the private sector."60 This statement obliquely confirms that public services that operate "in competition with one or more service suppliers" are covered by the agreement. The clear implication is that in such circumstances and where relevant specific commitments have been made, private for-profit service providers would have grounds under GATS to seek a share of subsidies that otherwise would be provided only to public, or private non-profit, service suppliers.

GATS applies to government measures respecting public monopolies "which operate commercially"

The director of the WTO Services Division has indicated that GATS obligations apply to government actions respecting public "monopolies which operate commercially." In his 1999 letter to an international NGO,61 he states:

"Not all monopolies, of course, are 'public monopolies' in the sense that they provide services supplied in the exercise of governmental authority, which I take to be the sense of your question. There are monopolies which operate commercially and have nothing to do with government, even if they have been granted monopoly rights by the government, and in dealing with these the government is bound by the normal GATS obligations, notably the Most Favoured Nation principle…"

This statement points out that some public monopoly services are subject to GATS constraints. In particular, it indicates that GATS obligations apply to government actions respecting public "monopolies which operate commercially". Even where these monopolies have been established and maintained to achieve efficiency, equitable distribution of services, public accountability or for other legitimate public purposes, if the monopoly services are deemed to be "commercial", they would be subject to GATS obligations.62

Public services would only become "an issue" in the event of a GATS challenge

In his 1999 letter, the WTO Services Director states that "there is no need for a government to take any specific action to 'ring-fence' the public component." As he put it:

"The status of the public component could only ever become an issue if some measure taken by the government concerned were to be questioned by another WTO Member."

In a similar vein, the recent WTO pamphlet, entitled "GATS -- Fact and Fiction", notes that while Member Governments "attach great importance" to the governmental authority exclusion, "there has been no need for interpretation of this phrase" … because "no question has been raised by any Member" about the exclusion. As the WTO puts it63:

"The issue could only arise if a specific measure which had been challenged in dispute settlement were to be defended on the ground that it applied only to services supplied in the exercise of governmental authority and was therefore outside the scope of the GATS."

The possibility that the "public component" and public service regulation might be "questioned by another WTO Member" and defended on the basis of this exclusion is, of course, precisely the crux of the question. These answers obliquely confirm that government measures relating to public service systems are indeed exposed to the threat of international disputes under the GATS.

5. Conclusion

The GATS brings public service systems -- and their regulation -- within WTO authority.

The GATS brings many aspects of public service systems, and governments' regulation of these systems, within the sphere of WTO authority. Indeed, most government measures "affecting" services are subject to GATS rules, even, in some cases, if these measures are non-discriminatory and have little or no effect on international trade.

The narrowness of the "governmental authority" exclusion is not widely recognised.

Despite the significance of GATS coverage, there are indications that some member governments may not fully appreciate the limited scope of the "governmental authority" exclusion. Many governments may not recognize that certain aspects of public services and their regulation are already subject to those GATS obligations that apply 'across-the-board', among them most-favoured-nation treatment and transparency. Some members may also not be aware that, where they have made specific commitments, certain aspects of their public service systems and of their regulatory ability in these areas may be subject to more demanding GATS restrictions, including national treatment and market access.

Assessments of GATS coverage on public service systems are warranted

There is no evidence available to the public that WTO members have assessed the significance of the GATS on their public service systems, or on the regulatory authority of governments, at any level of jurisdiction. In light of the growing recognition of the narrowness of the "governmental authority" exclusion, some governments may consider such detailed assessments clearly warranted and long overdue. These assessments may be considered especially important as some existing GATS obligations extend beyond international trade, reaching to the heart of governments' domestic regulatory authority.64

Assessing the practical implications of existing GATS commitments pertaining to public service systems has become time-sensitive, since members are currently engaged in negotiations to broaden and deepen the agreement. Members that fail to perform such assessments run a significant risk of covering services unintentionally in this and future rounds of negotiations. They may also introduce uncertainty into any new specific commitments they make -- uncertainty that is likely to be clarified ultimately not by the member governments themselves but through dispute settlement. Moreover, in the absence of clear guidance to the contrary from member governments, it is very likely that dispute settlement panels will interpret the "governmental authority" exclusion narrowly. This could have the effect of diminishing governments' regulatory capability and undermining their existing public service systems.

Revisiting the "governmental authority" exclusion in current negotiations -- to make it effective and permanent -- is likely to be considered an urgent priority.

WTO members may wish, as an urgent priority, to revisit the "governmental authority" exclusion during ongoing GATS re-negotiations to clarify it or, if necessary, renegotiate the text to ensure that public service systems are fully, effectively and permanently excluded from the GATS.

Endnotes

1 The agreement's broad scope is reflected in many of its definitions, including the following:

Measures affecting trade in services

The GATS applies to "measures by Members affecting trade in services (Article I.1). Here

trade in services The GATS applies to "measures by Members affecting trade in services (Article I.1). Here " measure " is defined as being in the form of "a law, regulation, rule, procedure, decision, administrative action, or any other form" (Article XXVIII(a).

" is defined as being in the form of "a law, regulation, rule, procedure, decision, administrative action, or any other form" (Article XXVIII(a). Measures "affecting trade in services" include measures "in respect of … the purchase, payment or use of a service; the access to and use of, in connection with the supply of a service, services which are required by those Members to be offered to the public generally; the presence, including commercial presence, of persons of a Member for the supply of a service in the territory of another Member…" (Article XXVIII(c)).

include measures "in respect of … the purchase, payment or use of a service; the access to and use of, in connection with the supply of a service, services which are required by those Members to be offered to the public generally; the presence, including commercial presence, of persons of a Member for the supply of a service in the territory of another Member…" (Article XXVIII(c)). "[T]rade in services" is defined merely as the "supply of a service" in any of four all-inclusive modes of supply that have some international component (Article I.2).

"[S]upply of a service" is defined broadly to include "the production, distribution, marketing, sale and delivery of a service" (Article XXVIII(b))

2 The important public service sector does not rate an exclusion or exemption comparable to those provided for the maintenance of public order (Article XIV) or for national security (Article XIVbis).

3There is no differentiation in obligations in the agreement between "public" and "private" services or providers. For example, there is no "public" mode of delivery distinct from a "private" mode of delivery within the four defined "modes" (Article I:2). Similarly, "supply of a service" includes "the production, distribution, marketing, sale and delivery of a service" (Article XXVIII(b)) without reference to the nature of the entities involved. Indeed, where a distinction is made between the two, it is to ensure that they are treated in a similar manner. Hence, "monopoly supplier of a service" (Article XXVIII(h)) is defined as either "public or private" sole supplier, and "juridical person" (Article XXVIII(l); see (d)) means "any legal entity … whether privately-owned or governmentally-owned."

4 For the purpose of establishing "commercial presence" for the delivery of a service, this is defined as "the constitution, acquisition or maintenance of a juridical person" (Article XXVIII(d)(i)). "Juridical person" is, in turn, defined as "any legal entity duly constituted … whether for profit or otherwise…" (Article XXVIII(l)) In sectors where specific market-access commitments are made, Members are prohibited from taking "measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service" (Article XVI:2(e)).

5 The Oxford English Dictionary, 1989, (Oxford, Clarendon Press), p. 552.

6 Ibid.

7 The Canadian Oxford Dictionary, (Don Mills, Oxford University Press Canada), p. 285.

8 Webster's Encyclopedic Dictionary, 1988, (New York, Lexicon), p. 196.

9 Canadian Oxford Dictionary, (op. cit., p. 285).

10 Webster's Encyclopedic Dictionary, (op. cit., p. 196).

11 "Exchange between men of the products of nature or art; buying and selling together; trading; exchange of merchandise, esp. as conducted on a large scale between different countries or districts; including the whole of the transactions, arrangements, etc., therein involved." Oxford English Dictionary, (op. cit., p. 552).

12 Webster's Encyclopedic Dictionary, (op. cit., p. 1046).

13 Canadian Oxford Dictionary, (op. cit., p. 1538).

14 Oxford English Dictionary, (op. cit., p. 348).

15 Oxford English Dictionary, (op. cit., p. 604).

16 Canadian Oxford Dictionary, (op. cit., p. 290).

17 Webster's Encyclopedic Dictionary, (op. cit., p. 200).

18 Based on those references that do exist in WTO documents, this assessment appears to be shared by the WTO Secretariat (please refer to the text for consideration of WTO explanations).

19 Significantly, the Council for Trade in Services has highlighted the "need" for a narrow interpretation; this is considered later in the text.

20 There appears to be some confusion amongst governments about the scope of the "governmental authority" exclusion. For example, the Right Honourable Richard Caborn, MP, the UK Minister for Trade, reportedly asserted in a letter to James Plaskitt, MP, dated 30 November 2000, that "[w]e are clear that GATS does not apply to services provided by central and local governments, or to services supplied in the exercise of governmental authority" (emphasis added). Similarly, the Minister of Post-Secondary Education and Skills Training in the provincial Government of Saskatchewan, Canada, recently stated to University of Saskatchewan Professors Tim Quigley and Larry Haiven that "I am advised that the current GATS excludes public services from its scope" (emphasis added).

European Communities officials have also considered the issue at the WTO. In an April 1998 meeting of the Committee on Regional Trade Agreements, EC representatives reportedly asserted that the rules of European integration contains an exclusion, for service activities connected with the exercise of "official authority", which is -- quoting from the WTO note on the meeting -- "practically identical" to the GATS "governmental authority" exclusion. (WT/REG39/1, 24 April 1998). Six months later, an EC representative reportedly asserted that the European exclusion was -- again quoting from the WTO note -- "presumably narrower than what was in the GATS" (WT/REG39/M/4, 13 October 1998, II.1.; emphasis added in both cases). More significantly perhaps, and despite the apparent conflict, the same representative went on to suggest that the EC itself interprets the exclusion narrowly. According to the latter WTO report, the representative asserted that both the European exclusion for "official authority" and the GATS exclusion for "governmental authority" applied to "the same type of activity" and that "[t]here were very few activities covered by that exception" (emphasis added; ibid., para. 15.) Subsequently, in May 1999, the European Communities issued a Joint Communication indicating the EC exclusion was "similar" to the GATS exclusion, that it has received a "restrictive interpretation", and that in fact "there are no examples … where the [European] Court [of Justice] found that an activity would fall under the scope [of the EC treaty exclusion]." (See Section 4 of the text.)

21 The principle that exclusions are generally to be interpreted narrowly is formalized in the 1969 Vienna Convention on the Law of Treaties.

22 The report of the WTO Appellate Body in the EC Bananas case, while not definitive on the subject, also appears to support this view. In its examination of measures affecting the competitive relations between domestic and foreign services and suppliers, the AB specifically considers the "governmental authority" exclusion, stating that "[t]here is nothing at all in these provisions to suggest a limited scope of application for the GATS". (World Trade Organization, European Communities -- Regime for the Importation, Sale and Distribution of Bananas, Appellate Body Report, WT/DS27/AB/R, 9 September 1997, paras 219-220.)

The relevant excerpt is reproduced here: "219. In contrast, the Complaining Parties argue that the scope of the GATS, by its terms, is sufficiently broad to encompass Regulation 404/93 and the other related regulations as measures affecting the competitive relations between domestic and foreign services and service suppliers. This conclusion, they argue, is not affected by the fact that the same measures are also subject to scrutiny under the GATT 1994, as the two agreements are not mutually exclusive. 220. In addressing this issue, we note that Article I:1 of the GATS provides that "[t]his Agreement applies to measures by Members affecting trade in services". In our view, the use of the term "affecting" reflects the intent of the drafters to give a broad reach to the GATS. The ordinary meaning of the word "affecting" implies a measure that has "an effect on", which indicates a broad scope of application. This interpretation is further reinforced by the conclusions of previous panels that the term "affecting" in the context of Article III of the GATT is wider in scope than such terms as "regulating" or "governing". We also note that Article I:3(b) of the GATS provides that "'services' includes any service in any sector except services supplied in the exercise of governmental authority" (emphasis added), and that Article XXVIII(b) of the GATS provides that the "'supply of a service' includes the production, distribution, marketing, sale and delivery of a service". There is nothing at all in these provisions to suggest a limited scope of application for the GATS…"

It should also be noted that a similar exclusion, contained in the EC treaty, has without exception been interpreted restrictively by the European Court of Justice (see Section 4).

23 According to the WTO, the most-favoured-nation obligation "is one of the most important principles of the GATS. [It] requires Members to grant services and service suppliers of any other Member the best treatment granted to services and services suppliers of any other country…" (World Trade Organization, "Services: GATS", Training Package, op. cit., p. 13.)

GATS Article II "Most-Favoured-Nation Treatment" states: "1. With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country."

24 The GATS provisions on Transparency (Article III) require governments to publish "all relevant measures … which … affect the operation of the Agreement".

25 It should be noted that GATS Domestic Regulation (Article VI) obligations are acknowledged to have a potentially broad impact and could have a significant effect on the regulation of public service systems. These controversial provisions apply to non-discriminatory regulatory measures; that is, they apply to those measures that treat local and foreign services -- and local and foreign service providers -- equally. The provisions thus apply to those measures that do not violate GATS non-discrimination rules -- Articles II (MFN) and XVII (National Treatment). The Domestic Regulation provisions of the GATS are currently under active negotiation. Article VI(4) states:

"With a view to ensuring that measures relating to qualification requirements and procedures, technical standards and licensing requirements do not constitute unnecessary barriers to trade in services, the Council for Trade in Services shall, through appropriate bodies it may establish, develop any necessary disciplines. Such disciplines shall aim to ensure that such requirements are, inter alia: (a) based on objective and transparent criteria, such as competence and the ability to supply the services; (b) not more burdensome than necessary to ensure the quality of the services; (c) in the case of licensing procedures, not in themselves a restriction on the supply of a service."

The scope of these intended "disciplines" is very broad and at least some of the provisions are intended in future to apply 'across-the-board' to all services even where specific commitments have not been made.

26 This core obligation commits governments to extend the best treatment that is given domestically to its treaty partners. The national treatment obligation is broader than generally recognized, extending in the GATS to measures that are capable of altering the conditions of competition in favour of domestic services and service providers. (For a critical discussion of the principles involved, drawn from recent GATS cases, see Sinclair, Scott (2000) "GATS: How the World Trade Organization's new 'services' negotiations threaten democracy", Canadian Centre for Policy Alternatives, pp. 41-47.)

27 The GATS Market Access provisions prohibit, in specified area, numerical limitations on service suppliers, transactions and operations in the form of quotas, monopolies, exclusive service suppliers or economic needs tests. In specified sectors, it also prohibits "measures which restrict or require specific types of legal entity or joint venture through which a service supplier may supply a service". This requirement may conflict with longstanding practices in the health and social service sectors in a number of countries which restrict funding, for example, to non-profit societies or to community-based service providers (See Sinclair, 2000, op. cit., p. 66-67.)

28 "The original proposal to make it clear that governmental services were not covered [in the Uruguay Round GATS] came from the EU and it was not controversial." Hartridge, David, Conference on GATS 2000 Negotiations, European Services Forum, Brussels, 27 November 2000, p. 2.

29 European Communities, Joint Communication from the Parties, Committee on Regional Trade Agreements, WT/REG50/2/Add.3; WT/REG51/2/Add.3; WT/REG52/2/Add.3 19 May 1999, Item 3, para. 3.

30 Ibid., para. 4.

31 Ibid., para 5.

32 Ibid., para. 6.

33 Ibid. Other activities listed that were ruled to fall outside the exclusion include:

private security undertakings and private security staff in Spain…

the activities of approved commissioners with insurance undertakings and private provident associations in Belgium…

the provision of business executives by personnel consultants in Germany…

the setting up of private schools in Greece

34 It is understood that the WTO Secretariat is not authorized to provide legal interpretations of the agreement.

35 Hartridge, David, "GATS and Public Services", letter to Mike Waghorne, Public Services International, reference: 65-let 31 May 2000, circulated by e-mail in June 2000. This letter is considered in some detail here as it is one of the few sources of information on what governments and the WTO Secretariat understand to be the meaning of the "governmental authority" exclusion. It was also widely circulated and is the only known document that responds directly to specific questions about the potential impact of the GATS on public service systems.

None of the 39 WTO documents containing reference to "services provided in the exercise of governmental authority" provide substantive discussion of the issue. However, a few do consider particular aspects, the most important of which are considered here.

36 GATS -- Fact and Fiction, World Trade Organization, 2001.

37 Hartridge, op. cit., item 2, paragraph 1.

38 Ibid., item 3, paragraph 1.

39 In a 26 October 2000 article in l'Humanité, the director of the WTO Services Division states the public services are not covered in the existing agreement and are not included in WTO negotiations. "[L]es service publics ne sont pas inclus dans négociations. Ils ne sont même pas couverts par les accords de l'OMC." (Hartridge, David, AGCS: non, il n'y a pas de complot!, l'Humanité, 26 Octobre 2000. The director juxtaposes this statement with a recitation of the text of the exclusion, adding that the exclusion is important to members because they hope to protect their public services. ("Cette exclusion est un principe cher à tous les membres de l'OMC, qui souhaitent tous guarder le droit de maintenir leurs services publics -- des services sans but lucratif et avec obligation de couverture universelle." It should be noted that here the director is not asserting that the existing 'governmental authority' exclusion applies to those services that are "sans but lucrative" and that have universal coverage obligations -- merely that these are the services that members may hope to protect.

40 World Trade Organization, "Services: GATS", Training Package, December 15, 1998, p. 58.

41 As no other similar WTO references appear to exist in the public domain, it seems likely that these examples are drawn from the GATS Annex on Financial Services. However, the definition of the exclusion in this Annex is distinct from that found in Article I and cannot properly be applied to the agreement itself.

Indeed, by contrast with the main text, the Annex defines "services supplied in the exercise of governmental authority" in terms of specific examples. The Annex states:

1. (b) "For the purposes of subparagraph 3(b) of Article I of the Agreement [the governmental authority exclusion], "services supplied in the exercise of governmental authority" means the following: activities conducted by a central bank or monetary authority or by any other public entity in pursuit of monetary or exchange rate policies; activities forming part of a statutory system of social security or public retirement plans; and other activities conducted by a public entity for the account or with the guarantee or using the financial resources of the Government." (emphasis added)

Even in the annex, however, additional conditions may apply. "[A]ctivities forming part of a statutory system of social security or public retirement plans; and activities conducted by a public entity for the account[,] or with the guarantee[,] or using the financial resources[,] of the Government" (Annex Article 1(b)(ii) and (iii)) are excluded only to the extent that they are not supplied in competition with other service providers. Annex Article I(c) indicates "if a Member allows any of [these] activities … to be conducted by its financial service suppliers in competition with a public entity or a financial service supplier" they fall outside the "governmental authority" exclusion for the purposes of the annex.

More fundamentally, the specified examples apply only to the definition contained in the financial services annex. As a result, they do not appear to be of direct relevance to the scope of the exclusion in GATS Article I and cannot appropriately be considered illustrative examples of services that are excluded from the main agreement. Indeed, the examples specified in the annex would be excluded from the main agreement only if those services meet the conditions set out in Article I:3(c) -- namely that the services are "supplied neither on a commercial basis, nor in competition with one or more service suppliers."

The contrast between the GATS and the financial services annex in the governmental authority exclusion go farther. As previously indicated, the GATS Article I exclusion contains a two-prong test -- excluded services must not be supplied (a) "on a commercial basis" and they must not be supplied (b) "in competition with one or more service suppliers". The 'commercial basis' test does not apply to any of the activities specified in the annex; neither test applies to the activities of "a central bank or monetary authority" or to activities "by any other public entity in pursuit of monetary or exchange rate policies"; and only the 'competition' test is applied to the other specified activities (c.f. Annex Articles 1(c) and (d).

For ease of reference, Article 1 of the Annex of Financial Services is reproduced here:

"1. Scope and Definition This Annex applies to measures affecting the supply of financial services. Reference to the supply of a financial service in this Annex shall mean the supply of a service as defined in paragraph 2 of Article I of the Agreement. For the purposes of subparagraph 3(b) of Article I of the Agreement, "services supplied in the exercise of governmental authority" means the following: activities conducted by a central bank or monetary authority or by any other public entity in pursuit of monetary or exchange rate policies; activities forming part of a statutory system of social security or public retirement plans; and other activities conducted by a public entity for the account or with the guarantee or using the financial resources of the Government. for the purposes of subparagraph 3(b) of Article I of the Agreement, if a Member allows any of the activities referred to in subparagraphs (b)(ii) or (b)(iii) of this paragraph to be conducted by its financial service suppliers in competition with a public entity or a financial service supplier, "services" shall include such activities. Subparagraph 3(c) of Article I of the Agreement shall not apply to services covered by this Annex."

42 It is not clear how each of these examples falls completely and unequivocally within the ordinary meaning of the text of the "governmental authority" exclusion contained in Article I of the main GATS text (see preceding footnote).

43 Some WTO statements may give the impression that the governmental authority exclusion is broad. For example, the WTO pamphlet "GATS -- Fact and Fiction", published in March, 2001, states that:

"Many public services are not provided on a commercial or competitive basis and are not subject to the GATS." (emphasis added, p. 8).

Similarly, the same pamphlet states that

"Whatever disciplines [on subsidies] are developed will not apply to governmental services, because these are simply outside the scope of the GATS" (p. 7).

Such statements, which could be interpreted as suggesting a broad exclusion, are rare and appear to conflict with the predominant WTO view that the governmental authority exclusion is narrow.

44 "Liberalisation? Don't reject it just yet", Mike Moore, Guardian, 26 February 2001.

45 Working Party on GATS Rules, Report of the Meeting of 6 October 1998, Note by the Secretariat, S/WPGR/M/18, 13 November 1998, p. 4.

46 Working Party on GATS Rules, Report of the Meeting of 19 February 1999, Note by the Secretariat, S/WPGR/M/20, 17 March 1999, p. 7.

47 Environmental Services, Background Note by the Secretariat, Council for Trade in Services, 6 July 1998, S/C/S/46, p. 14.

48 The WTO Services Division Director reinforced this point in a recent address to the European Services Forum, stating: "we in the Secretariat often have to explain the exclusion of governmental services and we have come up against the difficulty that these terms are not further defined. We need to be clear on what is meant by 'not on a commercial basis' (Hartridge, David, Conference on GATS 2000 Negotiations, European Services Forum, Brussels, 27 November 2000)."

49 Environmental Services, Background Note by the Secretariat, op. cit., p. 15

50 Ibid.

51 Ibid., p. 16.

52 Ibid., p. 14-15.

53 Council for Trade in Services, Report of the Meeting Held on 14 October 1998, Note by the Secretariat, S/C/M/30, 12 November 1998, p. 4.

54 Hartridge, op. cit., item 1, paragraph 3.

55 Health and Social Services, Background Note by the Secretariat, Council for Trade in Services, 18 September 1998, S/C.W/50, pp. 10-11.

56 Ibid., p. 18.

57 Ibid., p. 11.

58 Education Services, Background Note by the Secretariat, Council for Trade in Services, 29 September 1998, S/C/W/49, p. 4.

59 Health and Social Services, Background Note by the Secretariat, op. cit., p. 11.

60 Hartridge, op. cit., item 3, paragraph 1.

61 Ibid., item 1, paragraph 2. Mr. Hartridge was responding to the question "What GATS protection is there for a government which wishes to declare the whole of one service a public service and/or a public monopoly?"

62 Note that GATS constraints also apply to monopolies that operate in competition with other service suppliers -- whether or not they are "commercial". The second of the two conditions necessary for exclusion under Article I (namely, to be excluded, a service must not be supplied "in competition with one or more service suppliers") also apply to monopolies. There are few 'pure' monopolies in public service systems and it is difficult to conceive of many monopolies that a dispute settlement panel would rule not to be competing with other service suppliers. And, where competition was deemed to occur, the activities of these monopolies would not be excluded from the GATS under Article I:3.

63 GATS -- Fact and Fiction, World Trade Organization, op. cit., p. 8.

64 The WTO's Trade in Services Division has acknowledged, for example, that "trade in medical and social services is strongly influenced by measures not normally considered to be 'trade measures'. These may include (i) licensing and qualification requirements designed to ascertain the quality of the services provided and the integrity of professionals; (ii) restrictions on the range of goods and services professionals and hospitals are allowed to provide; (iii) controls or incentives intended to ensure the adequate provision of services in all regions and for all population groups; and (iv) the direct provision, on social policy grounds, of minimum services to economically disadvantaged groups." (WTO Council for Trade in Services, Health and Social Services, Background Note by the Secretariat, S/C/W/50, 18 September 1998, paragraph 61.)