General Agreement on Trade in Services

1. INTRODUCTION

Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer. Trade in services takes place between a producer and consumer that are, in legal terms, based in different countries, or economies, this is called International Trade in Services.

The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade.

All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. However, upon accession, Members may introduce temporary exemptions to this rule.

2. Historical background

Before the WTO's Uruguay Round negotiations began in 1986, public services such as healthcare, postal services, education, etc. were not included in international trade agreements. Most such services have traditionally been classed as domestic activities, difficult to trade across borders, notwithstanding the fact that for example educational services have been "exported" for as long as universities have been open to international students. Nevertheless, foreign participation has existed in many countries prior to the GATS. While the overall goal of the GATS is to remove barriers to trade, members are free to choose which sectors are to be progressively "liberalised", i.e. marketised and privatised, under which mode of supply a particular sector would be covered under, and to what extent to which liberalisation will occur over a given period of time. Members' commitments are governed by a "ratchet effect", meaning that commitments are one-way and should not be wound back once entered into. This reason for this is the creation of a stable trading climate

3.DECISIONS

Ministers decide to recommend that the Council for Trade in Services at its first meeting adopt the decision on subsidiary bodies set out below.

The Council for Trade in Services,

Acting pursuant to Article XXIV with a view to facilitating the operation and furthering the objectives of the General Agreement on Trade in Services,

Decides as follows:

1. Any subsidiary bodies that the Council may establish shall report to the Council annually or more often as necessary. Each such body shall establish its own rules of procedure, and may set up its own subsidiary bodies as appropriate.

2. Any sectoral committee shall carry out responsibilities as assigned to it by the Council, and shall afford Members the opportunity to consult on any matters relating to trade in services in the sector concerned and the operation of the sectoral annex to which it may pertain. Such responsibilities shall include:

(a) to keep under continuous review and surveillance the application of the Agreement with respect to the sector concerned;

(b) to formulate proposals or recommendations for consideration by the Council in connection with any matter relating to trade in the sector concerned;

(c) if there is an annex pertaining to the sector, to consider proposals for amendment of that sectoral annex, and to make appropriate recommendations to the Council;

(d) to provide a forum for technical discussions, to conduct studies on measures of Members and to conduct examinations of any other technical matters affecting trade in services in the sector concerned;

(e) to provide technical assistance to developing country Members and developing countries negotiating accession to the Agreement Establishing the World Trade Organization in respect of the application of obligations or other matters affecting trade in services in the sector concerned; and

(f) to cooperate with any other subsidiary bodies established under the General Agreement on Trade in Services or any international organizations active in any sector concerned.

4. Services trade

Ranging from architecture to voice-mail telecommunications and to space transport, services are the largest and most dynamic component of both developed and developing country economies. Important in their own right, they also serve as crucial inputs into the production of most goods. Their inclusion in the Uruguay Round of trade negotiations led to the General Agreement on Trade in Services (GATS).

5.MODES OF SUPPLY

Mode 1: Cross-border supply Service delivered within the territory of the Member, from the territory of another Member Service supplier not present within the territory of the member . Mode 2: Consumption abroad Service delivered outside the territory of the Member, in the territory of another Member, to a service consumer of the Member. Mode 3: Commercial presence Service delivered within the territory of the Member, through the commercial presence of the supplier Service supplier present within the territory of the Member. Mode 4: Presence of a natural person Service delivered within the territory of the Member, with supplier present as a natural person.

Criticisms

The GATS document has been criticized for tending to substitute the authority of national legislation and judiciary with that of a GATS Disputes Panel conducting closed hearings. WTO member-government spokespersons are obliged to dismiss such criticism because of prior commitment to perceived benefits of prevailing commercial principles of competition and 'liberalisation'.

While national governments have an option to exclude any specific service from liberalisation under the GATS, they are also under international pressure, from business interests, to refrain from so excluding any service "provided on a commercial basis". However, important public utilities including water and electricity supply most commonly involve purchase by consumers and are thus demonstrably "provided on a commercial basis". The same may be said of many health and education services which are sought to be 'exported' by some countries as profitable industries.^[3]

This definition makes virtually any public service "provided on a commercial basis" except for certain areas as police, the military, justice system and public administration. Over a long time perspective, this could open up for the privatisation or marketisation of large parts, and possibly all, of what today are considered public services currently available for the whole population of a country as a social entitlement, paid for out of general taxation, to be restructured, marketised, contracted out to for-profit providers, and eventually fully privatised and only available to those who can pay for them. This process is currently far advanced in most countries, usually (and intentionally) without properly informing or consulting the public as to whether or not this is what they want.

submitted by:

ASNEET KAUR

M.B.A (semi 1)

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