CKU/DCCD: Summery

This legal opinion was prepared in February 2005 for the German Commission for UNESCO by Prof. Dr. Markus Krajewski, University of Potsdam with the assistance of Sarah Bormann and Christina Deckwirth, in the context of the German Coalition for Cultural Diversity. The full German language version is 55 pages; English translation of the Summary of conclusions (3 pages) and of examples relating to the media, audiovisual services and cultural and linguistic pluralism (8 pages) by courtesy of the European Broadcasting Union, Geneva. Legal opinion prepared for the German UNESCO Commission

by Prof.Markus Krajewski,
University of Potsdam

with the assistance of Sarah Bormann and Christina Deckwirth

Summary of conclusions
1. The provision of cultural services on a cross-border basis constitutes trade in services for the purposes of international trade law. Measures which promote, restrict, regulate or in any other manner affect such trade fall within the sphere of application of the GATS.
Given the broad scope of the expression ‘trade in services’, the four modes of supply under the GATS potentially include measures which do not primarily concern trade but which are in the nature of domestic regulation. The tension between the principles of trade liberalisation underlying the GATS, on the one hand, and the legitimate regulation of the supply and consumption of services, on the other, is one of the key challenges facing the present system of world trade.

2. The only area excluded from the sphere of application of the GATS is that of services involving the exercise of core governmental authority which are supplied neither on a commercial basis nor in competition with other service suppliers. The provision of cultural services by the state or by local government is thus not exempt in principle from the application of the GATS. That is all the more so where the provision of cultural services is formally or substantively privatised.

3. The GATS is based on a system of obligations which are binding and applicable to varying degrees. There are general obligations to which there are just a small number of general exceptions (e.g. the transparency requirement); general obligations to which there may be specific exemptions (e.g. the most-favoured-nation principle), obligations which apply only insofar as an express commitment has been made (e.g. market access and national treatment) and obligations which are currently under negotiation in the WTO (subsidies, public procurement and domestic regulation).

4. As a result of this complexity, pronouncements as to the relationship of specific policy instruments to the GATS are often hypothetical and speculative. Hypotheses and speculation can quickly become hard reality, however, as the USA found out in November of last year when a WTO panel held the US ban on internet gambling to be unlawful in the light of the USA’s GATS commitments. In the late 90s, likewise, New
Zealand found that the imposition of local content quotas for radio would be contrary to its GATS commitments – although the case did not go to WTO dispute resolution.

5. With the above reservations, a number of points can nevertheless be made regarding the relationship between the GATS and instruments of cultural policy and cultural promotion:
a) The provision of cultural services by the state is not in itself contrary to the GATS. Specifically, the GATS does not formally require privatisation. However, GATS commitments can lead to commercialisation and liberalisation that bring substantive privatisation in their train. The return of a privatised sector to the public sector might encounter problems if accompanied by nationalisation, however, since that would be contrary to any existing market access commitments that had been entered into.
b) The funding of or financial support for cultural services through license fees, public subsidies, grants or tax breaks is not in conflict with GATS obligations either, provided it is non-discriminatory. In the assessment of the discriminatory effect of a measure under the GATS, the principle of ‘ likeness’ between a foreign and a domestic (or other foreign) service or supplier applies. Measures which, although technically non-discriminatory in practice, weaken the competitive position of foreign suppliers are also prohibited.
c) Local content quotas for the broadcasting and cinema sectors are, in general, contrary to the principle of non-discrimination. Like discriminatory measures, therefore, they are legitimate only if there is an exemption or if no commitment has been undertaken.
d) By contrast to the position in relation to trade in goods, there are as yet no general disciplines concerning subsidies, although such disciplines are currently under negotiation. The same applies to general, non-discriminatory domestic regulation (qualification requirements, licensing conditions and technical standards, such as book-price maintenance). Here too it is intended to establish disciplines to ensure that such regulation is not more burdensome than necessary. Public procurement is not currently subject to the core GATS principles (non-discrimination and market access). New rules are under negotiation here, too, however. All three areas are of considerable relevance for the cultural sector.
e) On the basis of the annex on financial services, the social insurance scheme for artists – together with the other elements of the statutory social insurance system – appear not to be covered by the GATS.

6. During the Uruguay Round, the Member States of the European Community (EC) undertook commitments of varying extent in the cultural sector. While the audiovisual sector was largely excluded from the GATS, various very far-reaching commitments were made in other sectors (theatre, music, visual arts and entertainment). Also of relevance are the commitments undertaken in relation to professional and business services (architecture, photography, publishing).

7. In the current GATS negotiations, the EC is being called upon by other trading partners to sign up to greater liberalisation. A number of countries (including Japan, Korea, the USA, Brazil and Mexico) have called on the EC to liberalise the audiovisual sector specifically. The EC, for its part, has made no offers to liberalise cultural services, nor has it called on its trading partners to do so. While the EC is unlikely to alter this position, the US’s reclassification efforts (with a view to cinema operation no longer being included in the audiovisual sector) are of great importance. The same can be said of the demarcation line between the audiovisual and telecommunications sectors, which is becoming increasingly blurred as a result of technological developments. Also of importance is the future treatment of e-commerce. For reasons of space it was not possible to examine the latter in the context of this opinion.

8. There is potential for conflict between the GATS and the proposed UNESCO convention on the protection of cultural diversity, although the actual likelihood of conflict is probably low given that the focus of the UNESCO convention would be on the general aims of cultural policy whereas the GATS is concerned with specific prohibitions.
A conflict might nonetheless arise between GATS obligations and the possibilities provided for under the UNESCO convention for preferential treatment for specific forms of cooperation with foreign partners (Articles 14 and 17) and for preference to be given to domestic cultural goods and services (Article 6). In addition, there is a general conceptual conflict between the UNESCO convention and the GATS in that the UNESCO convention takes account of the dual character of cultural services while the GATS treats them as tradable commodities only.

9. In the absence of any applicable general rules of international law, the relationship of the UNESCO convention to the GATS will be governed by specific provisions of the GATS and of the UNESCO convention. The options laid out under Article 19 of the UNESCO convention are based on the principle of conflict avoidance. Under one of those options, the UNESCO convention would take precedence in the case of a serious threat to cultural diversity. It should be borne in mind, however, that it is not enough for the relationship between the GATS and the UNESCO convention to be regulated only in the latter. That is because the question of the relationship between the two would become a practical issue only in the event of a conflict between them arising in dispute-resolution proceedings. WTO bodies can directly apply only WTO rules and may rely on other provisions of international law only for interpretation and gap-filling purposes, although they are under no obligation to do so. In the absence of any relevant interpretable terms e.g. in Article XIV of the GATS, it is necessary for the GATS to include a provision requiring account to be taken of the UNESCO convention. This could be achieved by an amendment of the GATS, by a supplementary protocol to the GATS, by a waiver, or by an express reference to the convention in the lists of specific commitments, such as in the form of a Reference Paper.

10. A substantive reference to the goals and instruments of the UNESCO convention in the GATS could be supplemented and safeguarded by an institutional reform of the WTO, in particular the dispute resolution mechanism. For example, individuals familiar with the
specific characteristics of the cultural sector could be included on the WTO list of potential panel members. In addition, WTO bodies and UNESCO or UNESCO convention bodies should cooperate formally with each other. This might include observer status for UNESCO at the WTO or participation by UNESCO bodies as experts in WTO disputes involving cultural policy issues.

February 2005



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	FORSIDE -> UNESCO Konvention -> Summery Udskriftsvenlig Effects of the GATS on instruments of cultural policy and cultural promotion in Germany This legal opinion was prepared in February 2005 for the German Commission for UNESCO by Prof. Dr. Markus Krajewski, University of Potsdam with the assistance of Sarah Bormann and Christina Deckwirth, in the context of the German Coalition for Cultural Diversity. The full German language version is 55 pages; English translation of the Summary of conclusions (3 pages) and of examples relating to the media, audiovisual services and cultural and linguistic pluralism (8 pages) by courtesy of the European Broadcasting Union, Geneva. Legal opinion prepared for the German UNESCO Commission by Prof.Markus Krajewski, University of Potsdam with the assistance of Sarah Bormann and Christina Deckwirth Summary of conclusions 1. The provision of cultural services on a cross-border basis constitutes trade in services for the purposes of international trade law. Measures which promote, restrict, regulate or in any other manner affect such trade fall within the sphere of application of the GATS. Given the broad scope of the expression ‘trade in services’, the four modes of supply under the GATS potentially include measures which do not primarily concern trade but which are in the nature of domestic regulation. The tension between the principles of trade liberalisation underlying the GATS, on the one hand, and the legitimate regulation of the supply and consumption of services, on the other, is one of the key challenges facing the present system of world trade. 2. The only area excluded from the sphere of application of the GATS is that of services involving the exercise of core governmental authority which are supplied neither on a commercial basis nor in competition with other service suppliers. The provision of cultural services by the state or by local government is thus not exempt in principle from the application of the GATS. That is all the more so where the provision of cultural services is formally or substantively privatised. 3. The GATS is based on a system of obligations which are binding and applicable to varying degrees. There are general obligations to which there are just a small number of general exceptions (e.g. the transparency requirement); general obligations to which there may be specific exemptions (e.g. the most-favoured-nation principle), obligations which apply only insofar as an express commitment has been made (e.g. market access and national treatment) and obligations which are currently under negotiation in the WTO (subsidies, public procurement and domestic regulation). 4. As a result of this complexity, pronouncements as to the relationship of specific policy instruments to the GATS are often hypothetical and speculative. Hypotheses and speculation can quickly become hard reality, however, as the USA found out in November of last year when a WTO panel held the US ban on internet gambling to be unlawful in the light of the USA’s GATS commitments. In the late 90s, likewise, New Zealand found that the imposition of local content quotas for radio would be contrary to its GATS commitments – although the case did not go to WTO dispute resolution. 5. With the above reservations, a number of points can nevertheless be made regarding the relationship between the GATS and instruments of cultural policy and cultural promotion: a) The provision of cultural services by the state is not in itself contrary to the GATS. Specifically, the GATS does not formally require privatisation. However, GATS commitments can lead to commercialisation and liberalisation that bring substantive privatisation in their train. The return of a privatised sector to the public sector might encounter problems if accompanied by nationalisation, however, since that would be contrary to any existing market access commitments that had been entered into. b) The funding of or financial support for cultural services through license fees, public subsidies, grants or tax breaks is not in conflict with GATS obligations either, provided it is non-discriminatory. In the assessment of the discriminatory effect of a measure under the GATS, the principle of ‘ likeness’ between a foreign and a domestic (or other foreign) service or supplier applies. Measures which, although technically non-discriminatory in practice, weaken the competitive position of foreign suppliers are also prohibited. c) Local content quotas for the broadcasting and cinema sectors are, in general, contrary to the principle of non-discrimination. Like discriminatory measures, therefore, they are legitimate only if there is an exemption or if no commitment has been undertaken. d) By contrast to the position in relation to trade in goods, there are as yet no general disciplines concerning subsidies, although such disciplines are currently under negotiation. The same applies to general, non-discriminatory domestic regulation (qualification requirements, licensing conditions and technical standards, such as book-price maintenance). Here too it is intended to establish disciplines to ensure that such regulation is not more burdensome than necessary. Public procurement is not currently subject to the core GATS principles (non-discrimination and market access). New rules are under negotiation here, too, however. All three areas are of considerable relevance for the cultural sector. e) On the basis of the annex on financial services, the social insurance scheme for artists – together with the other elements of the statutory social insurance system – appear not to be covered by the GATS. 6. During the Uruguay Round, the Member States of the European Community (EC) undertook commitments of varying extent in the cultural sector. While the audiovisual sector was largely excluded from the GATS, various very far-reaching commitments were made in other sectors (theatre, music, visual arts and entertainment). Also of relevance are the commitments undertaken in relation to professional and business services (architecture, photography, publishing). 7. In the current GATS negotiations, the EC is being called upon by other trading partners to sign up to greater liberalisation. A number of countries (including Japan, Korea, the USA, Brazil and Mexico) have called on the EC to liberalise the audiovisual sector specifically. The EC, for its part, has made no offers to liberalise cultural services, nor has it called on its trading partners to do so. While the EC is unlikely to alter this position, the US’s reclassification efforts (with a view to cinema operation no longer being included in the audiovisual sector) are of great importance. The same can be said of the demarcation line between the audiovisual and telecommunications sectors, which is becoming increasingly blurred as a result of technological developments. Also of importance is the future treatment of e-commerce. For reasons of space it was not possible to examine the latter in the context of this opinion. 8. There is potential for conflict between the GATS and the proposed UNESCO convention on the protection of cultural diversity, although the actual likelihood of conflict is probably low given that the focus of the UNESCO convention would be on the general aims of cultural policy whereas the GATS is concerned with specific prohibitions. A conflict might nonetheless arise between GATS obligations and the possibilities provided for under the UNESCO convention for preferential treatment for specific forms of cooperation with foreign partners (Articles 14 and 17) and for preference to be given to domestic cultural goods and services (Article 6). In addition, there is a general conceptual conflict between the UNESCO convention and the GATS in that the UNESCO convention takes account of the dual character of cultural services while the GATS treats them as tradable commodities only. 9. In the absence of any applicable general rules of international law, the relationship of the UNESCO convention to the GATS will be governed by specific provisions of the GATS and of the UNESCO convention. The options laid out under Article 19 of the UNESCO convention are based on the principle of conflict avoidance. Under one of those options, the UNESCO convention would take precedence in the case of a serious threat to cultural diversity. It should be borne in mind, however, that it is not enough for the relationship between the GATS and the UNESCO convention to be regulated only in the latter. That is because the question of the relationship between the two would become a practical issue only in the event of a conflict between them arising in dispute-resolution proceedings. WTO bodies can directly apply only WTO rules and may rely on other provisions of international law only for interpretation and gap-filling purposes, although they are under no obligation to do so. In the absence of any relevant interpretable terms e.g. in Article XIV of the GATS, it is necessary for the GATS to include a provision requiring account to be taken of the UNESCO convention. This could be achieved by an amendment of the GATS, by a supplementary protocol to the GATS, by a waiver, or by an express reference to the convention in the lists of specific commitments, such as in the form of a Reference Paper. 10. A substantive reference to the goals and instruments of the UNESCO convention in the GATS could be supplemented and safeguarded by an institutional reform of the WTO, in particular the dispute resolution mechanism. For example, individuals familiar with the specific characteristics of the cultural sector could be included on the WTO list of potential panel members. In addition, WTO bodies and UNESCO or UNESCO convention bodies should cooperate formally with each other. This might include observer status for UNESCO at the WTO or participation by UNESCO bodies as experts in WTO disputes involving cultural policy issues. February 2005
CKU styrker Danmarks kultursamarbejde med udviklingslandene