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General Agreement on Trade in Services

GATT: objectives, coverage and disciplines from WTO web-site

  1. Introduction
    • Services account for 60% of global production (69% in high, 55% in middle, 44% in low income countries) and 70% of employment in high (55% in upper middle, 25% in lower middle) income countries (construction excluded);
    • BOP based service trade amounted to $1,570bln. in 2002 or 20% of total trade, a further unmeasured int. trade in services doesn't cross borders, as the supplier (e.g. a branch of a foreign bank) or the consumer (e.g. tourist) does so instead;
    • Enhanced "tradability" due to new transmission technologies (e.g. e-banking, tele-health or distance learning).
  2. GATS agreement
    • Entered into force on 1 Jan, 1995;
    • Scope: all services except Governmental services (social security, health, education) and Air traffic rights;
    • Application: all measures, whether central, regional or local governmental level;
    • Classification
      1. Cross-border supply-only the service crosses the border, e.g. through telecommunications;
      2. Consumption abroad-tourist, student;
      3. Commercial presence-a branch office or a subsidiary of a foreign (defined as >50% of equity controlled by foreign nationals) bank, hospital, university, etc;
      4. Presence of natural persons-with or without Mode 3: employees, professionals (not connected to citizenship, residence or employment);.
    • General obligations and disciplines
      1. MFN treatment is applicable, whether specific commitments have been made or not, except if
        • The Member has established an exception at the time of entry or accession (80 of them have done so predominantly in road transport and audiovisual services), these exceptions in principle should have not lasted longer than 10 years;
        • The countries are members of regional trading arrangements which cover all four modes of supply, has “substantial sectoral coverage” and removes substantially all discrimination between participants;
      2. Transparency: members should have established enquiry point and promptly publish all relevant measures;
      3. Other general rules
        1. Intended to ensure that benefits under the GATS are not nullified or impaired by domestic regulations:
          (1) service trade affecting measures must be applied reasonably, objectively and impartially, if the supply of a scheduled service is subject to authorization, Members are required to decide on applications within a reasonable period of time;
          (2) there must be tribunals to review administrative decisions;
          (3) members are urged to recognize the educational or other qualifications of service suppliers of other countries when applying standards or granting licenses or certificates;
          (4) otherwise qualification requirements should be based on internationally agreed standards;
          (5) a monopoly supplier of a service must not be allowed to act inconsistently with a member's MFN obligations or its specific commitments;
          (6) BOP transactions relating to specific commitements should not be restricted.
        2. Exceptions
          (1) restrictions in the case of BOP difficulties;
          (2) general and security exceptions in line with GATT;
    • Specific commitments
      1. Market access:
        each member is to give no less favourable treatment to the services and service suppliers of other members than is provided in its schedule of commitments,
        In commited sectors the following limitations shall not be applied unless otherwise specified in Members Schedule
        1. limitations on the number of service suppliers;
        2. limitations on the total value of services transactions or assets;
        3. limitations on the total number of service operations or the total quantity of service output;
        4. limitations on the number of persons that may be employed in a particular sector or by a particular supplier;
        5. measures that restrict or require supply of the service through specific types of legal entity or joint venture;
        6. percentage limitations on the participation of foreign capital, or limitations on the total value of foreign investment.
      2. National treatment:
        (i) in the sectors covered by its schedule, and (ii) subject to any conditions and qualifications set out in the schedule, each member shall give treatment to foreign services and service suppliers treatment no less favourable than it gives to its own services and suppliers.
        GATS differs from GATT because otherwise services supplied by commercial or personal presence will enjoy virtually free access if given national treatment. In case of GATT the flow of goods can be restricted through tariffs and other border measures;
      3. Additional commitments: relating to the use of standards, qualifications or licenses (predominantly in telecommunication sector (60 countries)).
    • Progressive liberalization
      • Schedule commitments can be modified only in case of compensatory adjustments made on a MFN basis;
      • Mambers commeted to achieve a progressively higher level of liberalization.
    • Dispute Settlement: in line with GATT except for disputes over matters covered by double taxation agreements;
  3. GATS annexes
    • Air transport:
      a. air transport services are for the most part governed by Chicago Convention (1944), air trafic rights are exempted from GATS,
      b. applies to (i) aircraft repair and maintenance services, (ii) the selling and marketing of air transport services (excluding pricing) , (iii) computer reservation systems
    • Financial services:
      a. applies to insurance and insurance-related services and banking and other financial services;
      b. members are free to take prudential measures to protect investors, depositors, policy holders or persons to whom a fiduciary duty is owed by a financial service supplier, or to ensure the integrity and stability of the financial system.
    • Telecommunications:
      a. establishes this right to make use of public telecommunications networks and services "on reasonable and non-discriminatory terms";
      b. apply to all available public services such as telephone, telegraph, telex and data transmission, but not to the transmission of radio or television programming.
    • Article II (MFN) exemptions
    • Movement of natural persons
    • Negotiation on maritime transport services: non-application of the MFN obligation in maritime transport
  4. GATS SCHEDULE
    • Classification
      based on the UN Central Product Classification (CPC) system, 12 service sectors subdivided into some 160 sub-sectors:
      1. business (including professional and computer) services
      2. communication services
      3. construction and related engineering services
      4. distribution services
      5. educational services
      6. environmental services
      7. financial (insurance and banking) services
      8. health-related and social services
      9. tourism and travel-related services
      10. recreational, cultural and sporting services
      11. transport services and
      12. other services not included elsewhere
    • Parts:
      Part I lists "horizontal commitments": in other words, provisions that apply to foreign suppliers of any service that has been scheduled. Part II sets out the commitments undertaken for each listed sector or sub-sector.
    • "none" vs. "unbound"
  5. The Doha Development Agenda
Resources

Measuring Trade in Services
from WTO web-site, PDF file