GATS History, Objectives and Functions

General Agreement on Trade in Services (GATS) is a treaty within the World Trade Organization (WTO) framework, established in 1995, aimed at regulating international trade in services. GATS was created due to the growing significance of the service sector in the global economy and the increasing trade in services across borders. It sets out general principles and rules for trade in services, covering all four modes of service supply: cross-border supply, consumption abroad, commercial presence, and presence of natural persons. GATS’ objectives are to increase transparency and predictability of regulatory measures related to services, promote fair and equitable treatment of all WTO members, and encourage the progressive liberalization of trade in services through successive rounds of negotiations. GATS covers a wide range of service sectors, including financial, telecommunications, education, transportation, and health services, providing a comprehensive framework for facilitating international trade in services.

History of GATS:

General Agreement on Trade in Services (GATS) was born out of the Uruguay Round of trade negotiations, which took place from 1986 to 1994. This was the eighth round of negotiations under the General Agreement on Tariffs and Trade (GATT) framework and marked a significant expansion in the scope of international trade agreements. The Uruguay Round was notable for its comprehensive nature, covering not only goods (the traditional focus of GATT) but also services and intellectual property rights, leading to the creation of the World Trade Organization (WTO) in 1995.

Before the GATS, there was no global multilateral framework governing the trade in services. The increasing importance of the service sector in global trade, along with the complexities and specificities of trade in services as compared to goods, necessitated a separate agreement. Services trade was becoming an essential part of the economic strategies of countries worldwide, reflecting changes in global economic activity and advancements in technology.

The negotiations for the GATS were complex, given the diversity of services and their regulatory environments across different countries and sectors. The agreement sought to establish a set of rules and commitments that would apply to all WTO members, with the goals of promoting transparency, liberalization, and growth in the services sector while allowing governments the right to regulate and to introduce new regulations on the supply of services within their territories to meet national policy objectives.

The GATS came into effect on January 1, 1995, alongside the establishment of the WTO. It represented a landmark achievement in creating a rules-based system for international trade in services, laying the foundation for further negotiations and liberalization efforts in this crucial area of global commerce.

Objectives of GATS:

• Creating a credible and reliable system of international trade rules:

GATS aims to establish a comprehensive set of rules governing international trade in services, creating a predictable trading environment that encourages confidence among trading partners.

• Ensuring fair and equitable treatment of all participants (principle of non-discrimination):

One of the core principles of GATS is to ensure that all WTO member countries are treated equally. This includes the Most Favored Nation (MFN) treatment, ensuring that any advantage given to one member is extended to all other WTO members.

• Stimulating economic Growth and Development:

By facilitating the expansion of trade in services, GATS seeks to contribute to economic growth and development across nations, recognizing the significant role the service sector plays in the global economy.

• Promoting the interests of Developing countries:

GATS includes provisions aimed at increasing the participation of developing countries in trade in services, acknowledging their interests and providing flexibility in the implementation of the agreement’s provisions.

• Increasing the participation of Developing countries in Global trade:

GATS aims to enhance the ability of developing countries to benefit from the opportunities that arise from the liberalization of trade in services, including through provisions for technical assistance and capacity building.

• Improving the efficiency and competitiveness of service sectors globally:

Through the liberalization of trade in services, GATS aims to encourage competition, which can lead to improvements in efficiency and competitiveness of service sectors across countries.

• Facilitating the expansion and Liberalization of Trade in services:

GATS provides a framework for the gradual liberalization of trade in services through successive rounds of negotiations, aiming to reduce or eliminate barriers that hinder the international exchange of services.

Functions of GATS:

• Liberalization of Trade in Services:

GATS aims to progressively reduce and eliminate barriers to trade in services through negotiated agreements among WTO member countries. It encourages members to undertake commitments in specific sectors and modes of supply, aiming for a higher level of liberalization.

• Establishing and Enforcing Rules:

GATS sets out a comprehensive set of rules and principles governing international trade in services, including most-favored-nation (MFN) treatment, transparency, domestic regulation, and market access. These rules help ensure that trade in services is conducted fairly and predictably.

• Dispute Settlement:

GATS provides a mechanism for resolving disputes between members regarding their obligations and commitments under the agreement. This helps maintain the integrity of the agreement and ensures that members adhere to the rules.

• Promotion of Economic Growth and Development:

By facilitating the expansion of trade in services, GATS contributes to economic growth and development. It recognizes the importance of the service sector in the global economy and seeks to enable all members, including developing and least-developed countries, to benefit from trade in services.

• Technical Assistance and Capacity Building:

GATS includes provisions for technical assistance to developing countries, helping them build the capacity to participate more effectively in services trade. This includes assistance in drafting regulations, improving infrastructure, and training personnel.

• Recognition of Professional Qualifications:

GATS encourages member countries to negotiate mutual recognition agreements for professional services qualifications. This facilitates the movement of professionals between countries and contributes to the liberalization of trade in services.

• Flexibility for Developing Countries:

GATS provides special treatment for developing countries, including longer timeframes for implementing commitments and flexibility in choosing the sectors in which they make commitments. This acknowledges the varying levels of economic development among WTO members and aims to ensure that liberalization is beneficial for all.

• Monitoring and Transparency:

The agreement mandates members to notify the WTO about measures affecting trade in services and to maintain measures that are consistent with their GATS commitments. This promotes transparency and helps monitor the implementation of the agreement.