GATS: General Agreement on Trade in Services

GATS: General Agreement on Trade in Services
27 August 2020

GATS: General Agreement on Trade in Services

The General Agreement On Trade In Services (GATS) is the foremost set of international rules for international trade in services. The Indian nation has been a signatory to this Agreement since its arrival into force in 1995. General Agreement On Trade In Services set out a framework of law binding rules which govern the conduct of world trade in services. It is assisted by a number of schedules of specific commitments undertaken by individual World Trade Organization Members. These commitments tie Members not to introduce more restrictive rules which could have a harmful effect on trade. India made initial commitments at the time of the entry of the General Agreement On Trade In Services (GATS) into force. The commitments that have been arranged by India so far are accessible on the Ministry of Commerce’s website. The General Agreement On Trade In Services (GATS) has two principal objectives, i.e. first, to ensure that all signatories are treated in an equitable manner when accessing foreign markets; and second, to encourage progressive liberalization of trade in services.

The pillars of the General Agreement On Trade In Services (GATS) are general obligations, which are nearly applicable to all members and services and specific commitments resulting from negotiations, restricted to modes of supply and sectors in which a member has chosen to undertake access obligations. General obligations involve Transparency, MFN etc. While specific commitments include national treatment and market access.

The General Agreement On Trade In Services (GATS) is applicable in principle to all service sectors, with two exceptions. Article I(3) of the GATS cuts out “services supplied in the exercise of governmental authority”. These are those services that are supplied neither on a competition basis nor on a commercial basis with other suppliers. Furthermore, the Annex on Air Transport Services exempts from coverage measures affecting air traffic services and rights directly in relation to the exercise of such rights.

The General Agreement On Trade In Services (GATS) explicitly recognizes the right of members to manage and regulate the supply of services in pursuit of their own policy objectives. Although, the Agreement comprises provisions that ensure that service regulations are administered in an objective, reasonable, and impartial manner.

Modes Of Supply

The General Agreement On Trade In Services (GATS) describes trade in services like the supply of a service through any of four modes of supply which are the following as under :

  1. Cross Border Supply: It takes place when a service crosses a national border. It involves the supply of services flowing from the territory of one member into the territory of another member. In this case, services are supplied through Postal infrastructure, Tele-Communication.
  2. Consumption abroad: It means when a consumer of services moves into another member territory to obtain a service. For example, Patients coming to India from the US for treatment, Tourists etc.
  3. Commercial Presence: It involves setting up of territorial presence in another member territory by a service supplier to provide a service. For example, Hotel chains, Hospital chains etc.
  4. Presence of natural persons: It means when a person of one member enters the territory of another member to supply a service. For example, Doctors going abroad to provide service, Teachers going to foreign universities for teaching etc.
Basic Obligations Under GATS 

Obligations composed in the General Agreement On Trade In Services (GATS) may be classified into two broad groups i.e. general obligations that are applicable to all members and services sectors, and obligations that are applicable only to the sectors inscribed in a member's schedule of commitments. Such commitments are provided in individual schedules whose scope may vary widely between members. These obligations are the following as under :

1. General Obligations: It includes all the members and services and the following as under:

  1. MFN Treatment: Most Favoured Nation treatment means treating one’s trading partners with equality. Under the General Agreement On Trade In Services (GATS), if a nation permits foreign competition in a sector then equal opportunities in that sector should be provided to service providers from all other WTO members. It is based on “Favour one, favour all principle”.
  2. Transparency: Members are required to publish promptly “all relevant measures of general application” that affect the operation of the agreement. Members should also notify the Council for Trade in Services of the changed or new laws, regulations that affect trade in services covered by their specific commitments under the agreement. Each member is required to establish an enquiry point, to respond to requests from other members for information.

2. Specific Obligations: Obligations which are applicable on the basis of commitments, laid down in individual country schedules regarding market access and national treatment in specifically designated sectors are as under:

  1. Market Access: The permitting of market access is a commitment undertaken by individual Members in specified sectors after negotiations. It may be made subject to one or more limitations. For example, restrictions may be inflicted on the number of service operations, services suppliers, or employees in a sector.
  2. National Treatment: National Treatment requires equivalent treatment for domestic providers and foreign providers. Once a foreign supplier has been permitted to supply a service in one’s nation then there should be no discrimination in treatment among the domestic and foreign providers. This is not the same as MFN.

All the members are permitted to institute or maintain measures in contravention of their obligations under the Agreement, which also includes the MFN requirement or specific commitments in specific circumstances. These circumstances cover measures that are necessary to protect public morals or maintain public order, protect human, plant or animal health or life etc.