General Agreement on Trade in Services

The General Agreement on Trade in Services (GATS) is a set of multilateral, legally enforceable rules covering international trade in services. The basic principles of GATS are:

*All services are covered by GATS
*Most-favored nation treatment applies to all services, except the one-off temporary exemptions.
* National treatment applies in the areas where commitments are made
* Transparency in regulation and inquiry points.
* Regulation have to be objective and reasonable
* International payments: normally unrestricted.
* Individual countries’ commitments: negotiated and bound.
* Progressive liberalization: through further negotiations.

The agreement covers all internationally-traded services and can be applied in any of the four following modes:

*Services supplied from one country to another (e.g. international telephone calls), officially known as ‘cross border supply.
* Consumers of firms making use of a service in another country (e.g. tourism), officially known as ‘consumption abroad.
* A foreign company setting up subsidiaries or branches to provide services in another country (e.g. foreign banks setting up operations in a country), officially ‘commercial presence’.
* Individuals traveling from their own country to supply service in another (e.g. fashion models of consultants), officially ‘presence of natural persons.

Individual countries’ commitments to open markets in specific sectors were the outcome of negotiations . The commitments appear in ‘schedules’ that list the sectors being opened the extent of market access being given in those sectors and any limitation on national treatment. These commitments are bound like bound tariffs. These can only be modified or withdrawn after negotiations with affected countries.

The Uruguay Round was only the beginning. At the end of the Urugauy Round, government agreed to continue negotiations in four areas: basic telecommunications, maritime transport, movement of natural persons, and financial services. Some commitments in some of these sectors had been made in the Urugauy Round agreements.

Basic Telecommunications: This was an area where governments did not offer commitments during the Uruguay Round – essentially because the privatization of government monopolies was a complex issue in many countries. Sophisticated value-added telecommunication services, which are more commonly provided on a private basis, were included in many of the original GATS schedules. The negotiations on basic telecommunication ended in February 1997.

Maritime Transport: maritime transport negotiations wee originally schedule to end in June 1996, but participants failed to agree ion a package of commitments. The talks resumed with the new services round in April 2000. Some commitment are already included in some countries’ schedules covering the three main areas in this sector: access to any use of port facilities ; auxillary services; and ocean transport.

Movement of natural Persons: Movement of natural persons refers to the entry and temporary stay of persons for the purpose of providing a service. It does not relate to person seeking permanent employment or permanent employment or permanent residence in a country. Some commitments are already included in the schedules but it was agreed that negotiations to improve commitments would take place in the six months after the WTO came into force. These had so far achieved modest results.

Financial Services: Financial services is another area where further negotiations were scheduled to improve on the commitments included in the initial Uruguay Round schedules. Officially the first set of talks ended in July 1995, but the governments decided that more could be achieved if further talks could be held. These latest negotiations ended in December 1997.

Other Issues: GATS identified several more issues for further negotiation. One set of negotiations would create rules that are not yet included in GATS: rules dealing with subsidies, overnment procurement and safeguard measures.

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