General Agreement on Trade in

Services (GATS)

Presented By:
 mANISHA sHUKLA

 sAUD iMTIAZ

 nEHA jOSHI

 pALLAVI aRUN

 pAWAN gUPTA
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
Services: Economic importance

Share in Production and Employment:
depending on resource structure and level of
development of an economy


Share in Total World Trade:
more rapid expansion than merchandise trade
Chart I: Share of services in
production (GDP, 2000)

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
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e s* n o m
a n ti b eru ine d sia
nd oo n o
at ra gd ol en om P p In ay ga er ng
St F i n P g l li ip al A
d K r o M U am
ti e d A C Ph C
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U ni
U
Services Industry Agriculture
Services exports by economic groups

DEVELOPING
COUNTRIES

 26%

 74%

Developed
countries
 Application of trade theory
6

 Trade in services, in general, display the same

characteristics 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 cannot explain
the pattern of trade in services
 The removal or reduction of barriers to trade in
services would contribute to major increases in global
welfare
 Developing countries
7

• 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
 What is GATS?
8

 Implemented January 1995

 140 member countries
 All sectors (except government and air traffic
rights)
 GATS: Modes of supply
9

 Mode 1: Cross border supply

 relatively few bound commitments
 Mode 2: Consumption abroad
 relatively open
 Mode 3: Commercial presence
 market access restrictions prevail
 Mode 4: Movement of natural persons
 most restrictive
 Modes of trade
MODE MEANING EXAMPLE
Mode 1 Trade takes place from the territory of - Telehealth
Cross-border trade country A into that of B - Passing of information by
means of fax or email

Mode 2 Services consumed by nationals of - Tourism

Consumption abroad country A in territory of country B - Consumers who cross
borders to obtain medical
treatment
Mode 3 A service supplier of country A - Establishment of a private
Commercial crosses the border to establish and hospital by a European
presence provide a service in country B company in Ecuador

Mode 4 Temporary movement from country A - Doctors moving to another

Movement of natural to B to supply a service country to temporarily
persons provide their services
 GATS: Coverage
11
 Infrastructure services, capital
intensive, scale economies
 Communication
 Transport
• Traditionally “liberal”
services
– Distribution
– Tourism
• Strong institutional & regulatory
difference between jurisdictions
– Financial services
– Business services
– Health services
– Education
• Other
– Environmental services
– Recreation
– Culture
– Sport
– Construction
 GATS: Obligations
12

 General
 MFN treatment
 Transparency
 Specific
 Market access
 National treatment
Most-favoured-nation (MFN) treatment

MFN means treating one’s 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 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.)
Transparency
Publish all relevant laws and regulations, and set up
enquiry points within their bureaucracies.
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
 GATS commitments:
16

 Guarantee the conditions of operation of

foreign services suppliers at a certain
negotiated level of market access and
national 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
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
GATS classifies 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
Special Provisions For Developing Countries

 In particular, the objective of facilitating the increasing

participation of developing countries in services trade has
been enshrined in the Preamble to the Agreement and
underlies the provisions of Article IV.
 This Article requires Members, inter alia, to negotiate
specific commitments relating to the strengthening of
developing countries' domestic services capacity; the
improvement of developing countries' access to
distribution channels and information networks; and the
liberalization of market access in areas of export interest to
these countries.