Publications

Trade and Investment Rules for Energy

III. Aiding the Movement and Delivery of Energy Services

Analysis

The following paragraphs review points for attention by WEC and by the broader international community, taking into account the Doha Round and various regional developments.

Definitional Questions
The Task Force believes that an important first step is to define "energy services" and to provide appropriate categorization and sub-classifications to supplement the existing WTO and U.N. classification lists. Work done in the Doha Round, notably by the informal Friends of Energy Services group, represents a useful starting point. Classification efforts by the WTO Secretariat and by international organizations, NGOs, and other experts offer additional useful reference tools.

List of Market Access Barriers
A parallel effort could be to identify the most egregious impediments to market access faced by energy service providers. Examples include outright prohibitions of specific services; local supply requirements; purchase obligations; local hiring conditions; ownership restrictions; restrictions on modes of delivery (i.e., cross-border supply and commercial presence); restrictions on the entry of personnel; and limitations of or conditions for access to transit, transportation, and distribution networks.

The identification of these barriers, categorized and supported by specific examples, could provide a departure point in developing possible voluntary guidelines for governments. The effort, it should be noted, is not to name individual countries or devise some sort of blacklist. Rather, the idea is to survey the barriers that most directly impede the delivery of energy services as a reference tool for further action.

Market Access Guidelines
Having defined and categorized energy services and listed the most serious barriers to trade and investment, the next step could be to consider voluntary guidelines or principles of host State behaviour in removing and preventing the adoption of services barriers. While numerous FIPAs and BITs contain obligations on services trade in general terms, there are few examples of State obligations tailored specifically to the energy sector.

It is recognized that disciplines on market access can best be settled in the multilateral context. At the present time, however, with Doha negotiations suspended, efforts by WEC to propose a set of guidelines tailored to the needs of the energy sector could assist in post-Doha Round consideration by governments in both the WTO context and in bilateral negotiations.

Competition, Domestic Regulation, and Internal Market Reform
While border measures can constrain and prevent entry of energy services or foreign service providers, post-entry regulation, anti-competitive policies, lack of transparency, arbitrary and opaque application of rules, and preferential treatment of State-owned or controlled entities are equally potent de facto entry barriers.

The Task Force recognizes that proposing guidelines or norms in this area is sensitive and faces issues of sovereignty, resource ownership, and national jurisdiction over internal economic organization and regulation. The challenge is to find the right balance between international norms of behaviour and the sovereign right and duty of governments to legislate in the public interest.

An additional factor worthy of examination is the relationship between services trade and domestic competition policy. The OECD has been actively examining this within the framework of its Joint Group on Trade and Competition, producing a useful report that isolates the competition provisions in Regional Trade Agreements (RTA). There are divergent approaches in these RTAs, running the gamut from fairly vague language on anticompetitive behaviour to provisions obliging governments to enact specific legislation.

Noteworthy regional agreements and arrangements also include the E.U.'s single electricity market (beginning with Community Directive 96/92), setting out the E.U.'s policy objectives of increased competitiveness, improved environmental protection, and security of energy supply. The E.U. market system has important elements to free up energy services trade among member states and is considered an important source of ideas by the Task Force. Other regional agreements of significance are the Energy Charter Treaty (ECT) and the North American Free Trade Agreement (NAFTA). Trade in energy services has also been under examination in ASEAN and APEC.

The Task Force concludes that a common thread runs through these agreements, enshrining treaty obligations covering non-discrimination, transparency, and due process in relation to energy services trade and investment.

Energy Services and Climate Change
Emissions trading schemes emerging under the UNFCCC, the Kyoto Protocol, and elsewhere raise other issues respecting cross-border services. While emission credit trading is a subject that extends beyond the scope of this report, efforts at international agreements to facilitate the expansion of the services associated with emissions trading is highly relevant to the energy services subject in general.