Rohit Arora

Taking an inspiration from GATT (General Agreement on Tariffs and Trade) which is a multilateral agreement regulating international trade, in January 1995 a treaty was passed by the World Trade Organization (WTO) in Uruguay Round negotiations known as GATS (General Agreements on Trade in Services). Need for multilateral disciplines in service industry were felt due to a dynamic advancement in technology and removing of monopolies by many countries. The GATS established a rule-based framework for international trade in services and specified the obligations of members within the framework. It ensures fair & equitable treatment of all members and promotes progressive liberalization through successive rounds of negotiations. All members of WTO are parties to the GATS.

The GATS include all services except services supplied in the exercise of a governmental authority (but only if supplied neither on commercial basis nor in competition with other suppliers) and Air Transport Services consisting of air traffic rights and services directly related to the exercise of such rights.

The pillars of the GATS are general obligations, which virtually apply to all members and services and specific commitments resulting from negotiations, limited to sectors and modes of supply in which a member has chosen to undertake access obligations. General obligations include MFN, Transparency. While specific commitments involve market access and national treatment.

MODES OF SUPPLY

The GATS defines trade in services as the supply of a service through any of four modes of supply:

 (a) Cross border supply- Occurs when a service crosses a national border. It includes supply of services flowing from territory of one member into the territory of another member. Services are supplied through Tele-Communication, Postal infrastructure. E.g. College having cloud campus, Banking services.

(b) Consumption abroad- It means when a consumer of services moves into another member territory to obtain a service.  E.g. Patients coming in India from US for treatment, Tourists.

(c) Commercial Presence- It includes establishing territorial presence in another member territory by a service supplier to provide a service. E.g. Hotel chains, Hospital chains.

(d) Presence of natural persons- It means when a person of one member entering the territory of another member to supply a service. E.g. Doctors going abroad to provide service, Teachers going to foreign universities for teaching.

OBLIGATIONS OF MEMBERS

1. General Obligations– These includes to all services and to all members.

MFN Treatment: Most Favoured Nation treatment means treating one’s trading partners equally. 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. It is based on Favour one, favour all principle.

Transparency: Members are required to publish promptly “all relevant measures of general application” that affect operation of the agreement. Members must also notify the Council for Trade in Services of new or changed laws, regulations that affect trade in services covered by their specific commitments under the agreement. Each member is required to establish an enquiry point, to respond to requests from other members for information.

2. 2. Specific obligations-Obligations which apply on the basis of commitments, laid down in individual country schedules concerning market access and national treatment in specifically designated sectors.

Market Access: The granting of market access is a commitment undertaken by individual Members in specified sectors after negotiations. It may be made subject to one or more limitations. For example, limitations may be imposed on the number of services suppliers, service operations or employees in a sector, the value of transactions.

National Treatment: National Treatment requires equal treatment for foreign providers and domestic providers. Once a foreign supplier has been allowed to supply a service in one’s country there should be no discrimination in treatment between the foreign and domestic providers. This is not the same as MFN.

Exemptions: Members are allowed to introduce or maintain measures in contravention of their obligations under the Agreement, including the MFN requirement or specific commitments in specific circumstances. These circumstance cover measures necessary to protect public morals or maintain public order, protect human, animal or plant life or health.

(Author can be reached at arorarohit2004@gmail.com)

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