Theory of International Trade in Services Chapter seven Chapter seven Learning objective: learn about the brief history, characteristics, main contents of GATS; its key limitations and follow-up negotiations; get to know the regional agreements on trade in services. 7.1Introduction to General Agreement on Trade in Services Background of GATS birth (1)Liberalization of service trade proposed Developed country Developing country Led by the United States, developed countries actively propose the liberalization in service trade. Why do the United States proposed the liberalization? 1) The pressure from the transnational corporations 2) The desire to promote American interests in service trade and international investment. What s the attitude for the developing country? Oppose support (2) Attitude transformation of trade liberalization in services in the developing countries (3) Process of trade in services negotiation and birth of GATS First period of Uruguay Round negotiation started on Oct 27th 1986 ended in Dec 1988 Second period From the interim review to June 1990 Third period From the July 1990 to Dec 1993 GATS came into effect Jan 1st parts, 29 clauses and 8 appendixes (4) Significance of GATS to international trade in services Common observance Liberalization Increase the related goods trade Coordinate benefits of member countries (4) Significance of GATS to developing countries Fast development New exporting opportunities Secure access to foreign markets 7.1.2 Main purpose and basic rules of GATS (1) Main purpose of GATS To extend global service trade under the condition of transparency and gradual liberalization by setting up multilateral rules in service trade 1 Most Favored Nation Treatment 2 National Treatment 3 Transparency 4 Market Access (2) Basic rules of GATS Unified arrangement in service and trade Further participation of developing countries Respect domestic laws Other rules: 7.2 Review on General Agreement on Trade in Services Structure and Characteristics of GATS( ) (1) Structure of GATS( ) Preface The aim of purpose of GATS Main Body Part 1 (Article1 ) Scope and definations Part 2 (Articles 2-15) obligations and principles Part 3 (Articles 16-18) Special obligations Part 4 (Articles 19-21) Progressive liberalization Part 5 (Articles 22-26) Systems and organizations Part 6 (Articles 27-28) Provisions and withdrawing Appendix (2) Characteristics of GATS 1) GATS follows and uses the basic principle and spirit of GATT for reference. 2) GATS formulates respectively the general and special obligations. 3) Large amount of specific regulations and concrete promises need to be negotiated and defined further. 7.2.2 Contents of GATS 1 Preface( ) 2 Main Portion( ) 3 Appendix of GATS GATS Main portion 1) Range and definition of service trade 2) Regular duty of each member 3) Special responsibility undertaken 4)Gradual liberalization 5) Regulation items 6) Final clauses Definition of service trade Cross-border supply ( ) Consumption Abroad ) Commercial Presence Movement of natural person ( ) Main portion 1) Range and definition of service trade 2) Regular duty of each member 3) Special responsibility undertaken 4)Gradual liberalization 5) Regulation items 6) Final clauses Most favored nation treatment Transparency Developing countries participation Economic integration Domestic regulation Approval Monopoly and special service suppliers Business practices Emergency security measures Transfer and payments Government purchase Regular exception Subsidy Regular duty of each member Main portion 1) Range and definition of service trade 2) Regular duty of each member 3) Special responsibility undertaken 4)Gradual liberalization 5) Regulation items 6) Final clauses Special responsibility undertaken Main portion 1) Range and definition of service trade 2) Regular duty of each member 3) Special responsibility undertaken 4)Gradual liberalization 5) Regulation items 6) Final clauses Appendix of GATS GATS 1. Appendix of exemption in most favored nation treatment 2. Appendix of natural person movement in service supply 3. Appendix of natural person movement in service supply Appendix of GATS GATS 4. Appendix of financial service 5. Second appendix of financial service 6. Appendix of sea-transportation service negotiation Appendix of GATS GATS 7. Appendix of telecom service 8. Appendix of Basic telecom service negotiation 7.3 Main Limitation and Follow- up Negotiations of GATS 7.3.1Main Limitation of GATS GATS 1 Unbalance of Benefits Between Developed and Developing Countries Developed countries Developing countries 2 Less Binding Force in Trade Principle (3) Unpleasant Result of concession 7.3.2 Further Negotiations of GATS (GATS ) 1 Negotiations on improvement of framework agreement Negotiations Government procurement ( ) Subsidy for service industry ( ) Emergency safeguard in service industry ( ) 7.3.2 Further Negotiations of GATS (GATS ) 2 Further negotiation of GATS 7.4 Regional Agreements on Service Trade ( ) Service Trade Agreement of EEC( ) Service Trade Agreement Inside EEC ( ) Free movement of personnel ( ) Transportation Service Financial Service Telecom Service 1 Service Trade Agreement Inside EEC 2 EEC Agreement on Foreign Trade in Services 7.4.2 Agreement on Service Trade in North-American Free Trade Area Main regulations Finance Telecommunication Other Services Finance Main principles Trade presence and cross-border trade Non-discrimination treatment Transparency in procedure Precautionary measures and BOP measures Consult 7.4.3 APEC agreements on trade in services ( ) (1) Manners of trade liberalization in services in APEC (2) Osaka Action Agenda and service liberalization (3) Manila Action Plan for APEC and service liberalization Homework 1.What is the main frame of the General Agreement on Trade in Services? 2.What is the principle of the General Agreement on Trade in Services? 3.What are the main cores and principles for China to participate in the General Agreement on Trade in Services?