A GUIDE TO GATS by leader6


									                                          A GUIDE TO GATS

The General Agreement on Trade in Services was first negotiated as part of the Uruguay Round
of trade liberalisation negotiations, which concluded in 1994. GATS is designed to apply to
services generally, including:

Business Services:                            Professional, Computer and Related, Research and
                                              Development, Real Estate, Rental and Leasing.

Communications:                               Postal, Courier, Telecommunication, Audiovisual.

Construction & Engineering:                   General construction for buildings, general construction for
                                              civil engineering, installation and assembly work, building
                                              completion and finishing work.

Distribution:                                 Commission agents‟ services, wholesale trade services,
                                              retailing services, franchising.

Education:                                    Primary education, secondary education, higher education,
                                              adult education.

Environment:                                  Sewage services, refuse disposal services, sanitation and

Financial:                                    All insurance and insurance-related services, banking and
                                              financial services.

Health:                                       Hospital services, other human health services, social

Tourism and Travel:                           Hotels and restaurants, travel agencies and tour operators,
                                              tourist guides services.

Recreation, cultural & sporting:              Entertainment services, news agency services, libraries,
                                              archives, museums and other cultural services, sporting
                                              and recreational services.

Transport:                                    Maritime transport, internal waterways transport, air
                                              transport services, space transport, rail transport, road
                                              transport and pipeline transport.

Modes of Supply

GATS obligations pertain to the delivery of services by four modes of supply.

1.       Cross-border Supply, e.g. electronic commerce, internet banking with an overseas

2.       Consumption Abroad, e.g. an Australian studying at an overseas university.


3.       Commercial Presence, i.e. acquisition, establishment or operation of any commercial or
         industrial undertaking in the service sector of one country by a foreign entity.

4.       Presence of Natural Persons, e.g. an American actor travelling to Australia for film

National Treatment

The GATS National Treatment obligation requires each WTO member country in areas
nominated in its Schedule of Commitments, to:

         “…accord to services and service suppliers of any other member, in respect of all
         measures affecting the supply of services, treatment no less favourable than that it
         accords to its own like services and service suppliers.”

Depending on the commitments given, this obligation may prohibit television domestic content
quotas, cabotage arrangements for costal freight, requirements for standard mail to be carried by
the national postal service, and „discriminatory‟ government funding, i.e. funding that is only
available to domestic public sector institutions.

Market Access

The Market Access obligation precludes a government, in areas nominated in the country‟s
Schedule of Commitments, from establishing on a nation-wide or regional basis:

        Limitations on the number of service suppliers e.g. monopolies, exclusive service
         arrangements, numerical quotas, or application of an economic needs test.

        Limitations on foreign shareholdings.

        Limitations on the number of service operations or on the quantity of service output e.g.
         the number of medical graduates.

        Limitations on the total value of service transactions or assets.

        Measures which restrict or require specific types of legal entity or joint venture.

Other GATS Obligations

Other obligations pertain to:

        Ensuring that technical standards and qualifications and licensing requirements do not
         constitute unnecessary barriers to trade in services.

        Bilateral agreements affecting trade in services.

        The behaviour of monopolies.

        Business practices which restrain competition.


        The negotiation of new disciplines or obligations to remove the “trade distortive effects” of

        Further rounds of GATS negotiations to achieve “progressive liberalisation”.


General exemptions apply under the Agreement in respect of national security considerations,
temporary measures to deal with a serious balance of payments crisis, services delivered in the
exercise of government authority, and health, safety and environmental requirements. However,
these exemptions are heavily qualified, e.g:

        A service delivered in the exercise of government authority does not include a service
         provided or funded by government which is commercial in character or which competes
         with private providers (e.g. private schools, hospitals, job centres, etc.).

        Environmental, health, and safety regulations are subject to the requirement that they do
         not constitute “a disguised restriction on trade in services” or unjustifiably discriminate
         “between countries where like conditions prevail”.

The Schedules of GATS Commitments

The impact of GATS upon a country depends significantly upon its commitments. From a
neo-liberal or trade liberalisation perspective, the Uruguay Round GATS has the disadvantage of
being a bottom-up Agreement whereby countries were able to:

        Nominate which service sectors or sub-sectors would be covered e.g. private tertiary
         education as distinct from all of tertiary education.

        Determine that GATS obligations would apply to a nominated service area in respect of
         one or more of the four modes of supply, but not all modes.

        Specify limitations and qualifications in respect of their nominations.

The text of GATS, and a link to a site containing Australia‟s current commitments, can be found at

It is advisable to first consult the WTO‟s guide to reading the GATS schedules of commitments at

The Renegotiation of GATS

Despite the failure of the Seattle WTO meeting to launch a general round of trade liberalisation
negotiations, the “millennium round” of negotiations commenced in February 2000 in respect of
GATS. The European Union and the US have a fairly ambitious liberalisation agenda for these
GATS negotiations.

Australia, in a joint Communication with Chile and New Zealand, outlined the following approach
to the negotiations:


        The scope of the negotiations should be comprehensive, with no services sector excluded
         as a matter of principle.

        The negotiations should achieve higher levels of liberalisation in all services sectors,
         including air and maritime transport.

        Key objectives include the expansion of market access and the removal of discriminatory
         barriers .

        There should be more binding obligations to ensure that domestic government regulation,
         particularly with respect to technical standards, licensing, and qualification requirements,
         facilitates expansion of market access.

The Federal Government has also signalled support for greater trade liberalisation in respect of
education services, but it is unclear what is envisaged beyond securing greater market access for
Australia‟s education exporters.

Unions and community organisations need to act on the basis that there is a significant risk that
the GATS negotiations will advance neo-liberal policy agendas because of the demands of other
countries, if not also as a result of liberalisation initiatives from the Federal Government. Pressure
should be exerted on the Government to specify in detail what it is proposing in this round. For
services where government funding is essentially confined to public sector agencies, it would be a
mistake to simply clarify whether the Government intends to accept the National Treatment
obligation, i.e. render the funding contestable by private providers, because the liberalisation
objective can also be pursued via the Market Access obligation. Similarly, the Government‟s
objectives on domestic regulation warrant attention. The consequence would be to empower the
WTO to overrule domestic regulations affecting an area in the Schedule of Commitments, on the
grounds that the regulations are more “trade restrictive” than necessary.

Finally, the Government‟s rhetoric about comprehensive GATS negotiations plays into the hands
of those countries which seek to turn GATS from a bottom-up agreement where each country
determines which services are covered and to what extent, into a top-down agreement covering
all services by all modes of supply except where a particular country has been able to negotiate
an exemption.




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