General Agreement on Trade in Services

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 service sector, 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. However, upon accession, Members may introduce temporary exemptions to this rule.

Historical background

Before the WTO's Uruguay Round negotiations began in 1986, public services such as healthcare, postal services, education, etc. were not included in international trade agreements. Most such services have traditionally been classed as domestic activities, difficult to trade across borders, notwithstanding the fact that for example educational services have been "exported" for as long as universities have been open to international students.

Nevertheless, some service sectors—in particular, international finance and maritime transport—have been largely open for centuries, as necessary components of merchandise trade. Other large sectors have undergone fundamental technical and regulatory changes in recent decades, opening them to private commercial participation and reducing barriers to entry. The development of information technologies and the internet have expanded the range of internationally tradeable service products to include a range of commercial activities such as medicine, distance learning, engineering, architecture, advertising and freight forwarding.

While the overall goal of the GATS is to remove barriers to trade, members are free to choose which sectors are to be progressively liberalised, under which mode of supply a particular sector would be covered under, and to what extent to which liberalisation will occur over a given period of time. Members' commitments are governed by a "ratchet effect", meaning that commitments are one-way and should not be wound back once entered into. Article XXI allows Members to withdraw commitments and so far two members have used this option (USA and EU). In November 2008, Bolivia notified that it will withdraw its health services commitments.

Some activist groups consider that the GATS risks undermining the ability and authority of governments to regulate commercial activities within their boundaries, with the effect of ceding power to business interests over the interests of citizens. In 2003 'GATSwatch' network published a critical statement which was supported in 2003 by over 500 organisations in 60 countries. ^[1].

Four Modes of Supply

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

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 refers to the name of the official WTO document, MTN.GNS/W/120.

Criticisms

The GATS document has been criticized for tending to substitute the authority of national legislation and judiciary with that of a GATS Disputes Panel conducting closed hearings. WTO member-government spokespersons are obliged to dismiss such criticism because of prior commitment to perceived benefits of prevailing commercial principles of competition and 'liberalisation'.

While national governments have an option to exclude any specific service from liberalisation under the GATS, they are also under international pressure, from business interests, to refrain from so excluding any service "provided on a commercial basis". However, important public utilities including water and electricity supply most commonly involve purchase by consumers and are thus demonstrably "provided on a commercial basis". The same may be said of many health and education services which are sought to be 'exported' by some countries as profitable industries^[2].

References

1. ^ GATSwatch, 2003
2. ^ E.g., in 2003, the Confederation of University Faculty Associations of British Columbia urged the government of Canada to specify exclusion of post-secondary education, saying in a submission

   If GATS were applied to the Canadian education sector, the effects would be profound. Education would no longer be considered a public service; instead it would be categorized as merely another commercial enterprise.

   Source: Background Paper on GATS and Post-secondary Education

Further reading

• Clift, R. Background Paper on the General Agreement on Trade in Services and Post-Secondary Education in Canada [1]

See also

• Trade in Services
• Trade in Services Statistics
• World Trade Organization
• World Development Movement