What is the Impact - if any - of the Doha WTO Negotiations - if they ever Finish - on Customs and International Trade Lawyers?

01 June 2006

Gary Horlick, WilmerHale

Legal Services

The most direct result the services negotiations may produce is some limited liberalisation in the cross-border practice of lawyers. As most customs and international-trade lawyers know, legal services regulations in the United States and many other countries are subject to the WTO’s General Agreement on Trade and Services (GATS). As one of the obligations it took on in the 1994 Uruguay round (where the WTO was created) the United States agreed in general to relatively liberal treatment of foreign lawyers – but subject to a patchwork of restrictions. Some states, for example, are allowed to require that foreign lawyers maintain an office in the state; others required individual residency. US citizenship is not required – except for practice before the US Patent and Trademark Office. These obligations are explained in detail in the US Schedule of Commitments, which is found in a WTO document referred to as GATS/ SC/90. An excellent detailed description of how to locate and read the schedules can be found in an article by Laurel Terry, ‘ ‘GATS’ Applicability to Transnational Lawyering and Its Potential Impact on US State Regulation of Lawyers’, 34 Vanderbilt J Transnational L 989 (2001), as revised in 35 Vanderbilt J of Transnational Law 1387 (2002), notably a very useful guide to the numbering of WTO GATS documents (and finding them on the complex WTO website).

The US permits the practice of international law by foreign legal consultants, provided they are qualified in international law. Practice of third-country law is allowed, provided that the foreign legal consultant is licensed in that jurisdiction. Partnerships with local lawyers are allowed, as is the use of those lawyers’ firm name – subject to numerous non-discriminatory requirements such as a minimum age of 18 years in Michigan, experience requirements such as five years’ minimum legal practice, and so on. Many of these obligations reflect the various bilateral negotiations the US has participated in over the years, notably with Japan and various European jurisdictions. Again, it is essential to check on a state-by-state basis.

These obligations are likely to be revised in the Doha round underway. Services negotiations in general have been moving very slowly in the round. This is true of a number of the negotiating areas, as attention is focused on negotiations of agriculture and non-agricultural market access (NAMA – or to grossly oversimplify, industrial tariffs and non-tariff areas affecting manufactured goods and non-agricultural raw materials). Within the services negotiations, considerable controversy surrounds proposals by India and some other developing countries for liberalisation of services in what is referred to as Mode 4 – the cross-border movement of individuals (Modes 1, 2, and 3 are, respectively, services provided by cross-border transmission, (such as by wire), recipients of services traveling to the country where it is provided (such as tourism, or increasingly, medical services), and services provided by establishing a presence in the foreign country). In general, developing countries perceive a comparative advantage in lower cost workers (including skilled professionals), but the spectre of lower cost service providers is precisely the subject of immigration furores in many developed countries.

In addition to that political difficulty, it is technically difficult to negotiate services liberalisation. To make the obvious comparison, it is rather easy to quantify, if imperfectly, the kind of reciprocal liberalisation tariffs on goods which was the original focus of the GATT system (which, in effect, resulted in proposals like: “I will reduce my 10 per cent tariff on US$100 million of imports of salt from you, if you reduce your 10 per cent tariff on my exports of US$100 million of pepper to you.”). It is much harder to compare, say, the US proposal to eliminate the US citizenship requirement for legal practice before the Patent and Trademark Office, to a US request that another country guarantee US banks’ right to use branches rather than subsidiaries. As a result of these difficulties, and others, the WTO services negotiations have proceeded very slowly.

The US, along with several other countries, launched a new negotiating process on services in March 2006, based on a ‘plurilateral’ approach. In this process, groups of countries will collectively make requests for liberalisation in several sectors, recognising that developing countries may opt out of those sectors. The United States is participating in 12 of the groups, notably legal services. It is far too early to ascertain what the outcome of those negotiations will be. The US, for example, will resist for political reasons other countries’ requests for Mode 4 services, to the extent those requests would require changes in immigration law. Other countries have similarly-minded domestic political forces. The legal profession worldwide has certain notorious protectionist tendencies, and numerous states within the United States are not exempt from the accusation.

Legal services were a relatively low priority for US negotiators during the Uruguay round – which finished between 1993 and 1994 – but transnational legal practice, despite its long history (Grotius, the Dutch ‘father of international law’ practised in other jurisdictions than the Netherlands), was a small fraction of the transnational aspect of legal services today. Notably, leading law firms in many more countries than in 1993 are now very actively engaged in transnational legal practice, and that may offer a basis for increased liberalisation through GATS.

Other Doha Negotiations

The other services negotiations could be important to lawyers as well. Increased cross-border trade in financial services, for example, opens up new possibilities for legal instruments and financial transactions, as well as new challenges as financial services clients cross borders and encounter other lawyers. At a more mundane level, further liberalisation in services such as banking and telecommunications could reduce costs for transnational lawyering.

Negotiated changes in the WTO dispute settlement structure could also directly affect customs and international trade lawyers practising in that arena. For example, if a proposal to create permanent WTO panel members succeeds, it would affect the way cases are argued. It would also slightly reduce the use of practising lawyers as panel members, since few, if any, would find themselves appointed as full-time panellists (to date, only a few practitioners have served as ad hoc members of WTO panels, mainly because the ‘nationality’ rule precludes US and EU lawyers from serving on the numerous panels in which one or both entities is a party, absent unusual waivers). Of course, any change in the existing substantive WTO rules in any area is likely to lead to at least some disputes and work for lawyers, whether inside or outside governments. Disputes in the first 11 years of the WTO have included the definition of gambling, the correct labelling for scallops and sardines, the role of the IMF in currency issues, and many other cases which grabbed fewer headlines than fights over bananas and steel. Specifically, if a Doha round agreement is successful, it will include a substantial number of new rules involving agricultural trade. At present barriers to agricultural trade are among the highest, so a significant lowering of those barriers is likely to lead to a significant increase in trade, and with it a more or less directly proportional increase in the number of WTO disputes.

In addition to international dispute resolution, the negotiations are likely to affect lawyering in national forums as well. The most obvious example is anti-dumping and countervailing duty rules, where national procedures are prescribed in the WTO agreements. It is likely that the new agreements will include more detailed rules on transparency. Depending on the extent of those changes, that could have a significant impact on practice in many countries. In the US, for example, the growth of the trade bar was, more than anything else, a result of changes in national transparency rules in 1979, which literally tripled the amount of legal work for identical cases. It should be borne in mind that the intellectual property agreement in the 1986 to 1994 Uruguay round also had some provisions governing domestic legal procedures; services negotiations will have to inevitably take up questions of domestic regulatory procedures to make sure they are fair and transparent.

Finally, the completion of the present round will lead to greater interest in topics not yet included in the WTO – notably investment rules. A future negotiation of international investment rules would require considerable legal talent, if only to sort out the current patchwork of rules in bilateral and regional investment agreements such as NAFTA and the Energy Charter, as well as years of precedents from a variety of tribunals. The next round could even sort out some embarrassing failures of the system to date, such as the inability of the WTO to complete the agreement promised for the 1990s on a set of rules of origin – a fundamental building block of an international trading system, one would think.

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