General Agreement on Trade in Services
Encyclopedia
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.
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, foreign participation has existed in many countries prior to the GATS.
Nonetheless, most 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", i.e. marketised and privatised, 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. This reason for this is the creation of a stable trading climate. 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.
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.
This definition makes virtually any public service "provided on a commercial basis" except for certain areas as police, the military, justice system and public administration. Over a long time perspective, this could open up for the privatisation or marketisation of large parts, and possibly all, of what today are considered public services
currently available for the whole population of a country as a social entitlement, paid for out of general taxation, to be restructured, marketised, contracted out to for-profit providers, and eventually fully privatised and only available to those who can pay for them. This process is currently far advanced in most countries, usually (and intentionally) without properly informing or consulting the public as to whether or not this is what they want.
Treaty
A treaty is an express agreement under international law entered into by actors in international law, namely sovereign states and international organizations. A treaty may also be known as an agreement, protocol, covenant, convention or exchange of letters, among other terms...
of the World Trade Organization
World Trade Organization
The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
(WTO) that entered into force in January 1995 as a result of the Uruguay Round
Uruguay Round
The Uruguay Round was the 8th round of Multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade , spanning from 1986-1994 and embracing 123 countries as “contracting parties”. The Round transformed the GATT into the World Trade Organization...
negotiations. The treaty was created to extend the multilateral trading system to service sector
Tertiary sector of industry
The tertiary sector of the economy is one of the three economic sectors, the others being the secondary sector and the primary sector .The service sector consists of the "soft" parts of the economy, i.e...
, in the same way the General Agreement on Tariffs and Trade
General Agreement on Tariffs and Trade
The General Agreement on Tariffs and Trade was negotiated during the UN Conference on Trade and Employment and was the outcome of the failure of negotiating governments to create the International Trade Organization . GATT was signed in 1947 and lasted until 1993, when it was replaced by the World...
(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 RoundUruguay Round
The Uruguay Round was the 8th round of Multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade , spanning from 1986-1994 and embracing 123 countries as “contracting parties”. The Round transformed the GATT into the World Trade Organization...
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, foreign participation has existed in many countries prior to the GATS.
Nonetheless, most 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", i.e. marketised and privatised, 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
Ratchet effect
A metaphorical ratchet effect is an instance of the restrained ability of human processes to be reversed once a specific thing has happened, analogous with the mechanical ratchet that holds the spring tight as a clock is wound up...
", meaning that commitments are one-way and should not be wound back once entered into. This reason for this is the creation of a stable trading climate. 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.
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 Natural person Variously, in jurisprudence, a natural person is a human being, as opposed to an artificial, legal or juristic person, i.e., an organization that the law treats for some purposes as if it were a person distinct from its members or owner... |
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| Note: From the document MTN.GNS/W/124, available on the World Trade Organization World Trade Organization The World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948... Website, posted courtesy of ISTIA |
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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 legislationLegislature
A legislature is a kind of deliberative assembly with the power to pass, amend, and repeal laws. The law created by a legislature is called legislation or statutory law. In addition to enacting laws, legislatures usually have exclusive authority to raise or lower taxes and adopt the budget and...
and judiciary
Judiciary
The judiciary is the system of courts that interprets and applies the law in the name of the state. The judiciary also provides a mechanism for the resolution of disputes...
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.
This definition makes virtually any public service "provided on a commercial basis" except for certain areas as police, the military, justice system and public administration. Over a long time perspective, this could open up for the privatisation or marketisation of large parts, and possibly all, of what today are considered public services
Public services
Public services is a term usually used to mean services provided by government to its citizens, either directly or by financing private provision of services. The term is associated with a social consensus that certain services should be available to all, regardless of income...
currently available for the whole population of a country as a social entitlement, paid for out of general taxation, to be restructured, marketised, contracted out to for-profit providers, and eventually fully privatised and only available to those who can pay for them. This process is currently far advanced in most countries, usually (and intentionally) without properly informing or consulting the public as to whether or not this is what they want.
See also
- European Services ForumEuropean Services ForumThe European Services Forum is a network of representatives from the European services sector committed to actively promoting the liberalisation of international trade in services. It was created in April 1999 in order to give recommandations to the European Commission in the GATS negotiations of...
- Foreign Affiliate Trade StatisticsForeign Affiliate Trade StatisticsForeign affiliate trade statistics , also known as transnational corporation data details the economic operations of foreign direct investment-based enterprises....
- Trade in ServicesTrade in servicesTrade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer. Trade in services takes place between a producer and consumer that are, in legal terms, based in different countries, or economies, this is called International Trade in...
- Trade in Services StatisticsTrade in services statisticsTrade in services statistics are economic statistics which detail international trade in services. They received a great deal of focus at the advent of services negotiations which took place under the Uruguay Round, which became part of the General Agreement on Trade in Services, one of the four...
- World Development MovementWorld Development MovementThe World Development Movement is a membership organisation in the United Kingdom which campaigns on issues of global justice and development in the Global South....
- World Trade OrganizationWorld Trade OrganizationThe World Trade Organization is an organization that intends to supervise and liberalize international trade. The organization officially commenced on January 1, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade , which commenced in 1948...
Further reading
- Text of the General Agreement on Trade in Services wto.org
- Clift, R. Background Paper on the General Agreement on Trade in Services and Post-Secondary Education in Canada, cufa.bc.ca
- GATS, Privatisation, and Health
- World Development Movement
- Union Network International