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This article provides useful notes on the General Agreement on Trade in Services (GATS) !
GATS was formulated in the Uruguay Round against the backdrop of the phenomenal expansion of the service economy all over the world.
It is very imperative to mention some important aspects of GATS, especially its coverage, obligation and disciplines:
Coverage:
The agreement covers all internally traded services – for example banking, telecommunications, tourism, professional services, etc. It has been defined in four ways (or “modes” of trading services):
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i. Service supplied from one country to another (e.g., international telephone calls), officially known as “cross-border supply” (in WTO jargon, “mode 1”)
ii. Consumers or firms making use of a service in another country (e.g. tourism), officially “consumption abroad” (“mode 2”)
iii. A foreign company setting up subsidiaries or branches to provide services in another country officially “presence of natural persons”
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iv. Individuals traveling from their own country to supply services in another, officially “presence of natural persons”
Principle of GATS:
Trades in these services, according to GATS, are to be governed by the following obligations and disciplines:
i. Most Favoured Nation treatment (MFN) is the cornerstone of GATS, whereby equal opportunity is to be given to service providers from all WTO members. However, there was a temporary exception to honour for a period of 10 years the already preferential agreements the member countries signed with trading partners.
ii. GATS bind commitment on market access and national treatment to all WTO members. According to WTO, “the commitments are virtually guaranteed conditions for foreign exporters and importers of services and investors in the sectors to do business”. It is important that government services, as those are not applied commercially, are not subject to GATS commitment. There is nothing in GATS that forces governments to privatise services and industries. In fact the word privatise does not even appear in GATS. Nor does it out law government or even private monopolies.
iii. It is obligatory on the part of the government to make all relevant laws and regulations governing services public. The governments also have to notify to WTO any changes in the regulations that apply to services.
iv. GATS stipulate that member governments should regulate services reasonably, objectively and impartially when they set standard, price, safety measures, etc.
v. Recognition of other countries’ qualifications (the licensing or certification of service suppliers) must not be discriminatory.
vi. Progressive liberalisation of the services sector is a goal of GATS, which is to be achieved through negotiations.