WORLD TRADE
ORGANIZATIONS/CSS/W/102
13 July 2001
(01-3482)
Council for Trade in Services
Special SessionOriginal:  English
COMMUNICATION FROM THE UNITED STATES
Transparency in Domestic Regulation
The attached communication has been received from the delegation of the United States with
the request that it be circulated to Members of the Council for Trade in Services.
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I. INTRODUCTION
1. Transparency in domestic regulation is charac terized as the availability of information
necessary to evaluate the costs and opportunities of operating in a given commercial market.
Therefore, transparency in domestic regulati on should allow all market participants access to
information on regulations, procedures, and other measures that affect their interests, the ability to
comment on such proposals, and procedurally fair and open treatment. Both domestic and foreign
participants in commercial relations should be given the same access to relevant information – if, for
example, foreign firms are given lesser access to su ch information than domestic firms, trade barriers
can be created.  In addition to enhancing commercial relations, regulatory transparency provides acitizenry with a better understanding of domestic policy objectives and thereby contributes to public
confidence in government, providing support for domestic policy objectives and the rationale for trade
liberalization.  Transparent regulatory regimes can lead to benefits for both small and large
economies, such as good governance, improving public confidence in, and legitimacy of the
regulatory regime, and increasing investment while promoting trade in goods and services.
1
2. Transparent domestic regulation can create more efficient markets and an attractive
environment for investment and economic growth by  providing firms with the information necessary
to evaluate their ability to access and operate in foreign markets.  Non-transparent domestic regulation
results in additional trade barriers, which can nullify a liberal trade regime.  Thus, transparency is
necessary to preserve trade liberalization and to ensure that regulatory regimes do not become barriersto trade and investment.  This is particularly important for service suppliers because of the complexity
and costs involved in  the establishment of a commercial presence or the cross-border supply of
services.  Many global organizations, such as the IMF, are promoting transparency by developing
transparency standards for governments to follow.
2
                                                     
1This paper focuses on the role of regulatory bodies (i.e., administrative agencies engaged in regulatory
processes).
2 Such as the IMF’s Manual on Fiscal Transparency, and the Special and General Data Dissemination
Standards.  Ann M. Florini, “Does the Invisible Hand Need a Transparent Glove?  The Politics ofS/CSS/W/102
Page 2
3. Transparency can be beneficial to all countries.  Some countries see transparency as an
additional administrative burden and a poor use of already scarce resources.  Undoubtedly,
governments need to devote resources toward th e initial set-up and continuing maintenance of a
transparent regulatory system.  However, a transparent regulatory system’s benefits can far outweigh
the costs of its establishment.  The advent of new technologies such as the Internet can serve to reducethe costs of transparency.
3  The costs of a non-transparent regime may come at the expense of
economic growth and development, and contribute to a perceived lack of legitimacy.  Members
should work together so that all countries can realize transparency’s benefits, both domestically, and
in other markets.  This is particularly true for countries with small and medium sized enterprises that
may not have the resources to enter and do business in markets with non-transparent regulatory
regimes.  The United States is interested particular ly in discussing means to increase the participation
of developing countries in this debate to address their particular concerns.
II. PROPOSAL
4. The United States proposes that Members consider a wide application of measures for
transparency in domestic regulation, recognizing that all levels of government must retain the ability
to set, maintain, and enforce high levels of protection for consumers, health, safety, and the
environment.  The United States wishes to begin this debate by discussing which practices indomestic regulation have been effective for Members, to develop principles that support existing
GATS measures and promote greater transparency in domestic regulation, without prejudice to
concepts that have been suggested for specific sectors.
4  Such principles could provide all countries
with a blueprint to reap the benefits of an open, transparent regulatory system.  These principles
should be administered in a reasonable, objective and impartial manner and should not discriminateagainst foreign suppliers.  The United States believes that the following principles guiding
transparency in domestic regulation should be an important part of this debate.
A. P
RIOR NOTIFICATION AND COMMENT
5. Many countries administer some variation of prior comment processes.  For example, Korean
regulators consult through public hearings or notices or other means, and regularly consult withforeign trade associations.  In Japan, both foreign and domestic parties may comment when public
regulations are introduced, amended or repealed by a cabinet order or ministerial ordinance, with
certain exceptions.  In Mexico, prior comment is established in certain sector-specific laws, which
require publication of proposals for comment by foreign or domestic participants.
5
6. Meaningful notice and comment periods provide a reasonable assurance that interested parties
will see the notice and have adequate time to respond.  The ability of individuals and firms to
comment on regulatory measures before implementation offers a number of benefits, includingincreased efficiency and credibility of the proposed measure. Prior comment also reduces uncertainty
and discriminatory treatment in a given market as all parties are better informed through the ability to
participate in the development of regulations.  Pr ior comment allows the opportunity to solicit views
on proposed new or amended regulations from all interested parties, including domestic and foreign
service suppliers operating or seeking to operate in the national market as well as the general public sothat the provision is developed under an informed debate.  Established mechanisms to solicit and
                                                                                                                                                                    
Transparency,” paper prepared for the Annual World Bank Conference on Development Economics,
Washington, DC, April 28-30, 1999.
3 Ibid; and OECD, “Trade and Regulatory Reform: Insights from the OECD Country Reviews and
Other Analysis.” December 7-8, 2000.
4 For example, the United States tabled an initial s ectoral proposal on financial services (S/CSS/W/27)
that includes proposed approaches on regulatory transparency and other issues related to regulation.
5 OECD, “Trade and Regulatory Reform: Insights from the OECD Country Reviews and Other
Analysis.”S/CSS/W/102
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respond to public inquiries and comments help make the process easier to administer.  Dismissing the
need to consider and respond to comments on the proposed measures on the grounds of burdensome
costs can deprive countries of the benefits such procedures provide.  Beyond the initial start-up costs,
maintenance costs for such a system can be low.  As previously mentioned, new technologies such as
the Internet have further reduced the financial burden associated with a prior consultation system.6  In
order to complement the prior comment mechanism,  pending regulations, comments received by the
regulators, and responses to the comments all should be made available to the public.
B. APPLICATION PROCESS
7. The process of applying for a new license or authorization should be simple and clear, with
the same requirements for both domestic and foreign applicants.  A simplified application process can
help reduce the start-up costs for new businesses, aiding both domestic and foreign small and
medium-sized enterprises.  Transparent, established, publicly available rules for licensing will helpreduce arbitrary licensing.  The activities for which an authorization or license to supply a service is
required and the criteria to obtain, renew, retain, or relinquish such an authorization or license should
be made publicly available and include a list of all the documentation and information normally
required of the application in order to receive approval.  In addition, criteria under which the regulator
could suspend, revoke, or terminate an authorization or license should be made publicly available.Authorities should make public target deadlines within which applications should normally be
processed; outline the process for notifying violations of the terms and conditions of a license, as well
as a description of the nature and extent of disciplinary actions; and establish a mechanism to respond
to inquiries on rules and regulations from service suppliers.
8. As stated in Article VI of the GATS, where authorization is required for the supply of a
service on which a specific commitment has been made, the competent authorities of a Member shall,
within a reasonable period of time after the submission of an application considered complete under
domestic laws and regulations, inform the applicant of the decision concerning the application. At the
request of the applicant, regulators should promptly provide information concerning the status of the
application.  Other elements could further elaborate on Article VI.  For example, if an examination isrequired for licensing or qualification, such examinations should be scheduled at reasonable intervals.
Fees charged in connection with a license or authorization should be fair and reasonable, and should
not be designed to limit applications.  If an application is denied, regulators should provide a
sufficient explanation justifying the action.  Applicants should be given the opportunity to resubmit or
amend their applications.
9. In a transparent application process, applicants must also bear responsibilities.  Procedures for
disciplinary actions for violations, including procedures for the notification of alleged violations,responses by the party subject to such disciplinary action, and an explanation of decisions should be
made publicly available as well as any procedures for review or appeal of administrative decisions.
Thus, if a dispute arises, an applicant, or authorization or license holder will be better able to submit
its views and supporting documents in its own defense.
C. P
ROCEDURAL REVIEW AND REMEDIES :
10. Article VI:2 ensures the review and appropriate remedies for administrative decisions
affecting trade in services.  The right to procedural review allows all participants recourse in the event
of a dispute.  A transparent regulatory system generally should allow applicants the right to file
complaints regarding their treatment or refusal to review an application, and the right of appeal in the
event a license application is denied.  In addition, service suppliers should be notified of regulatory
                                                     
6 Ibid.S/CSS/W/102
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enforcement proceedings, and permitted to retain counsel of choice and submit evidence.  The
subjects of such proceedings should be allowed to review all evidence and be heard before an
appropriate judicial or other review body.  These rights lend legitimacy and credibility to the
regulatory body provided all participants are treated fairly.
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