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 came into force in January 1995, following the Uruguay Round negotiations. It was created to extend the multilateral trading system to the services sector, similar to how the General Agreement on Tariffs and Trade (GATT) governs merchandise trade.
All WTO members are parties to GATS, and the principle of most-favoured-nation (MFN) applies, though members may introduce temporary exemptions upon joining.
The agreement acknowledges the growing importance of service trade for global economic growth and aims to create a multilateral framework of principles and rules for trading services. Through market transparency and progressive liberalization, it seeks to benefit all trading partners, particularly developing and least-developed countries. Its goals are pursued through ongoing rounds of multilateral negotiations.
The European Community ratified GATS under the Marrakesh Agreement, enabling its implementation across member states.
Historical Background
GATS seeks to remove barriers to trade in services, but members can choose: - Which sectors to liberalize, - Which modes of supply apply, - The extent and timing of liberalization.
Once made, commitments are binding and cannot be reversed easily (ratchet effect), although Article XXI allows withdrawals. Notably: - US and EU have used this clause, - Bolivia notified withdrawal of its health services commitments in 2008.
Criticism
Some argue GATS undermines national regulatory authority, giving more power to corporate interests. In 2003, the GATSwatch network issued a critical statement supported by over 500 organizations from 60 countries.
Still, GATS is not mandatory. For countries seeking transparency and legal predictability, GATS offers an international legal framework. However, legal barriers to service trade, while potentially valid, can also enable corruption.
Four Modes of Supply
GATS defines four modes for supplying services in cross-border trade:
- Cross-border supply – Services flow across borders (e.g. international banking).
- Consumption abroad – Consumers use services in another country (e.g. tourism).
- Commercial presence – A foreign company establishes a branch/subsidiary.
- Presence of natural persons – Individuals travel to provide services temporarily.
Sectors Addressed
Services sectors under GATS are listed in the "W/120 list" (WTO document MTN.GNS/W/120), which includes 12 main sectors:
- Business
- Communication
- Construction and Engineering
- Distribution
- Education
- Environment
- Financial
- Health
- Tourism and Travel
- Recreation, Cultural, and Sporting
- Transport
- Other
Movement of Natural Persons
GATS distinguishes the movement of individuals providing services from those seeking permanent employment abroad. Such movement is regarded as temporary.
Criticisms
- GATS may substitute national legal authority with decisions made in closed WTO panels.
- Governments may face pressure from global business not to exclude public services from liberalization.
- Public utilities such as water, electricity, healthcare, and education can be classified as "commercially provided", making them subject to GATS rules.
- This broad definition allows the privatization or marketization of public services — including policing, military, prisons, and judiciary — often without public consent or awareness.
See Also
- European Services Forum(#)
- Foreign Affiliate Trade Statistics(#)
- Trade in Services(#)
- Trade in Services Statistics(#)
- World Development Movement(#)
- World Trade Organization(#)
References & Further Reading
- Text of the General Agreement on Trade in Services – WTO.org(https://www.wto.org/english/docse/legale/26-gats.pdf)
- Barlow, M. "The Last Frontier", The Ecologist Vol 31 No 1
- Clift, R. Background Paper on the General Agreement on Trade in Services and Post-Secondary Education in Canada, cufa.bc.ca
- GATS, Privatisation, and Health
- World Development Movement
- Union Network International