USA’s BPO-onshoring Act Tests WTO Rules

“Each Member shall accord to services and service suppliers of any other Member… treatment no less favourable than that it accords to its own like services and service suppliers.” — GATS Article XVII (National Treatment).

WHY THE WTO MATTERS HERE

The World Trade Organization (WTO) is the global referee for trade rules. It covers trade in goods, services (like call centers), and intellectual property. Members agree to open parts of their markets and to follow common rules. When a country breaks a rule, other countries can challenge it through the WTO’s dispute system, which can end with permission to retaliate if the rule-breaker doesn’t fix the problem.

Under the General Agreement on Trade in Services (GATS), countries list the service sectors and “modes” (ways services are delivered) where they will allow foreign competition. GATS also pushes members to gradually open more over time—this idea is called “progressive liberalization.”

The United States has a public Schedule of Specific Commitments at the WTO that shows where it has opened service sectors (including business/telecom-related services). Whether a measure breaks WTO rules depends on what is written in it.

NATIONAL TREATMENT — TREAT FOREIGN AND LOCAL SUPPLIERS EQUALLY

As reported elsewhere in this week’s The Reporter, The Keep Call Centers in America Bill 2025 (hereafter “The Bill”) may offend several WTO provisions.

In sectors the U.S. has committed, foreign services and suppliers must get treatment no less favorable than U.S. ones. You don’t have to name a nationality to break this rule—if a measure tilts the playing field toward locals, that can be enough.

For this reason, given that the Bill provides funding penalties and contract preferences for U.S.-based call centers, this changes the conditions of competition in favor of domestic operations. WTO case law has found that “effects-based” discrimination can breach this rule.

MARKET ACCESS — DON’T IMPOSE HIDDEN QUOTAS OR BANS

In committed sectors/modes, a country cannot set quantitative limits on foreign service supply (for example, a rule that amounts to a “zero quota” for offshore suppliers).

Requiring that all federal call-center work be performed in the U.S. functions like a ban on offshore performance for that work.

MOST-FAVOURED-NATION (MFN) — DON’T PLAY

FAVORITES AMONG COUNTRIES

The rules also demand Members treat like services and suppliers from all WTO members at least as well as those from any one country (no favorites).

However, the Bill forces an immediate transfer to a U.S.-based agent whenever a consumer reaches an overseas agent adds costs and friction for all foreign locations. Unless the U.S. listed a specific MFN exemption for this, that’s a red flag. (MFN exemptions and schedules are recorded at the WTO.)

THE GOVERNMENT-PROCUREMENT CAVEAT (IMPORTANT BUT LIMITED)

GATS Article XIII says the core services rules (MFN, national treatment, market access) do not apply to government procurement of services for governmental purposes (i.e., buying services for the government’s own use, not for resale). This could shield how federal contracts are awarded. But it doesn’t automatically cover measures that spill into the wider private market (like public “lists,” general funding ineligibility, or mandatory transfer rules for all customer calls).

COULD THE U.S. DEFEND THE BILL ANYWAY?

The GATS has general exceptions (Article XIV) for things like public morals or preventing fraud. But to use them, the U.S. would need to prove the measures are necessary and not applied in a discriminatory way.

WHY THIS MATTERS BEYOND WASHINGTON

Because the U.S. has made commitments in services, other countries can bring a WTO dispute if they think the law breaks GATS rules. The dispute system’s job is to settle these cases and, if needed, allow retaliation when a member refuses to comply—one reason countries feel the pressure to align with the rules they signed.