The legal order of the multilateral trade system upheld, since its very inception, in 1947 with the General Agreement on Tariffs and Trade (the GATT), several basic principles that can be categorised in three distinct areas. The first area enshrines the “non-discrimination” principle of the most-favoured nation (MFN) clause, which upholds that a State must treat all other members of the multilateral trade system on an equal basis. The second area sustains the principle of an “open market”, which prohibits all types of protectionism, except for customs´ tariffs and thus disallows non-tariff barriers. The third area regulates fair trade and prohibits government´s illegal subsidies and predatory market practices (3) . None of those principles is absolute and a number of exceptions are permitted, including the formation of preferential trade zones(4).
Non-tariff trade barriers are thus comprised within the open market principles allocated in the second area referred to above. Accordingly, article VIII of GATT 1947, which is still in force, regulates import and export transactions with a view of trying to prevent fees and formalities applicable there of to constitute non-tariff barriers to free trade. Among those practices and formalities are those related to certificates and documentation, quantitative restrictions, licensing, exchange controls and statistics (5). In addition, the multilateral legal order requires Member States (6) to administer, in a uniform, impartial and reasonable manner, all its laws, regulations, decisions and rulings applicable to international trade(7).
Therefore, non-tariff trade barriers are legislative, administrative or judicial measures, regulations or procedures, other than customs´ duties, used by Member States of the multilateral trade system of the World Trade Organization (WTO) to restrict imports from other members. In spite of the extant prohibition for almost 60 years, such practices are still very much in use and comprehend inter alia illegal subsidies, health, phyto-sanitary and safety standards, import quotas, abuse of trade remedy laws, environmental rules, financial dumping, consumer protection regulations, licensing procedures, regulation of services, immigration rules, etc.
Together with non-tariff trade barriers, tariff peaks constitute the other leg of the pincer movement of protectionism. Developed countries are the recognised champions of non-tariff trade barriers, as abundantly demonstrated by the jurisprudence of the multilateral trade system. This is so in spite of the specious rhetoric of free trade and of the specific obligation for developed countries to refrain from introducing, or increasing the incidence of, customs duties or non-tariff import barriers, on products of export interest to less-developed countries(8) .
During the Uruguay Round of the GATT, which was launched in 1986 and closed in 1993, developed countries have demanded and obtained the inclusion of the so-called “new areas” in the world trade system: services, intellectual property and investments. Developing countries had resisted before ultimately conceding, because their main economic areas of interest, agriculture and textiles, had remained excluded from free trade and still so remain today (9). By the end of the Round, an ominous analysis (10) of the World Bank had already indicated that the results of the negotiations would benefit developed countries by 64%. A more recent study by the International Monetary Fund (IMF) revealed that in the 6 years after the closing of the Round, developed countries reaped 73% of the respective advantages(11) .
The General Agreement on Trade in Services (GATS) is one of the treaties of the Uruguay Round. Its framework was given by developed countries when developing countries ceased their resistance in 1991 and thus seeks to liberalise the areas of services of interest of the latter. As a result, 6 years after the foundation of the WTO, the QUAD countries, Canada, the European Union (EU), Japan and the United States of America (USA), dominate more than 70% of international sales of services. In addition, whilst QUAD countries have during the period expanded their international sales of services from 4.8% per year (the case of Japan) to 10% (the case of the USA); developing countries have grown theirs from 0.3% (the case of South Africa), 0.6% (the case of Brazil) and 1.2% (the case of India).
The GATS itemises 6 different non-tariff measures which a Member shall not maintain or adopt either on the basis of a regional subdivision or on the basis of its entire territory: a) limitations on the number of service suppliers; b) limitations on the total value of service transactions; c) limitations on the total number of service operations; d) entry restrictions or joint-venture requirements; and e) limitations on the level of foreign equity (12). Those are applicable to 6 service areas contemplated in the GATS: a) telecommunication; b) construction; c) transportation; ) tourism; e) financial services; and f) professional services comprising inter alia the legal professions .
Services are to be provided in 4 different modes (13) : a) cross-border or from the territory of a Member State to the territory of another; b) by means of movement of consumer to the Member State where the service is provided; c) by means of a commercial presence of the service supplier; and d) by movement of the individual service provider. In connection with professional services, those of legal nature included, developed countries had a problem in the creation of a legal structure capable of achieving their desire of opening the markets of developing countries whilst maintaining theirs closed.
This negotiating position was achieved after the recognition, by the QUAD members, of the undesirability to have individual providers of legal services from developing countries entering the markets of developed countries and the desirability of having the large legal firms establish commercial presences abroad. The norm of highest hierarchy regulating the legal professions is the 1990 United Nations Basic Principles on the Role of Lawyers (14) (UN Principles), which treats lawyers as individuals, recognising a uniform international standard. In spite of this norm of higher precedence, the GATS treats lawyers as companies for market access purposes. In addition, the QUAD countries adopted uniform harsh immigration rules to create a cartel of horizontal non-tariff trade barriers for market access. (15) .
Those two non-tariff barriers, one devastatingly built into the GATS itself, were decisive in stalling the growth of law firms originating in developing countries, to the detriment of those from developed countries, notably the USA and the United Kingdom. Those practices have also demoralised negotiations for further global liberalisation and contributed to a grave decline in ethical standards in the legal professions (16). Thus, whilst there are more than 100 global law firms originating from the USA and the UK, there is only one from developing countries.
Developed countries´ law firms see developing countries as only markets to be conquered, with scant regard for the inherent obligations of the legal professions in developing environments. Accordingly, last week, the president of the Union Internationale des Avocats (UIA), the oldest international organisation of the legal professions, Mr. Paul Nemo, denounced that the big US and UK law firms take work away from young lawyers in emerging countries (17) .
As if that were not enough, a new non-tariff trade barrier is under development in the UK within the ambit of the so-called Clementi review, in accordance to which non-lawyer ownership of law firms will inter alia probably be allowed. This extraordinary alteration in domestic regulation without precedent in the world would not only be contrary to the UN Principles, but would also nullify and impair the specific commitments made by the EU within the ambit of the multilateral trade system, in accordance with article VI, 5, of GATS. This is so because the probable acceptance of the change would favour domestic law firms to the detriment of others.
If the multilateral trade system is to be advanced for the benefit of all, rather than for that of a few, the matter of non-tariff barriers is to be addressed very seriously indeed. This more so in the area of legal services.
1 Basic text of the presentation for the 14th Commonwealth Law Conference, September 2005, London, United Kingdom.
2 Member of the Brazilian and Portuguese Bars. Solicitor of the Supreme Court of England and Wales. Senior partner of Noronha Advogados. Brazilian government ad hoc representative for the Uruguay Round of the GATT. GATT and WTO panelist. CIETAC arbitrator. Post-graduation professor of international trade law.
3 Durval de Noronha Goyos, GATT, MERCOSUL & NAFTA, Legal Observer, Miami/São Paulo, 2nd edition – 1996, Page 18.
4 Ex vi article XXIV of GATT 1947.
5 See article VIII, 4 of GATT 1947.
6 Formerly contracting parties.
7 See article X, 3, a of GATT 1947.
8 See article XXXVII, 1, b, of GATT 1947.
9 For a history of the arguments of developing countries, see Durval de Noronha Goyos, “Arbitration in the World Trade Organization, Legal Observer Miami, 2003, page 29 et. seq.
10 Ian Goldin et al, “Trade Liberalization: Global Economic Implications”, 1993, the World Band and the OECD.
11 Durval de Noronha Goyos, “The WTO and the Consequences of Globalisation for Developing Countries”, Annals of the 47th Congress of the International Union of Lawyers, Lisbon, 2003, volume 3, page 1474 et. seq.
12 See Article XVI, 2, of GATS.
13 See Article I, 2, of GATS.
14 Approved by the 8th United Nations Congress on the Prevention of Crime and the Treatment of Offenders in September 1990 and adopted by the General Assembly of the United Nations in December 1990.
15 Durval de Noronha Goyos, “GATT: Derisory Progress”, Lawyers in Europe, London, United Kingdom, November/December 1992.
16 Durval de Noronha Goyos, “The Duty of Good Faith in International Services Negotiations”, International Trade Law Review, issue 4, page 115 et. seq. Oxford, UK, 2005.
17 UIA foundation to help young lawyers in developing countries take on big firms, in Law Society Gazette, September 2005, page 8.
Lawyer admitted in Brazil, England and Wales and Portugal. GATT and WTO panelist. Brazilian government ad-hoc representative for the Uruguay Round of the GATT. Post-graduation professor of the law of international trade.