General Agreement on Trade in Services

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General Agreement on Trade in Services

• Dr. (Mrs.) Vijaya Katti
• Professor Chairperson
• Management Development Programmes
• Indian Institute of Foreign Trade
• New Delhi 110016

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Why GATS Came into Existence

• The Developed Nations Fought for the Inclusion
• Reason
• From the eighties major revolution setting a
  phenomenal pace in the development of the sector
  started
• Envisaged High Growth Potential in exporting to
  the developing world
• Liberalisation beneficial to them without any
  risk involved

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Definition of Trade in Services

• The GATS does not define services but does
  define trade in services. The definition
  covers not only the cross-border supply of
  services but also transactions involving the
  cross-border movement of capital and labour.

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GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)

• Trade in Services different from Trade in Goods
• Cross Border Supply in Goods vs. four modes of
  supply in Services namely Cross Border Supply,
  Consumption Abroad, Commercial Presence, Movement
  of Natural Persons.
• Control through Regulations No Tariffs
• Obligations General (MFN,Transparency) vs.
  Conditional (National treatment)

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FOUR MODES OF SUPPLY OF SERVICES
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GATS - MAIN PRINCIPLES

• Universal obligations -
• MFN,
• Transparency
• Supporting obligations -
• Domestic regulations
• Monopolies and Exclusive Service
  Suppliers
• Business practices
• Recognition of qualification
• Economic integration

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NATURE OF GATS

• Positive list approach involving Choice of
• Services sectors in undertaking commitments
• Modes of Supply in undertaking commitments
• Horizontal Commitment or sectoral commitments
• Negative Listing of Limitations on
• - Market Access
• - National Treatment
• Additional Commitments
• GATS requires members to undertake binding
  commitments which add to certainty and
  predictability of trading regime in practice
  members exercise the choice of making
  commitments depending on various factors
  including the return which they expect from
  making commitments.

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Universal Coverage
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ARCADIA - SCHEDULE OF SPECIFIC COMMITMENTS
Modes of supply (1) Cross-border supply (2)
Consumption supply (3) Commercial presence (4)
Presence of natural persons
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Ongoing Negotiations Core provisions

• Article XIX of GATS
• Members shall enter into successive rounds of
  negotiations, beginning not later than five years
  from the date of entry into force of the WTO
  Agreement with a view to achieving a
  progressively higher level of liberalization
• Due respect for national policy objectives and
  levels of development
• Flexibility for developing countries to open
  fewer sectors and liberalize fewer types of
  transactions.
• Article IV1
• Facilitate increasing participation of developing
  country Members in world trade (access to
  technology and distribution channels,
  liberalization of sectors and modes of export
  interest)
• Annex on Article II Exemptions
• Negotiation of existing MFN Exemptions

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Ongoing Negotiations Rule Making

• 1. Rule-making Programme
• Safeguards,
• Government Procurement,
• Subsidies
• 2. Disciplines on Domestic Regulation

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NEGOTIATING CALENDER

• As per Doha Ministerial Declaration read with
  the Guidelines and Procedures for negotiations
  (NGP), the following calender is mandated
• Initial Request 30th June, 2002
• Initial Offers - 31st March, 2003
• Safeguards - 15th March 2004
• Government Procurement/ Subsidies/ Domestic
  Regulations aim to complete negotiations prior
  to completion of Negotiations on Specific
  Commitments
• Close of negotiations by January 1, 2005

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Guidelines and Procedure for Negotiations

• Progressive Liberalisation of Trade in Services
• Right to regulate re-regulate supply of
  services
• Maintain structure and principles of GATS
  including right to choose sectors and modes.
• No a- priori exclusion of any Sector or Mode of
  supply Special attention to sectors and modes of
  interest to developing countries
• Request - offer, the main method of
  negotiations.

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Contd

• Starting point of negotiations current
  schedules of commitments
• Flexibility in making Commitments for developing
  countries.
• Credit for Autonomous Liberalisation.
• Assessment of Trade in Services and adjustment of
  negotiations accordingly.

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The Request Offer ProcessRelevant Provisions

• Article XIX4 The process of progressive
  liberalization shall be advanced through
  bilateral, plurilateral or multilateral
  negotiations directed towards increasing the
  general level of specific commitments
• Negotiating Guidelines (S/L/93) The main method
  of negotiation shall be the request-offer
  approach.

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Formulating Initial RequestsRelevant Steps

• 1.Evaluation of Trading Opportunities
  (consultations with relevant Ministries,
  associations, etc.)
• II.Examination of Current Situation under GATS
• III.Definition of Negotiating Objective
• -Inclusion of additional sectors?
• -Improvements in existing Commitments on Market
  Access and National Treatment?
• -Scheduling of Additional Commitments
  (ArtXVIII)?
• -Removal of MFN Exemptions?

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IV. Circulation of REQUESTS

• No specified format
• Only to the relevant trading (s)
• Without further procedural obligations(no
  notification or transparency requirements, etc.)

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Formulating Initial OFFERSRelevant Steps

• Assessment of the REQUESTS Received
• Evaluation of Trade and Development interests
• Promotion of FDI?
• Improvements in business and/or social
  infrastructures?
• Promotion of technology transfer?
• Reduction/elimination of domestic supply gaps?
• Other social/economic/regional policy objectives?

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Contd

• iii. Need for Accompanying Regulatory Reform?
• Preparation and Circulation of initial OFFERS
• Highlight envisaged improvements in draft
  schedule and/or List of MFN Exemptions
• Consider scope for additional technical
  modifications and clarifications
• Circulate to all Members

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Issues to be considered in making offers

• Whether no commitment or Full or Partial
  Commitment
• In case of partial commitment the limitations to
  be attached in order to take care of particular
  concerns

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Contd.

• Market access limitations such as
• limits on number of suppliers,
• total value of service transactions,
• total number of service operations,
• total no. of natural persons to be employed by a
  service supplier,
• the percentage of foreign equity and the type of
  legal presence

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The MFN and National Treatment Under GATS

• MFN - Favour one, favour all. 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. MFN
  applies to all services, but some special
  temporary exemptions have been allowed
• National Treatment - equal treatment for
  foreigners and one's own nationals. Applies where
  a country has made a specific commitment, and
  exemptions are allowed.

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GATS 2000 Negotiations Initial Offers

• Till date more than 30 WTO members have made
  initial offers.
• Offers are conditional on negotiations and made
  by trading partners
• Offers are restrictive Limited improvements over
  UR commitments

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Contd

• Most countries have not bound the status quo
• More full commitments in Mode 1
• Removal of some limitations, esp. in Mode 3
• Economic needs test
• Form of legal entity
• Foreign equity participation
• Scope of operations
• Authorization/approval requirements

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Contd

• Sectoral offers on Mode 4 remain unbound
• Some improvements in horizontal offers on Mode 4
• Expanded to include contractual service
  suppliers, independent professionals, graduate
  trainees (EU offer)
• Requirement of economic needs and labour market
  tests removed/relaxed for intracorporate
  transferees, professionals, business visitors
  (Canada, EU)
• Period of stay extended for business visitors,
  executives, senior managers, specialists (Canada,
  New Zealand)
• Clarified definitions of service provider
  categories and associated qualification and
  training requirements

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Contd

• However certain problems remain
• Linking of Mode 4 to immigration rules and
  regulations
• Discretionary scope in recognition of training
  and qualifications
• Conditions on prior employment, duration of stay,
  inter-firm and geographic mobility, wages
• Numerical ceilings and quotas

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THANK YOU