General Agreement on Trade in Services

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The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way the General Agreement on Tariffs and Trade (GATT) provides such a system for merchandise trade.

All members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. However, upon accession, Members may introduce temporary exemptions to this rule.

Historical background[edit]

While the overall goal of GATS is to remove barriers to trade, members are free to choose which sectors are to be progressively "liberalised", i.e. marketised and privatised, which mode of supply would apply to a particular sector, and to what extent liberalisation will occur over a given period of time. Members' commitments are governed by a "ratchet effect", meaning that commitments are one-way and are not to be wound back once entered into. The reason for this rule is to create a stable trading climate. However, Article XXI does allow Members to withdraw commitments, and so far two members have exercised this option (USA and EU). In November 2008, Bolivia notified that it will withdraw its health services commitments.

Some activist groups consider that GATS risks undermining the ability and authority of governments to regulate commercial activities within their own boundaries, with the effect of ceding power to business interests ahead of the interests of citizens. In 2003 the GATSwatch network published a critical statement which was supported by over 500 organisations in 60 countries.[1] At the same time, countries are not under any obligation to enter international agreements such as GATS. For countries that like to attract trade and investment, GATS adds a measure of transparency and legal predictability. Legal obstacles to services trade can have legitimate policy reasons, but can also be an effective tool for large scale corruption (De Soto, Hernando. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.)

Four Modes of Supply[edit]

The GATS agreement covers four modes of supply for the delivery of services in cross-border trade:

CriteriaSupplier Presence
Mode 1: Cross-border supplyService delivered within the territory of the Member, from the territory of another MemberService supplier not present within the territory of the member
Mode 2: Consumption abroadService delivered outside the territory of the Member, in the territory of another Member, to a service consumer of the Member
Mode 3: Commercial presenceService delivered within the territory of the Member, through the commercial presence of the supplierService supplier present within the territory of the Member
Mode 4: Presence of a natural personService delivered within the territory of the Member, with supplier present as a natural person
Note: From the document MTN.GNS/W/124, available on the World Trade Organization Website, posted courtesy of ISTIA

Sectors addressed[edit]

Services Sector Classifications addressed in the GATS are defined in the so-called "W/120 list",[2] which provides a list of all sectors which can be negotiated under the GATS. The title refers to the name of the official WTO document, MTN.GNS/W/120.

Criticisms[edit]

The GATS agreement has been criticized for tending to substitute the authority of national legislation and judiciary with that of a GATS Disputes Panel conducting closed hearings. WTO member-government spokespersons are obliged to dismiss such criticism because of prior commitment to perceived benefits of prevailing commercial principles of competition and 'liberalisation'.

While national governments have the option to exclude any specific service from liberalisation under GATS, they are also under pressure from international business interests to refrain from excluding any service "provided on a commercial basis". Important public utilities such as water and electricity most commonly involve purchase by consumers and are thus demonstrably "provided on a commercial basis". The same may be said of many health and education services which are sought to be 'exported' by some countries as profitable industries.[3]

This definition defines virtually any public service as being "provided on a commercial basis" and is already extending into such areas as police, the military, prisons, the justice system, public administration, and government. Over a fairly short time perspective, this could open up for the privatisation or marketisation of large parts, and possibly all, of what today are considered public services currently available for the whole population of a country as a social entitlement, to be restructured, marketised, contracted out to for-profit providers, and eventually fully privatised and available only to those who can pay for them. This process is currently far advanced in most countries, usually (and intentionally) without properly informing or consulting the public as to whether or not this is what they desire.

See also[edit]

References[edit]

  1. ^ GATSwatch, 2003
  2. ^ Takuzinis.lv
  3. ^ For example, in 2003 the Confederation of University Faculty Associations of British Columbia urged the government of Canada to specify exclusion of post-secondary education, saying in a submission

    If GATS were applied to the Canadian education sector, the effects would be profound. Education would no longer be considered a public service; instead it would be categorized as merely another commercial enterprise.

    Source: Background Paper on GATS and Post-secondary Education

Further reading[edit]