General Agreement on Trade in Services

The GATS treaty is a new treaty (since the Uruguay Round in ’94; it entered into force in ’95), in Annex 1b of the WTO Agreement, managing the liberalisation of trade in services, a very politically and economically sensitive area.

Modes of Supply

The four different modes of supply regulated by this agreement are defined in GATS Art. 1:2, as follows:

  1. Mode 1: Cross Border Supply
    • Service delivered within the territory of the Member, from the territory of another Member
    • Supplier is outside the territory
      • e.g. “E – Lectures”
  2. 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
    • Supplier is outside the territory
      • e.g. tourism, going to a university overseas
  3. Mode 3: Commercial Presence
    • Service delivered within the territory of the Member, through the commercial presence of the supplier
    • Supplier is inside the territory
      • E.g. a bank branch (BoA in Denmark)
  4. Mode 4: Presence of a natural person
    • Service delivered within the territory of the Member, with supplier present as a natural person
    • Supplier is inside the territory
    • Note: this is not the same as immigration, it is temporary, and this is a very politically chargedsection
      • E.g. An engineering contractor coming to solve an issue

Liberalisation in GATS

  • Given the political sensitivity of Services, especially since it can be in areas which the government usually is the supplier (e.g. telecoms), or may involve migration, the requirements are not as strict as in GATT
    • You choose to be bound by GATS, and can opt in to it for different modes of supply, or different sectors
    • However, if liberalisation does occur, it must occur within this framework
    • Like GATT, all liberalising actions are recorded in the schedules to the agreement

Cornerstones/GATT Parallels

  • MFN treatment (GATS Art. 2) for all measures “covered by this agreement” (GATS Art. 2:1) – although exceptions are available (Annex on Article Two Exceptions)
  • National treatment (GATS Art. 17) – again, only for measures bound in the schedules
  • Bindings (GATS Art. 18, Part 4)
  • Exceptions, paralleling GATT Arts 20, 21 exist (GATS Art 14, 14bis)

Other important measures

  • Transparency (GATS Art. 3) – there is an exemption for confidential information (GATS Art. 3bis)
  • Exceptions for close economic cooperation areas (GATS Arts 5; 5bis)
  • Monopolies (GATS Art. 8) may exist if they do not contradict commitments to MFN (GATS Art. 8:1, referring to GATS Art. 2)
    • Actions outside of the monopoly by a monopoly power – you must ensure no unfairness in competition (GATS Art. 8:2)
  • Government Procurement is outside of the scope of this agreement, even if it is for the procurement of a service – MFN does not bind it (GATS Art. 12)

Dispute Settlement

  • Dispute settlement is via the DSU (GATS Art. 23)
  • Retaliation can come via suspended commitments within GATS, as allowed for by DSU Art. 22 (Compensation and suspension of concessions)

Special sectors of services

  • There are special annexes for
    • Air services
    • Financial services
    • Telecoms
    • etc.

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