The services sector comprises a broad spectrum – from communications to transport, finance, education, tourism and environmental services. Importantly, not only does trade in services take place, but several key services sectors, such as information and communication (ICT), finance and shipping, underpin commercial trade and economies as such. It is thus a dynamic sector and over the last five decades or so services have become the backbone of the global economy, growing by 10 percentage points between 2005 and 2017, according to World Trade Organization (WTO) figures. Today it makes up the most dynamic component of international trade.

Trade in services comprise disciplines more intricate than those for the trade of products under trade rules of the WTO. Moreover, unlike for goods, countries schedule their own commitments for services trade liberalization and are able to carve-out sectors or grade the liberalization in a tailored way to suit the nature and interests of their economies. WTO services rules are therefore brought together in their own agreement – the General Agreement on Trade in Services (GATS).

In support of Uzbekistan’s ongoing accession process to the WTO, a training session on the rules governing services trade was held for government officials of Uzbekistan between 28 and 30 July 2021 to introduce the key elements of GATS disciplines and negotiations (day one). The last two days of the training was dedicated to the financial services sector. The sector is strategically sensitive because of its importance for the economy at large and the systemic risks it poses. Financial services rules therefore have unique complexities.
The training was organized by the International Trade Centre (ITC) as part of the European Union (EU) trade capacity-building envelope ‘Facilitating the process of Uzbekistan's accession to the WTO’ and presented by international trade law and policy specialist, Mr. Rambod Behboodi.

The architecture of the GATS was laid out and the four modes through which a service can be supplied by the service provider of a country to consumers in another was explained in the general introduction. Terrain was covered of the types of measures countries might take that can affect a service, and the scope of such measures’ effect, along with bread-and-butter WTO principles under the GATS, such as national treatment and most-favoured nations treatment, as well as anti-competitive practices, and general and security exceptions.

The GATS permits latitude for acceding governments to schedule their services commitments. This means that in their schedules they can specify, firstly, the terms, limitations and conditions of market access; second, conditions and qualifications on national treatment; third, their undertakings relating to additional commitments; fourthly, they can determine the time-frame for implementation of the commitments; and lastly, the date of entry into force of the commitments.

In terms of specific commitments, acceding members may negotiate commitments on measures affecting trade in services that are not part of the scheduling under market access and national treatment. This covers issues such as standards or licensing.

Financial services – a strategic sector governed by standalone annex

Of all services sectors, the financial sector is the most heavily regulated because it is part of the basic architecture of an economy. This means the sector’s health is essential to the soundness of an economy as a whole. An unsound financial sector has systemic implications, ranging from international payments and risk management activities to foreign direct investment, as the financial crisis of 2008 so vividly showed. 

Yet, moral hazard inevitably can stem from policies aimed to prevent systemic risk and provide safety nets such as deposit insurance. For these reasons, WTO rules for the financial sector are treated separately in a standalone annex, and with separate, dedicated dispute settlement provisions.

The second- and third-day training focused on the state of play in Uzbekistan’s financial services sector, which is currently dominated by state banks, and its actual financial services trade patterns.

The training delved into strategies to identify key interests, pre-access GATS concessions and demands, and how to balance concessions with the country’s interests. Actual case examples were used to show how the GATS negotiations can be structured by exploring sectoral examples. In terms of engagement with WTO members during the negotiations, the training considered ways in which alliances can be built and how to “stress-test” the negotiation dynamics. A large portion of the training time was dedicated to address specific questions and concerns.

“The workshop on financial services organized by the EU project was very helpful for the Central Bank of Uzbekistan. Essentially, the sharing of best practice and financial services expertise, particularly about the cross-disciplinary implications of the banking sector and bespoke obligations will support Uzbekistan’s WTO accession process,” said Mr. Shokhrukh Akhmedov, Head of the International Cooperation Department at the Central Bank of Uzbekistan.

Representatives of the Ministry of Investments and Foreign Trade, the Ministry of Economic Development and Poverty Reduction, the Ministry of Finance, the Central Bank of Uzbekistan, and the Insurance Market Development Agency took part in the training.