General Agreement on Trade in Services

Definition

The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organization (WTO) that aims to create a global framework for trade in services. It establishes rules and commitments for countries to follow, promoting transparency and fairness in the international trade of services such as finance, telecommunications, and transport. By addressing barriers to cross-border data flows, GATS plays a vital role in facilitating the exchange of services across nations, thus supporting global economic integration.

5 Must Know Facts For Your Next Test

1. GATS came into effect in 1995 as part of the Uruguay Round negotiations and is the first legally binding international agreement covering trade in services.
2. Under GATS, member countries must list their specific commitments on market access and national treatment for various service sectors.
3. GATS includes four modes of supply for services: cross-border supply, consumption abroad, commercial presence, and presence of natural persons.
4. The agreement promotes the progressive liberalization of trade in services by encouraging countries to make additional commitments over time.
5. Cross-border data flows are essential under GATS as they enable the delivery of services through electronic means, impacting sectors like e-commerce and digital trade.

Review Questions

• How does the General Agreement on Trade in Services facilitate cross-border data flows between countries?
  • The General Agreement on Trade in Services facilitates cross-border data flows by establishing a legal framework that promotes transparency and encourages member countries to eliminate barriers to the supply of services. By addressing issues such as licensing, regulation, and market access, GATS ensures that data can move freely across borders, which is crucial for services that rely on electronic communication and information exchange. This framework helps create a more integrated global market for services, enabling businesses to operate efficiently across different jurisdictions.
• Discuss the significance of the modes of supply in GATS and their impact on international service trade.
  • The modes of supply defined in GATS—cross-border supply, consumption abroad, commercial presence, and presence of natural persons—are significant because they outline how services can be traded internationally. Each mode offers different avenues for service providers to enter foreign markets, affecting how companies strategize their operations globally. Understanding these modes helps countries negotiate commitments effectively and adapt their regulatory frameworks to enhance their competitiveness in the service sector.
• Evaluate the role of GATS in promoting sustainable economic development through the liberalization of services trade.
  • GATS plays a crucial role in promoting sustainable economic development by encouraging member countries to liberalize their service sectors while ensuring that regulations protect public interest. As nations commit to reducing barriers and increasing access to their service markets, GATS fosters competition and innovation, leading to improved efficiency and quality of services. Furthermore, by facilitating cross-border data flows and service delivery via digital platforms, GATS supports economic growth while enabling developing countries to participate more fully in the global economy.

Related terms

Trade in Services: The exchange of services rather than goods across international borders, including sectors like finance, transportation, and professional services.

World Trade Organization: An intergovernmental organization that regulates international trade, providing a framework for negotiating trade agreements and resolving disputes between member countries.

Mode of Supply: Refers to the different ways services can be supplied across borders, including cross-border supply, consumption abroad, commercial presence, and presence of natural persons.