Topics handled by WTO committees and agreements
Issues covered by the WTO’s committees and agreements

GATS: FACT AND FICTION
Introduction

The General Agreement on Trade in Services (GATS) is among the World Trade Organization's most important agreements. The accord, which came into force in January 1995, is the first and only set of multilateral rules covering international trade in services. It has been negotiated by the Governments themselves, and it sets the framework within which firms and individuals can operate. The GATS has two parts: the framework agreement containing the general rules and disciplines; and the national “schedules” which list individual countries’ specific commitments on access to their domestic markets by foreign suppliers.

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Debate must be based on
fact, not fiction


Each WTO Member lists in its national schedule those services for which it wishes to guarantee access to foreign suppliers. All commitments apply on a non-discriminatory basis to all other Members. There is complete freedom to choose which services to commit. In addition to the services committed, the schedules limit the degree to which foreign services providers can operate in the market. For example, a country making a commitment to allow foreign banks to operate in its territory may limit the number of banking licenses to be granted (a market access limitation). It might also fix a limit on the number of branches a foreign bank may open (a national treatment limitation).

 

Coverage and “modes of supply” Back to top

The GATS covers all internationally-traded services with two exceptions: services provided to the public in the exercise of governmental authority, and, in the air transport sector, traffic rights and all services directly related to the exercise of traffic rights. The GATS also defines four ways in which a service can be traded, known as "modes of supply":

  •  services supplied from one country to another (e.g. international telephone calls), officially known as "cross-border supply"; 

  • consumers from one country making use of a service in another country (e.g. tourism), officially known as "consumption abroad"; 

  • a company from one country setting up subsidiaries or branches to provide services in another country (e.g. a bank from one country setting up operations in another country), officially known as "commercial presence"; and 

  • individuals travelling from their own country to supply services in another (e.g. an actress or construction worker), officially known as "movement of natural persons".


Trade liberalization, and even economic growth, are not ends in themselves. The ultimate aim of Government is to promote human welfare in the broadest sense, and trade policy is only one of many instruments Governments use in pursuing this goal. But trade policy is nevertheless very important, both in promoting growth and in preventing conflict. The building of the multilateral trading system over the past 50 years has been one of the most remarkable achievements of international cooperation in history. The system is certainly imperfect—that is one of the reasons why periodic negotiations are necessary—but the world would be a far poorer and more dangerous place without it

In January 2000, WTO Member Governments started a new round of negotiations to promote the progressive liberalization of trade in services. The GATS agreement specifically states that the negotiations “shall take place with a view to promoting the interests of all participants on a mutually advantageous basis” and “with due respect for national policy objectives and the level of development of individual Members”. The pace and extent of these negotiations are set by the WTO’s 140 Member Governments themselves according to their different national policy priorities.

Recently, however, the negotiations and the GATS itself have become the subject of ill-informed and hostile criticism. Scare stories are invented and unquestioningly repeated, however implausible. It is claimed for example that the right to maintain public services and the power to enforce health and safety standards are under threat, though both are explicitly safeguarded under the GATS. How have serious people come to believe what is, on the face of it, out of the question? Why should any Government, let alone 140 Governments, agree to allow themselves to be forced, or force each other, to surrender or compromise powers which are important to them, and to all of us?

Decision-making in open societies presupposes informed public discussion. It must be based on fact rather than fiction. The purpose of this booklet is to contribute to this discussion and to a greater public understanding of the GATS by correcting statements made in some recent publications which we believe are misleading the public and undermining support for international economic cooperation. It must not be assumed that because we have disputed some allegations we accept that others are well-founded: these are merely examples

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“Too much of this century was marked by force and coercion. Our dream must be a world managed by persuasion, the rule of law, the settlement of differences peacefully within the law and cooperation. It’s a good thing that all our living standards are now based on the ability of our neighbours to purchase our products. That’s where the WTO can do splendid work and advance the progress of the human species.”
Mike Moore
Speech to the Transatlantic Business Dialogue, 29 October 1999
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