TRADE IN

SERVICES

PREPARED BY:
ANGELICA PAULA B. RICAFORT
HANNAH MAE L. SALOMON
TRADE IN SERVICES
DEFINITION

Trade in Services refers to the sale and delivery of

an intangible product, called a service, between a
producer and consumer. Trade in services that
takes place between a producer and consumer that
are, in legal terms, based in different countries is
called International Trade in Services.
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 The General Agreement on Trade
in Services (GATS) is a treaty of
the World Trade Organisation
(WTO) that entered into force in
GENERAL 1995. The objectives are: (a) to
create a reliable and predictable
AGREEMENT ON system of international rules for
TRADE IN SERVICES trade in services (b) to facilitate the
progressive liberalisation of
services markets.

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 TRADE IN SERVICES:
FOUR MODES OF SUPPLY
(MODE 1) Cross-border Supply – is analogous to trade in goods; arises when a
service crosses a national frontier, for example, the purchase of software or
insurance by a consumer from a supplier located abroad.

(Mode 2) Consumption Abroad – occurs when the consumer travels to the territory
of service supplier, for example, to purchase tourism, education, or health services.

(Mode 3) Commercial Presence – involves foreign direct investment, for example,

when a foreign bank or telecommunications firm establishes a branch or subsidiary
in the territory of a country.

(Mode 4) Presence/Movement of Natural Persons – occurs when independent

service provider or employees of a multinational firm temporarily move to another
country.
Most important
problems
confronting the 1. Protectionism
MNC in today’s 2. Control of trans-border data flows
international 3. Competition
services market. 4. The protection of intellectual property
5. Cultural barriers
 GOVERNMENT INTERVENTION IN
THE TRADE IN SERVICES

•Rights of establishment (meaning the right to establish a branch or subsidiary in a foreign country; for
example, many nations ban ownership of television stations by foreigners).
•Trade barriers, including limitations on the proportion of a market that can be served by a foreign company,
and discriminatory taxation of services providedInsert Image company.
by a foreign
•Foreign exchange controls; limits on remitting profits from service businesses.
•Government procurement barriers because government buys services only from “national” companies.
•Technical issues that may serve to keep out foreign firms, such as through the use of standards and
certification conditions.
•Government subsidies, counter veiling duties, and high customs valuation of foreign services, leading to
higher total tariffs.
•Licensing regulations that impose unreasonable terms of entry or insist on licensing as the only mode of entry.
•Restrictions on professional qualifications, including ban on entry of qualified service company personnel.
•Tolerance of commercial counterfeiting.
 REFERENCE

Vern Terpstra, Ravi Sarathy.

International Marketing. 1991.

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 THANK YOU!

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