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 services, 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.

Rationale

For a long time, no need was seen for a trade agreement in services since large segments of the services economy have traditionally been considered as domestic activities that are difficult to trade over borders, e.g. haircuts or seeing a doctor. Furthermore, sectors from rail transport to telecommunications have been viewed as classical domains of government ownership and control, given their infrastructural importance and the perceived existence, in some cases, of natural monopoly situations. A third important group of sectors, including health, education and basic insurance services, are considered in many countries as governmental responsibilities, given their importance for social integration and regional cohesion, which should be tightly regulated and not be left to the rough and tumble of markets.

Nevertheless, some services sectors, in particular international finance and maritime transport, have been largely open for centuries--as the natural complements to merchandise trade. Other large sectors have undergone fundamental technical and regulatory changes in recent decades, opening them to private commercial participation and reducing existing barriers to entry. The emergence of the Internet has helped to create a range of internationally tradeable product variants--from e-banking to tele-health and distance learning. A growing number of governments has gradually exposed previous monopoly domains to competition; telecommunication is a case in point.

Sectors addressed

The GATS agreement covers four "modes of supply":

• Cross border trade, which is defined as delivery of a service from the territory of one country into the territory of other country;
• Consumption abroad - this mode covers supply of a service of one country to the service consumer of any other country;
• Commercial presence - which covers services provided by a service supplier of one country in the territory of any other country, and
• Presence of natural persons - which covers services provided by a service supplier of one country through the presence of natural persons in the territory of any other country.

Countries can freely decide where to liberalize on a sector-by-sector basis, including which modes of supply they want to cover for which sector.

Criticism

The GATS document has been criticized for allegedly replacing the authority of national legislature, with the authority of the GATS Disputes Panel. Such allegations argue that GATS intends to override all "burdensome rules". The WTO and member governments disagree with such allegations. GATS hearings are closed and held in secret.

See also

• Trade in Services

External links

• Official WTO site about trade in services
• Gatswatch.org