The General Agreement on Trade in Services (GATS) created a framework for international trade rules in services. GATS aims to promote services trade liberalization on a mutually advantageous basis. It covers four modes of supplying services: cross-border trade, consumption abroad, commercial presence, and presence of natural persons. Under GATS, countries schedule specific commitments to liberalize certain services sectors and modes of supply, while maintaining exceptions. Commitments are bound under the GATS framework and principles of most-favored nation treatment and transparency.

1. GENERAL
AGREEMENT
ON
TRADE
IN
SERVICES

2. INTRODUCTION
 The creation of the GATS was one of the landmark achievements of the Uruguay
Round, whose results entered into force in January 1995, as a result of the Uruguay
round negotiations.
 The GATS was inspired by essentially the same objectives as its counterpart in
merchandise trade, the General Agreement on Tariffs and Trade (GATT): creating a
credible and reliable system of international trade rules, ensuring fair and equitable
treatment of all participants (Principle of non-discrimination), stimulating economic
activity through guaranteed policy bindings; and promoting trade and development
through progressive liberalization.
 While services currently account for over two-thirds of global production and
employment, they represent no more than 25 per cent of total trade, when measured on
a Balance-of-Payments basis. This seemingly modest share should not be
underestimated, however.

3. HISTORY
While the overall goal of GATS is to remove barriers to trade, members are
free to choose which sectors are to be progressively "liberalised" (i.e.
marketised and privatised); which mode of supply would apply to a particular
sector; and to what extent that "liberalisation" will occur over a given period
of time. Members' commitments are governed by a ratchet effect:
commitments are one-way and are not to be wound back once entered into.
The reason for the rule is to create a stable trading climate (i.e. a market).
However, Article XXI allows members to withdraw commitments, and so far
two members have exercised the option (US and EU). In November 2008,
Bolivia gave a notification that it will withdraw its health services
commitments.

4. GATS CONSISTS OF THREE PARTS:
I. The framework, containing the general principles and rules.
II. National schedules, which list a country’s specific commitments on access to their domestic
market by foreign providers.
III. Annexes, in which specific limitations for each sector can be attached to the schedule of
commitments.
Through negotiating rounds, countries choose the sectors and modes of services trade they wish
to include in their schedules as well as the limitations to market access and national treatment
they wish to maintain. It is only by reference to the individual country schedules that one can
know not only the service sector(s) that will be committed, but also the extent of commitment a
country is prepared to make. There is no minimum requirement as to its coverage, so that WTO
members are free to leave entire sectors out of their GATS commitments, or they may choose to
grant market access only in specific sectors, subject to the limitations they wish to maintain.

5. BUSINESS
SERVICES
• Professional
Services
• Medical and
Dental
Services
• Midwives,
nurses,
physiotherapis
ts,
paramedical
services
FINANCIAL
SERVICES
• All instruments
and insurance
related
services
HEALTH
RELATED AND
SOCIAL
SERVICES
• Hospital
services
• Other human
health services
SECTORS AND SUB-SECTORS OF
GATS

6. BASIC PURPOSE OF GATS
i. Trade expansion
ii. Transparency in trade
iii. Progressive liberalization
iv. Promoting economic growth of all trading partners
v. Development of developing countries
vi. Increase participation of developing countries
vii. Promote all member interest on a mutually advantageous basis
viii. Secure balance of rights and obligations

7. PARTICIPANTS
All WTO members are at the same time members of the GATS and to varying degrees, have
assumed commitments in individual service sectors.
WHAT ARE THE SERVICES COVERED?
The GATS applies in principle to all service sectors, with two exceptions. Article I (3) of the GATS
excludes “services supplied in the exercise of governmental authority”. These are services that are
supplied neither on a commercial basis nor in competition with other suppliers. Cases in point are
social security schemes and any other public service, such as health or education, that is provided
at non-market conditions. Furthermore, the Annex on Air Transport Services exempts from
coverage measures affecting air traffic rights and services directly related to the exercise of such
rights.

8. The ‘Most Favored Nation’ Clause
Transparency
Measures
Conditional Obligations
Market Access
National Treatment
PROVISIONS

9. MOST FAVOURED NATION
MFN means treating one’s trading partners equally. Under GATS, if a
country allows foreign competition in a given sector, equal opportunities in
that sector should be given to service 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 and it applies moreover to mutual exclusion treatment. EXAMPLE: if
one country chooses to exclude another country from providing a certain
service, all WTO members should be excluded. MFN applies to all services,
but some special temporary exemptions have been allowed.

10. TRANSPARENCY
In order to guarantee transparency, governments must publish all relevant
laws and regulations. Inquiry points within their administrations should help
foreign companies and governments obtain information about regulations in
any service sector. Moreover governments have to notify the WTO of any
changes in regulations that apply to the services that come under specific
commitments.

11. MEASURES
These include all laws, regulations and practices from national, regional or
local governments that may affect trade; this term applies to all sectors.

12. CONDITIONAL OBLIGATIONS
There are several conditional obligations attached to national schedules.
Example: market access and national treatment. These apply only to
commitments that are listed in national schedules and whose degree and
extent is determined by country.

13. MARKET ACCESS
The lists of market access commitments (along with any limitations and
exemptions from national treatment) are negotiated as multilateral
packages, although bilateral bargaining sessions are needed to develop the
packages. The commitments therefore contain the negotiated and
guaranteed conditions for conducting international trade in services. If a
recorded condition is to be changed for the worse, then the government has
to give at least three months’ notice and it has to negotiate compensation
with affected countries. But the commitments can be improved at any time.

14. NATIONAL TREATMENT
This principle means treating one’s own nationals and foreigners equally. In
services, this means that once a foreign company has been allowed to
supply a service in one’s country there should be no discrimination between
the foreign and local companies. Under GATS, a country only has to apply
this principle when it has made a specific commitment to provide foreigners
access to its services market. It does not have to apply national treatment in
sectors where it has made no commitment. Even in the commitments, GATS
does allow some limits on national treatment.

15. The definition of trade in services in GATS covers
the four modes of supply. Distinctions among these
modes are based on whether the service supplier
and the consumer are present in the same country
or different countries when the transaction occurs.
MODES OF
SUPPLY

16. CROSS BORDER SUPPLY
Cross-border supply, takes place when a service is produced in one country but consumed in
another one. Like traditional trade, when a good is delivered across a border both the supplier
and the consumer remain in their respective countries. For example, a law firm may deliver legal
advice by telephone or through the internet to a client overseas, or an individual from one
country may purchase and download a computer game from a software firm residing in another
country.

17. CONSUMPTION ABROAD
Consumption abroad, takes place when services are consumed in the
country where they are produced. The consumer or his/her property are
abroad when the service is supplied. For example, a tourist may visit a
museum while abroad or the property of a consumer, such as a ship, may
be sent abroad to be repaired.

18. COMMERCIAL PRESENCE
Commercial presence, takes place when a service supplier establishes a
presence abroad in order to provide services. For example, a financial
institution may open a branch in another country in order to provide financial
services there. Transactions in services under mode 3 are not included in
Canada’s international trade in services estimates. The information on mode
3 is rather available through the Foreign Affiliate Trade Statistics (FATS)
program. Sales of foreign-owned firms in the domestic economy (payments)
and sales of domestic owned firms in foreign economies (receipts) are used
as estimates for mode 3.

19. PRESENCE OF NATURAL
PERSONS
Presence of natural persons, takes place when an individual is present
abroad in order to provide a commercial service. The service is produced in
the country where it is consumed. For example, an engineering consultant
may travel abroad to oversee aspects of a building project or an employee
of a software firm may be sent abroad to deliver information technology
services.

20. WHY WAS IT NECESSARY TO INTRODUCE THREE
ADDITIONAL MODES OF SUPPLY APART FROM THE
TRADITIONAL CONCEPT OF CROSS BORDER TRADE?
The supply of many services often involves the simultaneous physical presence of both
producer and consumer. There are thus many instances in which, in order to be
commercially meaningful, trade commitments must extend to cross-border movements of
the consumer, the establishment of a commercial presence within a market, or the
temporary movement of the service provider.

21. POSITIVE LIST
APPROACH
 The GATS utilize a 'positive list' approach in
the schedule of specific commitments.
 This opens to market access and national
treatment only the specific sectors selected
by each member for inclusion. In other
words, members are free to choose which
sectors they wish to liberate ( or negotiate
on) at the time on negotiation.
 The schedule lists all measures etc., that
limit market access and national treatment in
these specific sectors. Therefore the positive
list approach is called 'hybrid approach' by
some.

22. IMPACT ON INDIAN
ECONOMY
 One of the most growing areas of activity is the service sector today. Traditionally, apart
from financial, communication and tourism new parts of service sector such as
environment, education and counselling are emerging service sectors which has led to a
world boom.
 The developed countries have dominated this expansion of services, accordingly for
three quarter of the world services output.
 In 1997, service sector output was valued 6.1 trillion$ or 61 per cent of global output of
goods and services.
 One important method for developing the service sector is to allow FDI into Indian
economy. The Justification is that the requirement for capital for upgradation, expansion
and modernisation of most services is so large that we just do not have resources to
invest in them.

23. HEALTH SECTOR
 FDI would help upgrade standards in hospitals and bring in technology and better
management practices.
 Although, there is possibility that good doctors will leave government hospitals and
join the foreign ones for higher pays and more attractive working conditions.
 This will create an internal brain drain.
 However, on the same count it would be wrong to deprive the health sector of FDI
since there will be an overall improvement of standards in health care.

24. EDUCATIONAL
SERVICES
 India has to pay serious attention to GATS agreements as applicable to education services,
identify opportunities and competitiveness in various sub-sectors and negotiate commitments
accordingly.
 There is vast potentialities in all levels of education, i.e. primary, secondary, higher education,
distant education, education testing services, education materials, on-line courses, editions of
books and sale of education CDs etc.
 It also involves the services generated by movement of students and teachers for the sake of
education. The actual presence of educational service providers each as university or its service
brands will also generates services.
 It must be understood that GATS does not make mandatory for member countries to open up
all segments of education. Based on perspectives, gains, specific segments can be opened up
in phased manner.

25. BANKING
SERVICES
 As important constituents of the financial reforms strategy adopted in 1990s has been the
opening of the economy to foreign investment-both direct and portfolio. As reforms
gathered momentum particularly the current account convertibility in 1994-95, foreign
direct investment (FDI) and portfolio capital flows began to predominance over often form
of capital inflows.
 India is also looking for ways of improving competitive conditions in domestic financial
sector to raise efficiency by attracting more foreign capital inflows, particularly more long-
term equity investment.

26. CROSS BORDER MOVEMENT OF
LABOUR
 Globalisation has set in motion in forces, which are creating a demand for labour mobility
across borders as developing institutions on supply side to meet this demand.
 The movement of labour from countries where there is a labour surplus to countries where
there is a labour shortage. The WTO has overlooked this issue as this can be beneficial
for developing countries.
 Equivalent of WTO concept of 'national treatment‘ for migrant labourers.

27. According to the World Development Movement's report, it goes on to show that there are
concerns on a number of fronts including the following:
 GATS covers basic services like water, health and education. These are basic necessities –
not things that can be left to the market. It should be the duty of governments to ensure that
even the poorest have access to such services, whether or not they can afford to pay. Yet,
water supply in developing countries appears to be a major target for European companies in
the current negotiations.
 GATS rules are not just limited to the cross-border trade in services. They also prevent some
forms of government regulation of foreign investors, that is, of multinational companies setting
up shop in their country.
 The GATS therefore extends beyond other trade agreements, preventing governments from
following their own national development strategies and ensuring that local people actually
benefit from the presence of multinational corporations.

28. CRITICISMS

29.  The GATS agreement 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 the option to exclude any specific service from
liberalisation under GATS, they are also under pressure from international business
interests to refrain from excluding any service "provided on a commercial basis". Important
public utilities such as water and electricity 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.[5]
 This definition defines virtually any public service as being "provided on a commercial basis"
and is already extending into such areas as police, the military, prisons, the justice system,
public administration, and government. Over a fairly short 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, to be restructured, marketised, contracted out to for-profit providers, and
eventually fully privatised and available only to those who can pay for them. This process is
currently far advanced in most countries, usually (and intentionally) without properly

30. CONCLUSION
 Its goal is to basically further liberalize services in the public domain. While private businesses
providing public services can have its merits, the concerns with something like GATS has been
along the lines of concentrated ownership, foreign ownership by large transnationals and rules
limiting or affecting the ability of national governments to appropriately hold companies providing
these services sufficiently accountable.
 On a broad range of "services" this therefore has a wider impact than many other (often also
undemocratic) international trade and investment agreements.
 Transnational corporations [TNCs] and their strong business lobby groups have helped make the
US and European Union (EU) push the GATS hard to developing countries.
 If given the go ahead, it too would be seen to have a “devastating effects on the ability of
governments to meet the needs of the poorest and most powerless of their citizens”.

31.  Commitments made by governments under GATS are effectively irreversible. The
privatisation and deregulation of service provision is highly controversial, yet governments
are not only signing away their own right to regulate – but the right of future generations to
implement different policies.
 The GATS therefore extends beyond other trade agreements, preventing governments from
following their own national development strategies and ensuring that local people actually
benefit from the presence of multinational corporations.
 Commitments made by governments under GATS are effectively irreversible. The
privatisation and deregulation of service provision is highly controversial, yet governments
are not only signing away their own right to regulate – but the right of future generations to
implement different policies.

32. THANK YOU!
WTO GROUP C
BBA FOREIGN TRADE
2018-2021