General Agreement on Trade in Services (GATS)

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 signatories 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.

Historical background
Before the WTO's Uruguay Round negotiations began in 1986, public services such as
healthcare, postal services, education, etc. were not included in international trade
agreements. Most such services have traditionally been classed as domestic activities,
difficult to trade across borders, notwithstanding the fact that for example educational
services have been "exported" for as long as universities have been open to international
students. Nevertheless, foreign participation has existed in many countries prior to the
GATS.

Nonetheless, most service sectors—in particular, international finance and maritime

transport—have been largely open for centuries, as necessary components of
merchandise trade. Other large sectors have undergone fundamental technical and
regulatory changes in recent decades, opening them to private commercial participation
and reducing barriers to entry. The development of information technologies and the
internet have expanded the range of internationally tradeable service products to include a
range of commercial activities such as medicine, distance learning, engineering,
architecture, advertising and freight forwarding.

While the overall goal of the GATS is to remove barriers to trade, members are free to
choose which sectors are to be progressively liberalised, under which mode of supply a
particular sector would be covered under, and to what extent to which liberalisation will
occur over a given period of time. Members' commitments are governed by a "ratchet
effect", meaning that commitments are one-way and should not be wound back once
entered into. This reason for this is the creation of a stable trading climate. Article XXI
allows Members to withdraw commitments and so far two members have used this option
(USA and EU). In November 2008, Bolivia notified that it will withdraw its health
services commitments.

Some activist groups consider that the GATS risks undermining the ability and authority
of governments to regulate commercial activities within their boundaries, with the effect
of ceding power to business interests over the interests of citizens. In 2003 'GATSwatch'
network published a critical statement which was supported in 2003 by over 500
organisations in 60 countries. [1].

Four Modes of Supply

The GATS agreement covers four modes of supply for the delivery of services in cross-
border trade:

Criteria Supplier Presence

Service delivered within the territory of the
Mode 1: Cross-
Member, from the territory of another
border supply Service supplier not
Member
present within the
Mode 2: Service delivered outside the territory of the
territory of the member
Consumption Member, in the territory of another Member,
abroad to a service consumer of the Member
Mode 3: Service delivered within the territory of the
Commercial Member, through the commercial presence
Service supplier present
presence of the supplier
within the territory of
Service delivered within the territory of the
Mode 4: Presence of the Member
Member, with supplier present as a natural
a natural person
person

Criticisms
The GATS document 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 an option to exclude any specific service from
liberalisation under the GATS, they are also under international pressure, from business
interests, to refrain from so excluding any service "provided on a commercial basis".
However, important public utilities including water and electricity supply 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[
General Agreement on Trade in Services

Author and Page information

• by Anup Shah
• This Page Last Updated Tuesday, July 24, 2001

• This page: http://www.globalissues.org/article/47/general-agreement-on-trade-in-

services.
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o http://www.globalissues.org/print/article/47

Without the enormous pressure generated by the American financial services sector,
particularly companies like American Express and Citicorp, there would have been no
services agreement and therefore perhaps no Uruguay Round and no WTO." David
Hartridge, Director, WTO Services Division.

— Laura Wilkes, GATS 2000 — The end of democracy?

GATS could limit the sovereignty of host governments [to control TNCs]. GATS
increases the power of TNCs at the expense of governments.

— John Madeley, Big Business Poor Peoples; The Impact of Transnational Corporations
on the World's Poor, (Zed Books, 1999) p. 143.

The General Agreement on Trade in Services (GATS) at the WTO is seen as the next
MAI (Multilateral Agreement on Investment, that was successfully derailed by enormous
protest at the impacts it would have on people's lives).

Its goal is to basically further liberalize services in the public domain. While private
businesses providing public services can have its merits, the concerns with something
like GATS has been along the lines of concentrated ownership, foreign ownership by
large transnationals and rules limiting or affecting the ability of national governments to
appropriately hold companies providing these services sufficiently accountable. On a
broad range of "services" this therefore has a wider impact than many other (often also
undemocratic) international trade and investment agreements.

Transnational corporations [TNCs] and their strong business lobby groups have helped
make the US and European Union (EU) push the GATS hard to developing countries.

If given the go ahead, it too would be seen to have a "devastating effects on the ability of
governments to meet the needs of the poorest and most powerless of their citizens"
according to the World Development Movement's report, titled In whose service?. The
report goes on to show that there are concerns on a number of fronts including the
following:

1. GATS covers basic services like water, health and education. These are basic
necessities –- not things that can be left to the market. It should be the duty of
governments to ensure that even the poorest have access to such services, whether
or not they can afford to pay. Yet, water supply in developing countries appears to
be a major target for European companies in the current negotiations.
2. GATS rules are not just limited to the cross-border trade in services. They also
prevent some forms of government regulation of foreign investors, that is, of
multinational companies setting up shop in their country. The GATS therefore
extends beyond other trade agreements, preventing governments from following
their own national development strategies and ensuring that local people actually
benefit from the presence of multinational corporations.
3. Commitments made by governments under GATS are effectively irreversible. The
privatisation and deregulation of service provision is highly controversial, yet
governments are not only signing away their own right to regulate – but the right
of future generations to implement different policies.

The scope of Gats is breathtaking. Almost every human activity is designated a "service",
from transport and tourism to water, health and education. Foreign corporations will be
allowed to take over almost any public service on the basis of a secret "agreement" that is
irreversible. The EU website describes Gats as "first and foremost, an instrument for the
benefit of business". A prototype is well under way in Britain with the coming
privatisation of the London Underground, air traffic control and sections of the health
service and education.

— John Pilger, The violence of a few protesters in Gothenburg is trivial. Blair runs a
violent government, which sells lethal weapons, June 25, 2001