of current work
WTO’s General Agreement on Trade in Services (GATS) contains
separate mandates for a heavy work programme covering a wide range of
subjects. Work on some of the subjects started in 1995, as mandated,
soon after the GATS came into force in January 1995. Work on other
subjects, including the negotiations to further liberalize
international trade in services, started in 2000, also as mandated.
All these subjects come under the current work programme, some of
which involves negotiations and some calls for study and review. As
yet, no deadlines have been set for conclusion of work on any of these
subjects — with one exception: the negotiations on safeguards (see
below GATS rules).
to further liberalize trade in services (Articles XIX and IV.3)
to further liberalize international trade in services started in early
2000 as mandated by the GATS (Article XIX). Now in their second year,
the negotiations are continuing actively with the full commitment by
first phase of the negotiations concluded successfully in March 2001
when members agreed on the guidelines and procedures for the
negotiations. Agreement on the guidelines marks the fulfilment of a
key element in the negotiating mandate as laid down in the GATS. By
agreeing these guidelines, members have not only set the objectives,
scope and method for the negotiations in a clear and balanced manner,
but also unequivocally endorsed some of the fundamental principles of
the GATS — i.e. members’ right to regulate and to introduce new
regulations on the supply of services in pursuit of national policy
objectives; their right to specify which services they wish to open to
foreign suppliers and under which conditions; and the overarching
principle of flexibility for developing and least-developed countries.
The guidelines, therefore, reflect great sensitivity towards the
public policy concerns in relation to important sectors such as
health-care, public education and cultural industries, while stressing
the importance of achieving higher levels of liberalization and
ensuring effective market access.
March 2001, the negotiations have moved into a more intensive phase of
discussing specific proposals. So far, around 100 proposals have been
submitted by 50 members covering a wide range of services sectors, the
movement of natural persons and other issues such as the treatment of
small and medium-sized enterprises, transparency of regulations,
classification issues and MFN exemptions. members have agreed to
review progress in March 2002.
on GATS rules (Articles X, XIII, and XV)
started in 1995 and are continuing on the development of possible
disciplines that are not yet included in the GATS: rules on emergency
safeguard measures, government procurement and subsidies. Work so far
has concentrated on safeguards, where members have agreed to conclude
the negotiations by March 2002. But the results will come into effect
at the same time as the results of the current services negotiations
— for which no deadline has been fixed as yet. Rules on safeguards
will define the procedures and disciplines under which a member can
introduce temporary measures to limit market access in situations of
on domestic regulations (Article VI.4)
started in 1995 to establish disciplines on domestic regulations —
i.e. the requirements foreign service suppliers have to meet in order
to operate in a market. The focus is on qualification requirements and
procedures, technical standards and licensing requirements. By
December 1998, members had agreed disciplines on domestic regulations
for the accountancy sector. Since then, members have been engaged in
developing general disciplines for all professional services and,
where necessary, additional sectoral disciplines. All the agreed
disciplines will be integrated into the GATS and become legally
binding by the end of the current services negotiations.
and negotiations concerning MFN exemptions (Annex on Article II)
on this subject started in 2000. When GATS came into force in 1995,
members were allowed a once-only opportunity to take an exemption from
the MFN principle of non-discrimination between a member’s trading
partner. The measure for which the exemption was taken is described in
a member’s MFN exemption list, indicating to which member the more
favourable treatment applies, and specifying its duration. In
principle, these exemptions should not last for more than ten years.
As mandated by the GATS, all these exemptions are currently being
reviewed to examine whether the conditions which created the need for
these exemptions in the first place still exist. And in any case, they
are part of the current services negotiations.
of autonomous liberalization (Article XIX)
negotiating guidelines and procedures agreed by members in March 2001
(see above) also stated that, based on multilaterally-agreed criteria,
account shall be taken and credit shall be given in the negotiations
for autonomous liberalization undertaken by members since previous
negotiations and that members shall endeavour to develop such criteria
prior to the start of negotiations on specific commitments. Members
are continuing their discussions on various issues including the
relationship between credit and binding of commitments, how to assess
the value of the liberalization measures and hence of the credit to be
granted, and multilateral versus bilateral treatment of autonomous
of trade in services (Article XIX)
work on this subject started in early 1999. The GATS mandates that
members conduct an assessment of trade in services with reference to
the objectives of the agreement, including those related to increasing
the participation of developing countries in services trade. The
negotiating guidelines also restate this mandate, make this a standing
item on the members’ agenda, and state that the negotiations shall
be adjusted in the light of the results of the assessment. Members
have generally acknowledged that the dearth of statistical information
and other methodological problems make it impossible to conduct an
empirical assessment of trade in services. However, they are
continuing their discussions with the assistance of several papers
produced by the Secretariat.
of air transport services (Annex on Air Transport Services)
present, most of the air transport sector — traffic rights and
services directly related to traffic rights — is excluded from the
coverage of the GATS. However, the GATS mandates a review by members
of this situation. The purpose of the review, which started in early
2000, is to decide whether additional air transport services should be
covered by the GATS. The review could develop into a negotiation in
its own right, resulting in an amendment of the GATS itself by adding
new services to its coverage and by adding specific commitments on
these new services to national schedules.
of GATS back
GATS is the first ever agreement of multilateral, legally-enforceable
rules covering international trade in services. It was negotiated in
the Uruguay Round. GATS has three elements: the main text containing
general obligations and disciplines; annexes dealing with rules for
specific sectors; and individual countries’ specific commitments to
provide access to their markets, including indications of where
countries are temporarily not applying the “most-favoured-nation”
principle of non-discrimination. These commitments — like tariff
schedules for trade in goods — are an integral part of the
agreement. So are the temporary withdrawals of most-favoured-nation
obligations and disciplines
agreement covers all internationally-traded services — for example,
banking, telecommunications, tourism, professional services, etc. The
agreement also defines four ways of trading services:
supplied from one country to another (e.g. international telephone
calls), officially known as “cross-border supply”
or firms making use of a service in another country (e.g.
tourism), officially known as “consumption abroad”
foreign company setting up subsidiaries or branches to provide
services in another country (e.g. foreign banks setting up
operations in a country), officially “commercial
travelling from their own country to supply services in another
(e.g. fashion models or consultants), officially “presence of
one, favour all. MFN means treating one’s trading partners equally
on the principle of non-discrimination. Under GATS, if a country
allows foreign competition in a sector, equal opportunities in that
sector should be given to service providers from all other WTO
members. (This applies even if the country has made no specific
commitment to provide foreign companies access to its markets under
applies to all services, but some special temporary exemptions have
been allowed. When GATS came into force, a number of countries already
had preferential agreements in services that they had signed with
trading partners, either bilaterally or in small groups. WTO members
felt it was necessary to maintain these preferences temporarily. They
gave themselves the right to continue giving more favourable treatment
to particular countries in particular services activities by listing “MFN exemptions” alongside their first sets of commitments.
In order to protect the general MFN principle, the exemptions could
only be made once; nothing can be added to the lists. They are
currently being reviewed as mandated, and will normally last no more
than ten years.
on market access and national treatment
countries’ commitments to open markets in specific sectors — and
how open those markets will be — are the outcome of negotiations.
The commitments appear in “schedules” that list the sectors
being opened, the extent of market access being given in those sectors
(e.g. whether there are any restrictions on foreign ownership), and
any limitations on national treatment (whether some rights granted to
local companies will not be granted to foreign companies). So, for
example, if a government commits itself to allow foreign banks to
operate in its domestic market, that is a market-access commitment.
And if the government limits the number of licences it will issue,
then that is a market-access limitation. If it also says foreign banks
are only allowed one branch while domestic banks are allowed numerous
branches, that is an exception to the national treatment principle.
clearly defined commitments are “bound”: like bound tariffs
for trade in goods, they can only be modified after negotiations with
affected countries. Because “unbinding” is difficult, the
commitments are virtually guaranteed conditions for foreign exporters
and importers of services and investors in the sector to do business.
says governments must publish all relevant laws and regulations, and
set up enquiry points within their bureaucracies. Foreign companies
and governments can then use these inquiry points to obtain
information about regulations in any service sector. And they have to
notify the WTO of any changes in regulations that apply to the
services that come under specific commitments.
objective and reasonable
domestic regulations are the most significant means of exercising
influence or control over services trade, the agreement says
governments should regulate services reasonably, objectively and
impartially. When a government makes an administrative decision that
affects a service, it should also provide an impartial means for
reviewing the decision (for example a tribunal).
two (or more) governments have agreements recognizing each other’s
qualifications (for example, the licensing or certification of service
suppliers), GATS says other members must also be given a chance to
negotiate comparable pacts. The recognition of other countries’
qualifications must not be discriminatory, and it must not amount to
protectionism in disguise. These recognition agreements have to be
notified to the WTO.
payments and transfers
a government has made a commitment to open a service sector to foreign
competition, it must not normally restrict money being transferred out
of the country as payment for services supplied (“current
transactions”) in that sector. The only exception is when there
are balance-of-payments difficulties, and even then the restrictions
must be temporary and subject to other limits and conditions.
Uruguay Round was only the beginning. GATS requires more negotiations,
which began in early 2000. The goal is to take the liberalization
process further by increasing the level of commitments in schedules.
annexes: services are not all the same
trade in goods is a relatively simple idea to grasp: a product is
transported from one country to another. Trade in services is much
more diverse. Telephone companies, banks, airlines and accountancy
firms provide their services in quite different ways. The GATS annexes
reflect some of the diversity.
of natural persons
annex deals with negotiations on individuals’ rights to stay
temporarily in a country for the purpose of providing a service. It
specifies that the agreement does not apply to people seeking
permanent employment or to conditions for obtaining citizenship,
permanent residence or permanent employment.
in the banking system affects the whole economy. The financial
services annex says governments have the right to take prudential
measures, such as those for the protection of investors, depositors
and insurance policy holders, and to ensure the integrity and
stability of the financial system. It also excludes from the agreement
services provided when a government is exercising its authority over
the financial system, for example central banks’ services.
Negotiations on specific commitments in financial services continued
after the end of the Uruguay Round and ended in late 1997.
telecommunications sector has a dual role: it is a distinct sector of
economic activity; and it is an underlying means of supplying other
economic activities (for example electronic money transfers). The
annex says governments must ensure that foreign service suppliers are
given access to the public telecommunications networks without
discrimination. Negotiations on specific commitments in
telecommunications resumed after the end of the Uruguay Round. This
led to a new liberalization package agreed in February 1997.
this annex, traffic rights and directly related activities are
excluded from GATS’s coverage. They are handled by other bilateral
agreements. However, the annex establishes that the GATS will apply to
aircraft repair and maintenance services, marketing of air transport
services and computer-reservation services. Members are currently
reviewing the annex.