Regulatory bodies for accountancy across the world will, over the next two years, need to examine their professional rules governing licensing and qualifications to make sure they are not tougher than they need to be.
Soon strict regulations could be challenged at the World Trade Organisation, which in two-to-three years is likely to have the power to order national governments to reform accounting codes, to make them more liberal.
In a country as stricken with debates over the loss of sovereignty to an international organisation – the European Union – the growing influence of the WTO is often overlooked in the UK.
This is a mistake, as the accountancy profession will soon find out.
At the WTO’s headquarters in Geneva, a ’round’ (set of negotiations) on rules affecting the trade in services is taking place. It is expected to end by 2003 and when it does, an agreement on domestic regulations for accountancy will become international trade law.
This means WTO member countries will be able to object to a particular national professional rule, if they think they can prove a less rigorous regulation would equally achieve the maintenance of accountancy standards.
If such a case was brought to a WTO disputes panel and it ruled against a member government, it would be forced to reform or face the possibility of punishing trade sanctions being levied against its exports. In this way, the WTO’s agreement on domestic regulations in accountancy will have teeth.
It represents an unprecedented move by a global international organisation into national affairs, a process that will be all too familiar in the UK, regarding the EU.
The difference is that this law will apply round the world. Accounting professions from the United States, to Antigua and Argentina, to Hong Kong and Qatar and to Papua New Guinea, Slovakia, France and Britain will have to pay heed.
At the heart of this WTO agreement is the so-called ‘necessity test.’ This says: ‘Members shall ensure that measures relating to licensing requirements and procedures, technical standards and qualification requirements and procedures, are not prepared with a view to or with the effect of creating unnecessary barriers to accountancy services.
‘For this purpose, members shall ensure that measures are not more trade-restrictive than necessary to fulfil a legitimate objective.’
The agreement lists these allowable aims as the ‘protection of consumers, the quality of service, professional competence and the integrity of the profession’.
It also defines technical standards as ‘requirements which may apply both to the characteristics or definition of the service and to the manner in which it is performed’. This is all ground-breaking stuff for accountancy.
In the past, the WTO, headed by Mike Moore has concentrated on preventing member countries from erecting rules that unfairly discriminate against foreign accountants and practices.
The new law applies to all tough bureaucratic hurdles, even if they apply to any accountant, regardless of whether they are local or from abroad.
What the direct affect of all this will be remains to be seen. WTO officials are at pains to stress when member countries agree trade agreements, they try to make sure they will not be hauled over the coals in a dispute proceeding later.
But, like any law, until it is tested in court, or in this case, a disputes procedure, no one can be sure of its effect.
One official at the WTO’s headquarters in Geneva says: ‘It’s difficult to assess the impact.’ He said the negotiations that led to the striking of the agreement were not held in an atmosphere of wanting to enforce a global liberalisation of the profession. Nonetheless, its existence will at least make it more difficult for WTO member governments to sanction the tightening of professional accountancy regulations. The only way, so to speak, is up.
Once it becomes law, the agreement will affect all WTO member countries who have made commitments to open their accountancy sectors to foreign competition.
Only states who have refused to open up their professions for foreigners – such as India – will be able to escape. It means that New Delhi would technically be able to insist its accountants study for 10 years and take professional examinations in every official Indian language.
But because Britain allows competition in the sector from overseas, it is unlikely to get away with insisting that all practising accountants should have taken exams in Welsh.
Accountancy was singled out as the first profession to be the focus of a WTO agreement on domestic regulation, because of a worldwide consensus that it was particularly hidebound by national regulations.
But lest accountants feel they have been harshly singled out, they are unlikely to be alone for long. The round on services is already discussing whether to introduce similar rules for other professions, from doctors to lawyers, and their national organisations have been sent copies of the accountancy agreement for comments.
WTO officials say feedback has been positive and the result may be a general WTO rule covering national regulations for all professions. Never before has accountancy been the thin end of such a big wedge.
More WTO stories
WTO on accounting
ANTI-COMPETITIVE PRACTICES IN THE UK
The WTO is not alone in its desire to open up accountancy markets, writes Chris Quick. Officials at the UK’s competition watchdog have this month begun analysing responses to a probe into restrictive practices in the accountancy profession. The Office of Fair Trading launched the consultation in May to review anti-competitive practices in the accountancy, legal and related professions.
Issues under the microscope include how accountants set and charge fees, restrictions on entry to the profession and rules that say certain services can only be performed by people with particular qualifications. The OFT says there had been a good response to the consultation, but says it is too early to say when or what the OFT’s next move would be. However the watchdog is ‘aware’ of developments at the WTO.
The DTI confirmed that the UK would sign up to any agreement made by the WTO, but that it was too early to say how its trade laws would affect regulation of the profession.
Firms and accountancy bodies are unconcerned about the OFT’s probe. ACCA argues the profession has multiple entry rules and that quality of service is a greater issue than consumer choice. Chief executive Anthea Rose says: ‘The UK accountancy profession has never been centrally controlled. There has never been a statutory definition of ‘accountancy’ or ‘accountant’.
This has allowed a multiplicity of bodies to offer qualifications in accountancy. In this regard, accountancy is much less restrictive than other professions.’
Fat cat fee inquiry: www.accountancyage.com/Practice/1102497.
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