GENERAL AGREEMENT ON TRADE IN SERVICES (GATS)

The GATS was inspired by essentially the same objectives as its

counterpart in merchandise trade, the General Agreement on Tariffs and Trade
(GATT): creating a credible and reliable system of international trade rules;
ensuring fair and equitable treatment of all participants (principle of non-
discrimination); stimulating economic activity through guaranteed policy
bindings; and promoting trade and development through progressive
liberalization. GATS has three main parts: the main text with general principles
and obligations; annexes with rules for specific sectors; and Member countries'
specific commitments to provide access to their markets.

OBJECTIVES
The GATS has two primary objectives: first, to ensure that all signatories
are treated equitably when accessing foreign markets; and second, to promote
progressive liberalization of trade in services (over time, eliminating trade
barriers to enable further participation in one another's markets).

MODES OF SUPPLY
The definition of services trade under the General Agreement on Trade in
Services (GATS) is four-pronged, depending on the territorial presence of the
supplier and the consumer at the time of the transaction. The GATS
distinguishes between four modes of supplying services: cross-border trade,
consumption abroad, commercial presence, and presence of natural persons.

Mode 1: Cross-border
- Defined to cover services flows from the territory of one Member into the
territory of another Member.
o Example: A user in country A receives services from abroad through
its telecommunications or postal infrastructure.
o banking or architectural services transmitted via
telecommunications or mail

Mode 2: Consumption abroad

- Services supplied in the territory of one WTO Member to the service
consumer of any other Member.
- Refers to situations where a service consumer (e.g. tourist or patient)
moves into another Member's territory to obtain a service.
o Example: Nationals of country A have moved abroad as tourists,
students, or patients to consume the respective services.

Mode 3: Commercial Presence

- Services supplied by a service supplier of one WTO Member, through
commercial presence, in the territory of any other Member.
- Implies that a service supplier of one Member establishes a territorial
presence, including through ownership or lease of premises, in another
Member's territory to provide a service.
 o Example: The service is provided within country A by a locally-
established affiliate, subsidiary, or representative office of a foreign-
owned and — controlled company (bank, hotel group, Construction
Company, etc.)
o domestic subsidiaries of foreign insurance companies or hotel
chains

Mode 4: Presence of natural persons

- Services supplied by a service supplier of one WTO Member, through the
presence of natural persons of a Member in the territory of any other
Member.
- Consists of persons of one Member entering the territory of another
Member to supply a service (e.g. accountants, doctors or teachers). The
Annex on Movement of Natural Persons specifies, however, that Members
remain free to operate measures regarding citizenship, residence or
access to the employment market on a permanent basis.
o Example: A foreign national provides a service within country A as
an independent supplier (e.g., consultant, health worker) or
employee of a service supplier (e.g. consultancy firm, hospital,
Construction Company).

COVERAGE
GATS considers education as a tradable service. GATS covers 12 service
sectors (Business; Communication; Construction and Engineering; Distribution;
Education; Environment; Financial; Health; Tourism and Travel; Recreation,
Cultural, and Sporting; Transport; "Other".). Two exceptions are services in the
exercise of governmental authority and air traffic rights.
GATS applies to all measures affecting trade in services. GATS defines measures
as all laws, regulations and practices from national, regional or local government
or non-governmental bodies exercising powers delegated to them by
government that may affect trade.