Determining the Necessity of Domestic Regulations in Services: The Best is Yet to Come

Abstract

A necessity test is a tool that reflects the balance between each country's prerogative to regulate in its own jurisdiction and the multilateral interest in progressive liberalization of services trade. Experience gained in goods trade indicates that the principle of necessity can be a useful proxy allowing the judiciary of the World Trade Organization (WTO) to draw the dividing line between legitimate regulation and protectionist abuse. This article explores the possibility of creating a necessity test that would be applicable to all services sectors. Such a horizontal test may yet emerge from the current negotiations within the Working Party on Domestic Regulation (WPDR), which aim to fulfil the legal mandate contained in Article VI(4) of the General Agreement on Trade in Services (GATS or the Agreement ). At the core of this mandate, as clarified by various negotiating documents, lies the requirement that Members ensure that domestic regulatory measures relating to licensing, qualifications, and technical standards do not constitute unnecessary barriers to trade in services.