Trade in services

Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer. Trade in services that takes place between a producer and consumer that are, in legal terms, based in different countries is called International Trade in Services. Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer. Trade in services that takes place between a producer and consumer that are, in legal terms, based in different countries is called International Trade in Services. International trade in services is defined by the Four Modes of Supply of the General Agreement on Trade in Services (GATS). A 'Natural person' is a human being, as distinct from legal persons such as companies or organisations. Countries can freely decide where to liberalize on a sector-by-sector basis, including which specific mode of supply they want to cover for a given sector. Mode 2 (Consumption Abroad) is by far the most liberalized mode in terms of commitments by WTO members. This is mostly due to governments being less likely to restrict the movements of citizens outside domestic borders (e.g. tourists). Mode 1 (Cross-Border Trade) is not often committed, mostly because it is impossible for many services to be supplied remotely (e.g. construction services), while Mode 3 (Commercial Presence) is more open, reflecting its crucial role in driving the international supply of services, transferring know-how and improving the capacity of economies to participate in global value chains. Mode 4 (Presence of Natural Persons) has the lowest depth of commitments, probably due to a number of sensitivities involved with the movement of foreign workers. In 2014, global trade in services totaled some $4.8 trillion, with Mode 3 (commercial presence) accounting for 55% of the total, followed by Mode 1 (cross-border trade) at 30%, then Mode 2 ( consumption abroad) at 10%, and Mode 4 (presence of natural persons) the lowest share, at less than 5%.