TRADE IN SERVICES

MANDEEP SINGH(500802507)
FLOW OF PRESENTATION
 Importance Of Services
 History Of GATS
 Origin Of GATS
 Components Of GATS
 Various Services Under GATS
 Different Modes Of Supplying Services under
GATS
 India & GATS
 References
Importance of Services
 World exports of commercial services amounted to
US$ 3,350 billion in 2009,
 After growing on average at around 8.5% per year in
value terms since 1980.
 Trade in commercial services grew faster than trade in
goods (7.5% on average) during this period, increasing
its share in total world trade by 3 percentage points.
 In 2009, services accounted for approximately 21% of
total world trade.
EXPORT OF COMMERCIAL SERVICES
HISTORY OF GATS
 First attempt came from US at GATT ministerial
meeting in Nov.1982
 This incentive came from US private sector
providers
 However this attempt failed due to oppose of
European Community was not interested &
developing countries oppose the move
 Reason- since they thought that comparative
advantage was mainly with developed countries &
they saw no gain with themselves.
 HISTORY….Contd.
 By Uruguay round in 1986 four main clusters were formed-
 US & Some OECD(Organization for Economic Co-operation
and Development) countries- who proposed the GATS
concept into GATT
 European Community & Some OECD countries & some
developing countries- which were working for overall
compromise
 Group of G-10 led by Brazil & India oppose the US initiative
 Group of G-20 countries who were ready to accept US
proposal but at some conditions
ORIGIN OF GATS
 Inclusion of trade in services in 1986 ministerial
declaration GATT was a result of compromise
between these four clusters.
 Following the declaration in 1987 the GROUP OF
NEGOTIATIONS ON SERVICES was formed
(GNS)
 All the GATT members were also members of
GATS
PILLARES OF GATS

• Set of general obligations &

GATS disciplines
• Schedules of Specific
Pillars Commitments
• Annexes on specific issues

Commitme
nts • By service sectors
Under • By mode of supply
GATS
GATS
 GATS was divided into six parts having 29 articles-
1. Scope of agreement & Definition of services
2. General obligations
3. Specific commitments
4. Progressive liberalization
5. Institutional provisions
6. Final provisions regarding denying by any
country
 TYPES OF SERVICES
Commercial services:
3. Communications services
1. Transportation 4. Construction services
5. Insurance services
2. Travel
6. Financial services
3. -10. Other commercial services 7. Computer and information
services
8. Royalties and licence fees
9. Other business services
11. Government services 10. Personal, cultural and
(not in GATS) recreational services
CONTD…
• Sea transport (passenger, freight, other)
• Air transport (passenger, freight, other)
1. Transport • Other transport (passenger, freight, other)
• Space, Rail, Road, ...

• Business travel
• Expenditure by seasonal and border workers
• Other
2. Travel • Personal travel
• Health-related expenditure
• Education-related expenditure
• Other
3. Communications • Postal & courier
services
• Telecommunication
…etc …
© WTO/OMC
 SECTORWISE COMMITMENTS
160
140
25
120
25 25
100 25
80 24
23
60 118 22
24 24 16
96 92 86 20
40 73 64 53
20 42 41 42 37
0
M L SS . .. T N N T N H N
IS IA E T O R IO IO E N IO L T I O
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A N N U E N IB C
TO IN BU U A T R C R R O R
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C O C O EN D
DEVELOPING DEVELOPED
 PROPOSALS
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DEVELOPING COUNTRIES DEVELOPED COUNTRIES
GATS ARCHITECTURE
 GATS is divided into two parts:

1.Rules of General applications- apply to all

service sectors

2. Specific Rules- apply to service sectors where

specific commitments are made
GATS GENERAL OBLIGATIONS
 Most favored nation(MFN)
- must provide equivalent treatment to all members
 Transparency

- must publish all the information

- must inform other parties of new changed measures
- must reply promptly to all requests by parties
GATS GENERAL OBLIGATIONS
2
 Domestic Regulations
 Qualifications, technical standards & licensing do

not constitute unnecessary barriers against the trade

 Negotiation for above disciplines must -

 Be objective

 Not more than ensuring the quality of service

 Licensing procedure can not be restriction in

supply of service
GATS GENERAL OBLIGATIONS
3
 Exceptions are very limited, except for national
security – self defining
 Governmental authority
 Must meet to criteria
GATS SPECIFIC OBLIGATIONS
 Member’s list service commitments in an annex,
which is a part of the agreement
 Listing is by service sectors through a classification
system (UN based)
 Listing requires specifying modes
 Listing requires specifying any limits or exceptions
 GATS SPECIFIC OBLIGATIONS – MARKET
ACCESS
 Market access
 No limits on number of
service suppliers
 No limits on total value of
service operations
 No limit on number of
employees
 No limits on legal entities
 Public, private, for profit and
not-for-profit
 No limits on foreign capital
 Consequence
 No limits on retail outlets or
on locations of outlets
 No limits on retail outlets
 No limits on temporary entry
 No restrictions on private
outlets
 No restrictions on foreign
ownership and control
GATS SPECIFIC OBLIGATIONS 2
 National Treatment
 Must provide level of treatment at least as good as the
best treatment provided to like services and service
providers
 Equivalent treatment, not identical
 “Like” broadens the scope
 Applies to subsidies
Detailed View of Modes of Service Supply
(GATS) used by trade negotiators
 Mode 1 – Cross-border
 Mode 2 – Consumption abroad
 Mode 3 – Commercial presence
 Mode 4 – Presence of natural persons
Cross-border Supply (Mode 1)
 Service crosses border
 No movement of producer or consumer

Examples:
 Customer support (call centers)

 Telecommunications

 Remote diagnostic services (telemedicine)

Consumption Abroad (Mode 2)
 Consumer travels to the location of the producer
Examples:
 Tourism

 Education (study abroad)

 Medical services (involving travel)

 Presence (Mode 3)
 Foreign Direct Investment

 Service is delivered through a locally established

affiliate
E.g. The establishment of a branch of a foreign
based firm such as a legal office or bank
 Temporary movement of natural persons
(mode 4)
 Natural person (individual) travels to the country
where production occurs
 Self-employed service producer
 Employee of service producer
 Temporary movement of natural persons
(mode 4)
 Important question: At what point does the person
become a “resident” of the country where the
service is provided?
 BOP conventions – After 1 year.
 GATS – Whatever is agreed, but may be longer
than 1 year.
UNDERSTANDING MODES OF SUPPLYING
SERVICES
CONTD…
SAMPLE OF SCHEDULE OF GATS
COMMITMENTS
INDIA & GATS
Contribution to GDP
INDIA SECTOR WISE RANK IN
EXPORT/IMPORT
INDIA’S EXPORT OF SERVICES
INDIA’S IMPORT OF SERVICES
Indo-US TRADE IN SERVICES
 The Indo-US services trade is likely to grow to an
ambitious $150 billion in the next six years, says a
CII estimate.

 At present, the country's total engagement with the

US is over $60 billion, out of which about $40
billion are accounted for by the merchandise trade.
Last fiscal, the services exports to the US touched
$22 billion.
Present & future of Indian GDP

In 2010 In 2042 Multiples

GDP (in $ Trillion) 1.25 10.62 8.5

INDUSTRY 352.5 2867.5 8.1

SERVICES 686.3 7540.2 11.0

AGRICULTURE 212.5 212.5 1.0

LIMITATIONS & BARRIERS IN GROWTH

 PROTECTIONISM APPROACH

 Discriminatory access to distribution and communications system

(TELECOMMUNICATION ,INSURANCE)

 Quantitative-restriction (QR)-type policies

 Price-based barriers(visa fees, entry or exit taxes, discriminating airline

landing fees, port taxes, tariffs)

 Limits on foreign share-holding in individual companies or by sector

 Qualification and licensing requirement

References
 http://capitalstock.wordpress.com
 www.wto.org
 http://www.sice.oas.org
 www.rbi.org.in
 www.rbi.org.in/scripts/BS_EntireSearch.aspx?searc
hString=services&strSection=Publications
 www.wikipedia.org