The 1990s saw the first general multilateral agreement of trade in services at the WTO level (GATS). This agreement is much less developed, less extensive and much more conditional than the (GATT) agreement on goods. Unlike the rapid development of the agreements in goods between the 1940s and 1990s gradually eliminating most tariffs, there has been no development of the agreement on a multilateral basis between WTO members as a whole.

The agreement consists of general obligations and specific commitments in the same way as the agreement on goods. The general obligations are presumptively applicable to all parties. However, they are tied to the commitments made by the states sector by sector in relation to liberalisation. Therefore, they apply only to the sectors in which specific liberalisation commitments have been made and then to the extent of such commitments.

The agreement provides for a wide range of sectors in which liberalisation of rules on a cross-border basis might be offered,  further negotiated and agreed. It may apply to the four  different modes of supply of international trade in services namely

  • cross-border supply from a business in one state to another one state to a customer or client in another state
  • consumption of service abroad in one state by a  customer or client of another state
  • The commercial presence of a service supplier of one state in the state providing a service though that commercial presence
  • where the service supplier of one state operates through the presence of persons in another state

The agreement does not apply to access to employment citizenship or residence on a long-term basis. There are limited provisions for the temporary residence of persons within a member state which can be varied by the state concerned by its laws

GATS does not apply to governmental non-commercial services. There are further general exceptions in relation to matters such as safeguarding the balance of payments, protecting public health, public order and morals, preventing deceptive and fraudulent practices, protection of privacy confidentiality and national security. The exceptions must not be applied in a manner which constitutes a means of arbitrary or unjustifiable discrimination.

GATS Principles

The basic principle of GATS is that each state member is to afford services and service suppliers of other member states treatment no less favourable than that which applies to its own services and service suppliers. The most favoured nation commitment is not as thoroughgoing as in the case of goods as it applies only to liberalises sectors and is also subject to further exemptions.

There is a transparency principle requiring states to publish national measures relevant to the commitments they have given. They are to ensure their domestic rules are administered in an objective and impartial way. Licensing qualifications and technical standards must not be burdensome restricted or non-transparent. States agree to publish measures of general application in relation to trade in services.

Where services are covered by commitments given, measures of general application relating to those commitments must be administered in a reasonable objective and impartial manner. The must be a prompt and impartial review of administrative decisions affecting trade in services.

The Council for trade in services may establish and develop disciplines or standards in relation to measures relating to qualification requirements procedures technical standards and licensing requirements with a view to ensuring that they do not constitute unnecessary barriers to trade. The discipline seeks to ensure that requirements are objective and transparent such as in relation to competence and ability to supply the service or burdensome than necessary to ensure the quality of the service that any licensing procedures do not constitute a restriction on the supply of the service.

States may enter mutual recognition arrangements or agreements in relation to educational qualifications and licenses. They usually provide for a framework for cooperation on the recognition of qualification, rather than strong substantive rules equivalent to the Qualifications Directive.

Applies to Nominated Sectors Only

GATS seeks to open up specific service sectors. States may undertake a schedule of commitments covering the trade sectors which are open to market access subject to limitations and conditions specified. There are certain types of limitations that are not permissible, or which are not applicable unless specified.

States need not open all their sectors. Developed states have opened about two-thirds of the sectors while developing states have opened up 30% of their sectors. There are provisions for a list of exemptions and conditions under which measures can be maintained which are inconsistent with the general principle of non-discriminatory access. There are mechanisms for the review of exemptions periodically, including a review of whether the justification has continued.

The provisions on services in trade agreements are in no way as thoroughgoing as those in relation to goods. They only apply to the extent that the states have made specific commitments in their schedule of services. There is no automatic national treatment principle. The principles only apply where there are commitments for market access.

Commitments Often Limited and Revocable

The commitments are in practice, much more restrictive and selective than those in the area of goods. In practice, there are significant conditions and limitations. The schedules set out the commitments for the areas opened up to international market access including the limitation conditions of access qualifications for national treatment timeframe and commencements.

Although commitments cannot generally be avoided, there are mechanisms for withdrawal. Market access or national treatment commitments given in schedules may be withdrawn provided that other members affected may enter negotiations with you to reaching an agreement for necessary compensatory adjustments in other trade areas. If no agreement is reached the member affected may refer the matter to arbitration for an award of a permitted compensatory measure.

In the sectors covered by the schedules and subject to conditions and qualifications states are to afford services and service suppliers of other WTO GATS members no less favourable treatment than that accorded to its own services and service providers. The commitments relate to matters such as national treatment market access and other commitments. The commitments may be subject to limitations and conditions on market access and conditions for national treatment.

Therefore, they contrast to the more thoroughgoing agreement on goods is very significant. Market access and national treatment are only available if included in the specific commitments which the state concerned has given under the GATS.

Can be Expanded in Trade Agreements

As with trade in goods, states may be prepared to make commitments for full unqualified market access in negotiations on a reciprocal basis in services sectors on the basis of commitment by other states in the same or other sectors. The GATS contemplate that the state parties may enter into successive rounds of negotiation periodically with a view to achieving progressively higher levels of liberalisation.

Unlike the key EU, freedoms to sell goods provide services work and invest in other EU states the rights under the principal WTO agreements are not enforceable by businesses or individuals. There exists nothing equivalent to the EU free trading rights which automatically invalidate barriers to exercise of rights and give rights to compensation and remedial measures for breach.

As in the case of goods, states may enter more favourable agreements with each other in relation to services by way of exception to the most-favored-nation principle.

Limited Undertakings on Internal Regulation

The general multilateral WTO agreements do not contain common rules on key areas such as social and employment rights the protection of the environment and fair competition. There are more general crude and less effective mechanisms that allow states to take actions against other states if they engage in some types of unfair competition. If the state grants subsidies on exports ((other than for agriculture) which leads to lower prices than the domestic price so that it has more than an equitable share of world exports in a particular product it must notify and undertake certain consultations with states affected.

In the case of certain types of subsidy, an affected state may complain where it has an adverse effect on its domestic industry, denies some benefit to which it is already entitled. or seriously prejudice its interests. A subsidy may take any form such as for example a tax break. The panel on ultimate dispute resolution may recommend that the subsidy be withdrawn. If it is not it may permit countermeasures. Countermeasures may be by way of a countervailing duty which may be levied for example against a subsidised good.

Dumping is the sale of goods below their value which can be a form of predatory market action. Anti-dumping duties may be introduced to counteract the dumping.

The technical barriers to trade agreement and the sanitary and phytosanitary agreement apply to standards for goods and agricultural products, respectively. Technical standards are not more restrictive than necessary to fulfil a legitimate objective.

States may pursue legitimate objectives provided they do not constitute arbitrary or unjustifiable discrimination between state members to whom the same conditions apply. They may take measures necessary to ensure the quality of its exports for the protection of human animal and plant, life or health, of the environment, prevention of deceptive practices at the levels it considers appropriate.

The measures must not be applied in a manner that constitutes a means of arbitrary or unjustifiable discrimination between countries with which the same conditions prevail. They must conform generally with the requirements of the agreements. States must use relevant technical standards where they exist except where there is good reason otherwise. Higher standards may be required in relation to agri-food scientific if the evidence justifies it.

States should consider accepting the standards of other states. They should accept such standards as equivalent if they can be demonstrated objectively to achieve an appropriate level of protection. There are codes of practice for the preparation adoption and application of standards.

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