General Agreement on Trade in Services

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. 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 parties 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. 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 that 'liberalisation' will occur over a given period of time. Members' commitments are governed by a ratchet effect: commitments are one-way and are not to be wound back once entered into. The reason for the rule is to create a stable trading climate (i.e. a market). However, Article XXI allows members to withdraw commitments, and so far two members have exercised the option (US and EU). In November 2008, Bolivia gave a notification 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 supported by over 500 organisations in 60 countries. 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 they 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.) The GATS agreement covers four modes of supply for the delivery of services in cross-border trade: Services Sector Classifications addressed in the GATS are defined in the so-called 'W/120 list', 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. The sectors covered by the GATS are twelve service sectors (Business; Communication; Construction and Engineering; Distribution; Education; Environment; Financial; Health; Tourism and Travel; Recreation, Cultural, and Sporting; Transport; 'Other') which, in turn, are divided into sub-sectors. 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.