The fifth and final lesson from last month’s World Trade Organization ruling against Argentina’s anti-tax haven policies is:
Naming is (or should be) half the battle.
When countries have disputes over goods trade, it’s relatively straightforward what to compare. If my country makes cars, and your country keeps them out in favor of your nation’s carmakers, then you are discriminating against LIKE goods.
In services trade, matters are less clear. Is a haircut by an expert stylist LIKE a haircut from your dad, who uses a razor he got in the 1970s from Sears Roebuck? Is a haircut by someone who doesn’t speak your language (and so can’t understand your style preferences) the same as someone who does? Is a haircut in a place that doesn’t regulate and license barbers like a haircut from a barber that had to pass aptitude exams? The opportunity for qualitative distinctions in the services arena is limited only by your zest for Seinfeld-ian discursions.
It is unsurprising, then, that disputes under the WTO’s General Agreement on Trade in Services end up coming down to how the service is characterized. When the gambling haven Antigua challenged the US Internet gambling ban, the island’s lawyers had to show that the US GATS commitment in “recreational services” implicitly included “gambling services”. The US had to contest that claim. They also had to try to convince WTO adjudicators that “gambling via the Internet” was not like “gambling in a brick and mortar casino”, as the latter is easier to regulate.
What is surprising, however, is how little attention WTO panelists dedicated to likeness in their recent ruling against Argentina.
For starters, they were very vague about WHAT service was at issue. This should have been easy enough, since the WTO has access to several exhaustive taxonomies of services trade (see here, here and here). Panama argued that the GATS applies to measures that “affect” trade in services, that the word has a broad meaning in the jurisprudence, and so an “exhaustive enumeration of each and every one of the services possibly affected by a measure” isn’t necessary. (para. 7.70) The panel agreed, and then cut and pasted a table from Panama’s submissions that listed off eight Argentine anti-tax haven policies. For many of them, the claimed affected service sector was “all sectors”. (para. 7.97)
The panel did not seem too concerned with the question in any event. Instead, they spent most of their time on an even more esoteric issue: can WTO rules apply when the complaining country can’t show it provides the service (nevermind what service) in question to the respondent country in question? Because the panel said yes (para 7.94), they never circled back around to examining what service was at issue.
It would have been interesting to see the panel wrestle with the argument that tax haven banking services are not like non-tax haven banking services. Specifically, what tax havens provide is TAX AVOIDANCE services. The reason Argentines bank in tax havens is not because the banking is better – it’s because of the secrecy. Whole different thing. Such a line of argument would test the US claims in that Antigua case which, wouldn’t you know it, that panel never took up. Gotta love that judicial economy.
To be fair to the Argentina v. Panama panel, they showed a steady concern with the importance of regulation. They weighed the quality of Argentina’s regulations not only in Argentina’s defenses (where you would expect it to come up), but also in Panama’s offensive claims.
As I’ve argued here, they way they went about it was a little messy for my tastes. But, if we’re going to hint around the unique role that regulation plays in the services trade, I’d rather just name what it is we are doing at each step of the analysis.
And then name the dang service!