General Agreement on Trade in Services

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The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to services, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade.

All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well.

1 Rationale
2 Four Modes of Supply
3 Sectors addressed
4 See also
5 External

[edit] Rationale

Before the WTO's Uruguay Round of negotiations which began in 1984, services were not included in international trade agreements. Large segments of the services economy have traditionally been considered as domestic activities that are difficult to trade over borders, and some services sectors have been viewed as domains of government ownership and control, given their infrastructural importance and the perceived existence, in some cases, of natural monopolies. A third important group of sectors, including health, education and water services are considered in many countries as governmental responsibilities, which should be tightly regulated and not be left to the exclusive rule of markets.

Nevertheless, some services sectors, in particular international finance and maritime transport, have been largely open for centuries--as the natural complements to merchandise trade. Other large sectors have undergone fundamental technical and regulatory changes in recent decades, opening them to private commercial participation and reducing existing barriers to entry. The emergence of the Internet has helped to create a range of internationally tradeable product variants--from e-banking to tele-health and distance learning. A growing number of governments have gradually exposed previous monopoly domains to competition; telecommunication is a case in point.

[edit] Four Modes of Supply

The GATS agreement covers four modes of supply for the delivery of services in cross-border trade:

	Criteria	Supplier Presence
Mode 1: Cross-border supply	Service delivered within the territory of the Member, from the territory of another Member	Service supplier not present within the territory of the member
Mode 2: Consumption abroad	Service delivered outside the territory of the Member, in the territory of another Member, to a service consumer of the Member
Mode 3: Commercial presence	Service delivered within the territory of the Member, through the commercial presence of the supplier	Service supplier present within the territory of the Member
Mode 4: Presence of a natural person	Service delivered within the territory of the Member, with supplier present as a natural person	Service supplier present within the territory of the Member
Note: From the document MTN.GNS/W/124, available on the World Trade Organization Website, posted courtesy of ISTIA

Countries can freely decide where to liberalize on a sector-by-sector basis, including which specific mode of supply they want to cover for a given sector.

[edit] Sectors addressed

Services Sector Classifications addressed in the GATS are defined in the so-called "W/120 list", which provides a list of all sectors which can be negotiated under the GATS. The title "W/120" refers to the name of the official WTO document, MTN.GNS/W/120.