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General Agreement on Trade in

Services (GATS)

Presented By:

mANISHA sHUKLA

sAUD iMTIAZ

nEHA jOSHI

pALLAVI aRUN

pAWAN gUPTA

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General Agreement on Trade in

Services (GATS)

Reasons for establishment:-

Due to huge growth of services economy

Services account for two third of global output

Services Contribute in global employment

Contribution of services in global trade

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Services: Economic importance

Share in Production and Employment:

depending on resource structure and level of

development of an economy

Share in TotalWorld Trade:

more rapid expansion than merchandise trade

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Chart I: Share of services in

production (GDP, 2000)

0%10%20%30%40%50%60%70%80%90%

100%

Unite

dStat

es*

France

Unite

dKing

dom

Polan

d

Argentina

Colom

bia Peru

Philip

pines

India

Mala

ysia

Uganda

Came

roon

Angola

Services Industry Agriculture

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Services exports by economic

groups

26%

74%

DEVELOPING

COUNTRIES

Developed

countries

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Application of trade theory6

Trade in services, in general, display the samecharacteristics as trade in goods

The theory of comparative advantage does apply

to services trade Given high levels of regulation (protection) in the

service sector, economic factors alone cannotexplain the pattern of trade in services

The removal or reduction of barriers to trade inservices would contribute to major increases inglobal welfare

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Developingcountries7

50% of GDP

Fourfold increase in trade over last 15 years

Important contributor to economy-wide efficiency

and development

Labour intensive

More dependent on trade in services than

industrialised countries

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What is GATS?8

Implemented January 1995

140 member countries

All sectors (except government and air traffic rights)

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GATS: Modes of supply9

Mode 1: Cross border supply

relatively few bound commitments

Mode 2: Consumption abroad

relatively open

Mode 3: Commercialpresence

market access restrictions prevail

Mode 4: Movement of naturalpersons

most restrictive

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MODEMODE MEANINGMEANING EXAMPLEEXAMPLE

Mode 1Mode 1CrossCross--border tradeborder trade

Trade takes place from theTrade takes place from theterritory of country A into that of Bterritory of country A into that of B

-- TelehealthTelehealth-- Passing of informationPassing of information

by means of fax or emailby means of fax or email

Mode 2Mode 2ConsumptionConsumption

abroadabroad

Services consumed by nationalsServices consumed by nationalsof country A in territory of countryof country A in territory of country

BB

-- TourismTourism-- Consumers who crossConsumers who cross

borders to obtain medicalborders to obtain medicaltreatmenttreatment

Mode 3Mode 3CommercialCommercial

presencepresence

A service supplier of country AA service supplier of country Acrosses the border to establishcrosses the border to establish

and provide a service in country Band provide a service in country B

-- Establishment of aEstablishment of aprivate hospital by aprivate hospital by a

European company inEuropean company inEcuadorEcuador

Mode 4Mode 4Movement ofMovement of

natural personsnatural persons

Temporary movement fromTemporary movement fromcountry A to B to supply a servicecountry A to B to supply a service

-- Doctors moving toDoctors moving toanother country toanother country to

temporarily provide theirtemporarily provide theirservicesservices

Modes of tradeModes of trade

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GATS: Obligations12

General

MFN treatment

Transparency

Specific

Market access

National treatment

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Most-favoured-nation (MFN)

treatment

MFN means treating ones trading partners equally

on the principle of non-discrimination. Under GATS,

if a country allows foreign competition in a sector,

equal opportunities in that sector should be given toservice providers from all other WTO members.(This

applies even if the country has made no specific

commitment to provide foreign companies access to

its markets under the WTO.)

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Transparency

Publish all relevant laws and regulations, and set up

enquiry points within their bureaucracies.

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Commitments on market access and

national treatment

Individual country's commitments to open markets

in specific sectors and how open those markets

will be are the outcome of negotiations.

Market access commitment.

market-access limitation.

exception to the national treatment

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GATS commitments:

16

Guarantee the conditions of operation offoreign services suppliers at a certain

negotiated level of market access andnational treatment

Ensure that this level cannot be deteriorated

Make this level available as a minimum to all

WTO Members Are subject to periodic negotiations with a

view to improve them

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GATS: Objectives

Expansion of services trade

Progressive liberalization through

successive rounds of negotiations as a means

of promoting growth and development

Transparency of rules and regulations

Increasing participation of developing

countries

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GATSclassifies trade in services

into four modes of supply:

Mode 1: Cross-border supply

Mode 2: Consumption abroad

Mode 3: Commercial presence

Mode 4: Presence of natural persons

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Special Provisions For Developing

Countries

In particular, the objective of facilitating the increasingparticipation of developingcountries in services tradehas been enshrined in the Preamble to the Agreementand underlies the provisions of Article IV.

This Article requires Members, inter alia, to negotiatespecificcommitments relating to the strengthening ofdevelopingcountries' domestic services capacity; theimprovement of developingcountries' access to

distribution channels and information networks; and theliberalization of market access in areas of exportinterest to these countries.