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GATS TRAINING MODULE: CHAPTER 1

Basic Purpose and Concepts

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1.2 Basic Purpose

As stated in its Preamble, the GATS is intended to contribute to trade expansion “under conditions of transparency and progressive liberalization and as a means of promoting the economic growth of all trading partners and the development of developing countries”. Trade expansion is thus not seen as an end in itself, as some critical voices allege, but as an instrument to promote growth and development. The link with development is further reinforced by explicit references in the Preamble to the objective of increasing participation of developing countries in services trade and to the special economic situation and the development, trade and financial needs of the least-developed countries.

The GATS’ contribution to world services trade rests on two main pillars: (a) ensuring increased transparency and predictability of relevant rules and regulations, and (b) promoting progressive liberalization through successive rounds of negotiations. Within the framework of the Agreement, the latter concept is tantamount to improving market access and extending national treatment to foreign services and service suppliers across an increasing range of sectors. It does not, however, entail deregulation. Rather, the Agreement explicitly recognizes governments’ right to regulate, and introduce new regulations, to meet national policy objectives and the particular need of developing countries to exercise this right.

To a considerable degree, the drafters of the GATS took inspiration from the GATT and used terms and concepts that had already been tested for decades in merchandise trade. These include the principles of most-favoured-nation (MFN) treatment and national treatment. Comparable to its status under the GATT, MFN treatment — i.e. the obligation not to discriminate between fellow WTO Members — is an unconditional obligation, which applies across all services covered by GATS. The tariff schedules under the GATT, in which countries bind their tariff concessions on merchandise imports, find their equivalent in schedules of specific commitments which define the relevant trade conditions for services. 

Reflecting peculiarities of services trade, however, there are also notable differences in scope and content between the two agreements.

1. Unlike the GATT, the GATS covers measures affecting both the product (service) and the supplier.
    
2. The definition of services trade covers not only cross-border supply, but three additional forms of transaction (“modes of supply”).
    
3. While quota-free entry (“market access”) and national treatment are generally applicable obligations under GATT, they apply under the GATS on a sector-by-sector basis and only to extent that no qualifications (“limitations”) have been scheduled.
    

Food for thought:

1. In your opinion, why was the GATS necessary?
    
2. How does the purpose of the GATS fit with your national development objectives?
    

Possible reply:

1. Increasing economic importance of services production and trade as a result of technical progress, government retrenchment (privatization, commercialisation of important services sectors), increased reliance on market forces in general.
    
2. Role of services, in particular in infrastructurally relevant areas (finance, communication, transport, etc) as determinants of overall economic efficiency.
    
3. Positive impact of multilateral access guarantees on inflows of investment, skills and expertise.
    
4. Possibility to reap economies of scale and scope within an internationally open services environment.
    

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