General Agreement on Trade in Services

1. General Agreement on Trade in Services Dr. (Mrs.) Vijaya Katti Professor & Chairperson Management Development Programmes Indian Institute of Foreign Trade New Delhi – 110016

2. Why GATS Came into Existence • The Developed Nations Fought for the Inclusion • Reason • From the eighties major revolution setting a phenomenal pace in the development of the sector started • Envisaged High Growth Potential in exporting to the developing world • Liberalisation beneficial to them without any risk involved

3. Definition of “Trade in Services” • The GATS does not define “services” but does define “trade in services”. The definition covers not only the cross-border supply of services but also transactions involving the cross-border movement of capital and labour.

4. GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) • Trade in Services different from Trade in Goods: Cross Border Supply in Goods vs. four modes of supply in Services namely Cross Border Supply, Consumption Abroad, Commercial Presence, Movement of Natural Persons. • Control through Regulations – No Tariffs • Obligations – General (MFN,Transparency) vs. Conditional (National treatment)

5. FOUR MODES OF SUPPLY OF SERVICES

6. GATS - MAIN PRINCIPLES • Universal obligations - • MFN, Transparency • Supporting obligations - • Domestic regulations • Monopolies and Exclusive Service Suppliers • Business practices • Recognition of qualification • Economic integration

7. NATURE OF GATS • Positive list approach involving Choice of : • Services sectors in undertaking commitments • Modes of Supply in undertaking commitments • Horizontal Commitment or sectoral commitments • Negative Listing of Limitations on : • - Market Access • - National Treatment • Additional Commitments • GATS requires members to undertake binding commitments which add to certainty and predictability of trading regime; in practice members exercise the choice of making commitments depending on various factors including the return which they expect from making commitments.

8. Universal Coverage

9. ARCADIA - SCHEDULE OF SPECIFIC COMMITMENTS Modes of supply: (1) Cross-border supply (2) Consumption supply (3) Commercial presence (4) Presence of natural persons

10. Ongoing Negotiations : Core provisions • Article XIX of GATS: • “… Members shall enter into successive rounds of negotiations, beginning not later than five years from the date of entry into force of the WTO Agreement … with a view to achieving a progressively higher level of liberalization …” • Due respect for national policy objectives and levels of development • Flexibility for developing countries to open fewer sectors and liberalize fewer types of transactions. • Article IV:1: • Facilitate increasing participation of developing country Members in world trade (access to technology and distribution channels, liberalization of sectors and modes of export interest) • Annex on Article II Exemptions: • Negotiation of existing MFN Exemptions

11. Ongoing Negotiations : Rule Making • 1. Rule-making Programme • Safeguards, • Government Procurement, • Subsidies • 2. Disciplines on Domestic Regulation

12. NEGOTIATING CALENDER As per Doha Ministerial Declaration read with the Guidelines and Procedures for negotiations (NGP), the following calender is mandated: • Initial Request – 30th June, 2002 • Initial Offers - 31st March, 2003 • Safeguards - 15th March 2004 • Government Procurement/ Subsidies/ Domestic Regulations : aim to complete negotiations prior to completion of Negotiations on Specific Commitments • Close of negotiations by January 1, 2005

13. Guidelines and Procedure for Negotiations • Progressive Liberalisation of Trade in Services • Right to regulate & re-regulate supply of services • Maintain structure and principles of GATS including right to choose sectors and modes. • No a- priori exclusion of any Sector or Mode of supply– Special attention to sectors and modes of interest to developing countries • Request - offer, the main method of negotiations.

14. Contd… • Starting point of negotiations : current schedules of commitments • Flexibility in making Commitments for developing countries. • Credit for Autonomous Liberalisation. • Assessment of Trade in Services and adjustment of negotiations accordingly.

15. The Request & Offer Process:Relevant Provisions • Article XIX:4:::; “The process of progressive liberalization shall be advanced… through bilateral, plurilateral or multilateral negotiations directed towards increasing the general level of specific commitments…” • Negotiating Guidelines (S/L/93): “The main method of negotiation shall be the request-offer approach.”

16. Formulating Initial Requests:Relevant Steps 1.Evaluation of Trading Opportunities (consultations with relevant Ministries, associations, etc.) II.Examination of Current Situation under GATS III.Definition of Negotiating Objective -Inclusion of additional sectors? -Improvements in existing Commitments on Market Access and National Treatment? -Scheduling of Additional Commitments (ArtXVIII)? -Removal of MFN Exemptions?

17. IV. Circulation of REQUESTS • No specified format • Only to the relevant trading (s) • Without further procedural obligations(no notification or transparency requirements, etc.)

18. Formulating Initial OFFERS;Relevant Steps • Assessment of the REQUESTS Received • Evaluation of Trade and Development interests • Promotion of FDI? • Improvements in business and/or social infrastructures? • Promotion of technology transfer? • Reduction/elimination of domestic supply gaps? • Other social/economic/regional policy objectives?

19. Contd… iii. Need for Accompanying Regulatory Reform? • Preparation and Circulation of initial OFFERS • Highlight envisaged improvements in draft schedule and/or List of MFN Exemptions • Consider scope for additional technical modifications and clarifications • Circulate to all Members

20. Issues to be considered in making offers • Whether no commitment or Full or Partial Commitment • In case of partial commitment the limitations to be attached in order to take care of particular concerns:

21. Contd. • Market access limitations such as • limits on number of suppliers, • total value of service transactions, • total number of service operations, • total no. of natural persons to be employed by a service supplier, • the percentage of foreign equity and the type of legal presence

22. The MFN and National Treatment Under GATS • MFN - Favour one, favour all. if a country allows foreign competition in a sector, equal opportunities in that sector should be given to service providers from all other WTO members. MFN applies to all services, but some special temporary exemptions have been allowed • National Treatment - equal treatment for foreigners and one's own nationals. Applies where a country has made a specific commitment, and exemptions are allowed.

23. GATS 2000 Negotiations : Initial Offers • Till date more than 30 WTO members have made initial offers. • Offers are conditional on negotiations and made by trading partners • Offers are restrictive: Limited improvements over UR commitments

24. Contd… • Most countries have not bound the status quo • More full commitments in Mode 1 • Removal of some limitations, esp. in Mode 3 • Economic needs test • Form of legal entity • Foreign equity participation • Scope of operations • Authorization/approval requirements

25. Contd… • Sectoral offers on Mode 4 remain unbound • Some improvements in horizontal offers on Mode 4 • Expanded to include contractual service suppliers, independent professionals, graduate trainees (EU offer) • Requirement of economic needs and labour market tests removed/relaxed for intracorporate transferees, professionals, business visitors (Canada, EU) • Period of stay extended for business visitors, executives, senior managers, specialists (Canada, New Zealand) • Clarified definitions of service provider categories and associated qualification and training requirements

26. Contd… • However certain problems remain: • Linking of Mode 4 to immigration rules and regulations • Discretionary scope in recognition of training and qualifications • Conditions on prior employment, duration of stay, inter-firm and geographic mobility, wages • Numerical ceilings and quotas

27. THANK YOU