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M y C o u r s e s e r i e s

The Agreement Establishing the WTO has four Annexes. Annexes 1, 2, and 3, are called "Multilateral Trade
Agreements" because they apply to all the WTO Members.
 Annex 1 is divided into three sections:
 Annex 1A ( The Multilateral Agreements on Trade in Goods );
 Annex 1B ( General Agreement on Trade in Services (GATS) ); and,
 Annex 1C ( Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)).
Now we will focus on Annex 1B – the GATS.
In this Module, we will start by presenting a brief overview of the historical background of the GATS and the basic principles of the Agreement. Then we will introduce the Members' obligations contained in the text of the
Agreement, its Annexes, and Members' Schedules of Specific commitments. Finally, we will introduce briefly the concepts and issues involved in the ongoing negotiations on services market access and rules.
The Council for Trade in Services (CTS) is the WTO body in charge of overseeing the functioning of the
GATS.
2

Services represent the fastest growing sector of the global economy, accounting for about 60 per cent of world production and employment and nearly 20 per cent of world trade. 1 The rules on trade in services are contained in the GATS, which is the first multilateral agreement on trade in services. The main objectives of the GATS are to establish a multilateral framework of principles and rules for trade in services, to expand trade under conditions of transparency and progressive liberalization as a means of promoting the economic growth of all trading partners and the development of developing countries. The benefits of services liberalization do not extend only to the service industries themselves, but to all other economic activities which need access to efficient services.
The GATS covers any measure applied by a WTO Member affecting trade in services (includes any action taken at any level of government and by non-governmental bodies). Trade in services is defined as the supply of a service through any of the four modes of supply (cross-border supply2 , consumption abroad3 , commercial presence4 and presence of natural persons5). The GATS explicitly excludes services provided in the exercise of governmental authority and measures affecting air traffic rights.
A WTO Member's obligations under the GATS are defined by: (i) the Agreement itself; (ii) annexes addressing the particular policy concerns or the particularities of individual services sectors and modes; and, (iii) Members'
Schedules of specific commitments specifying market access and national treatment commitments per sector and mode of supply, as well as additional commitments, if any.
The GATS includes rules on MFN treatment (applies to any measure, except where a departure is allowed by the GATS), transparency (e.g. publication of measures), domestic regulation (e.g. qualification requirements and procedures) and provisions directed to increase the participation of developing countries and LDCs.
As with Members' Schedules of tariff concessions for goods, each WTO Member is required under the GATS to submit a Schedule for trade in services, which contains market access and national treatment commitments, as well as any additional commitments. By scheduling commitments, a Member guarantees other Members minimum conditions of access on an MFN basis, comparable to a tariff binding under the GATT 1994. Since these are ceiling bindings, Members are not prevented from being more 'generous' (or less discriminatory) in practice. Schedules may vary widely in their sector scope and the levels of commitments implied, reflecting
Members' national policy objectives and constraints. Similarly to the Schedules on tariff concessions for goods, commitments can only be withdrawn or modified after negotiations and agreement on any compensatory adjustment with affected Members. The modifications of commitments must be implemented on an MFN basis.
1 As of 2008.
2 Mode 1 (a type of transaction analogous to trade in goods): from the territory of one Member into the territory of any other Member.
3 Mode 2: in the territory of one Member to the service consumer of any other Member (consumer moves to the territory of another country and buys services there).
4 Mode 3: by a service supplier of one Member, through commercial presence, in the territory of any other
Member.
5 Mode 4: by a service supplier of one Member, through the presence of natural persons of a Member in the territory of any other Member.
3

The GATS approach to scheduling is knows as "positive list" approach since each individual Member decides which sector and modes to commit, and how much market access and national treatment to provide. There is a common format consisting of four columns: (i) description of the sector; (ii) limitations on market access
( Article XVI ); (iii) limitations on national treatment ( Article XVII ); and, (iv) additional commitments
( Article XVIII ), if any. Members are free to inscribe six specified types of limitations on market access and any departures from national treatment under the four modes of supply. Domestic regulations not falling under
Articles XVI or XVII must not be scheduled; however, they are nevertheless subject to certain disciplines set out in the GATS.
AN OVERVIEW OF A WTO MEMBER'S SCHEDULE
Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons.
SECTOR OR SUB-
SECTOR
Limitations on market access
Limitations on national treatment
Additional commitments
I. HORIZONTAL COMMITMENTS
"All sectors included in this Schedule" or kept blank
Covering only those modes for which horizontal limitations are inscribed.
Covering only those modes for which horizontal limitations are inscribed.
Optional
(kept blank when no additional commitment).
II. SECTOR-SPECIFIC COMMITMENTS
SECTOR DESIGNATION 1) 1)
2)
3)
4)
2)
3)
4)
Covering all four modes in each service sector or sub-sector identified in column 1.
Covering all four modes in each service sector or sub-sector identified in column 1.
Table 1: An overview of a WTO Member's schedule
Commitments in a Schedule are organized by sector and by mode of supply. For each sector or sub-sector inscribed, the Schedule must indicate, with respect to the four modes of supply set out in Article I, any limitations on market access or national treatment which may be maintained. Most Schedules are divided in two parts. Part I (''horizontal commitments'') contains limitations which apply to all service sectors included in the Schedule. The purpose of having such a section is to avoid repeating the same entry many times in the
Schedule. Part II presents the sector-specific commitments.
Entries in Schedules tend to conform to uniform conventions. ''None'', when used in the sector-specific part of the Schedule, means that there are no limitations specific to this sector under the relevant mode except the conditions set out in the horizontal section. ''Unbound'' means that a Member remains free in a given sector
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and mode of supply to introduce or maintain measures inconsistent with market access or national treatment.
In cases where a commitment is made with limitations, the entry should describe concisely the elements which make it inconsistent with Articles XVI (market access) and Article XVII (national treatment).
The GATS mandates Members to enter into successive rounds of negotiations in services with a view to achieving a progressively higher level of liberalization. In addition, it provides for continued negotiations in four-rule making areas (known as "built-in agenda"): development of disciplines on domestic regulation, emergency safeguards, subsidies and government procurement. These negotiations form part of the Doha
Round of Negotiations.
5

The GATS is a relatively new agreement compared to the General Agreement on Tariffs and Trade (GATT), which entered into force in 1948. For almost half a century, the multilateral rules on international trade dealt only with trade in goods.
The GATS is the first multilateral trade agreement to cover trade in services. Its creation was one of the major achievements of the Uruguay Round of trade negotiations, from 1986 to 1993. All Members of the World
Trade Organization (WTO) are signatories to the GATS and have to assume the resulting obligations.
The need for a trade agreement in services has long been questioned. Large segments of the services economy, from hotels and restaurants to personal services, have traditionally been considered as domestic activities. Other sectors, from rail transport to telecommunications, have been viewed as classical domains of government ownership and control, given their infrastructural importance and the perceived existence, in some cases, of natural monopoly situations. A third important group of sectors, including health and education, are considered in many countries as governmental responsibilities, which should not be left to the rough and tumble of markets.
Nevertheless, some services sectors, in particular international finance and maritime transport, have been largely open for centuries — as the natural complements to merchandise trade. Other large sectors have undergone fundamental technical and regulatory changes in recent decades, opening them to private commercial participation and reducing or eliminating barriers to entry. The emergence of the Internet has helped to create a range of internationally tradable services — from e-banking to distance learning — that were unknown only two decades ago. Distance-related barriers that had previously disadvantaged suppliers and users in remote locations have been reduced or even eliminated. A growing number of governments has gradually exposed previous monopoly domains to competition (e.g. telecommunication).
Services represent the fastest growing sector of the global economy, currently accounting for about
60 per cent of world production and employment and nearly 20 per cent of world trade. Not surprisingly, the world's largest and most advanced economies, including the United States, Japan and most
European Union (EU) Member States, are among the most important suppliers and importers of services.
However, an increasing number of developing countries have also built up export-oriented services industries, capitalizing for example on their comparative advantage in tourism or on growing demand in adjacent countries for financial and other infrastructural services.
This reflects a basic change in attitudes. The traditional framework of public service increasingly proved inappropriate for operating some of the most dynamic and innovative segments of the economy. Given the continued momentum of world services trade, the need for internationally recognized rules became increasingly pressing.
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Why is the Liberalization of Services Important?
It is impossible for any country to prosper today under the burden of an inefficient and expensive service infrastructure. Producers and exporters of any product need access to efficient banking, insurance, telecommunications and transport systems in order to be competitive. In markets where supply is inadequate, imports of essential services can be as vital as imports of basic commodities. Therefore, the benefits of services liberalization extend far beyond the service industries themselves; they are felt through their effects on all other economic activities.
To know more about the benefits of service liberalization, see: http://www.wto.org/english/tratop_e/serv_e/gats_factfiction3_e.htm
In face of the increasing need for internationally recognized rules on services trade, one would wonder whether the GATT rules governing goods trade could simply be extended to services. The answer tends to be in the affirmative as far as some basic principles are concerned, including non-discrimination or the concept of bound conditions of access, but is negative if some inherent differences of services, and services trade, are taken into account:
 Goods are storable and the production and consumption of goods normally take place at different times. In contrast, services are not normally storable and the production and consumption of services often take place simultaneously. As a consequence, the supply of services normally requires much more producer-user interaction than goods do.
 Many services are heavily regulated. Governments are involved, for example, to ensure compliance with social policy objectives (health, education), to guarantee access to basic networks
(pipelines, rails), and to enforce necessary prudential rules (banking, insurance).
 Market access for goods is generally restricted by tariffs. However, access conditions for services are mainly determined by non-tariff barriers such as domestic regulations or quotas.
 Goods are tangible while services are not. Many domestic regulations focus on the service providers rather than on the services themselves (e.g. in the form of licensing and qualification requirements).
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The Preamble of the GATS sets out three main objectives:
Main Objectives of the GATS
 to establish a multilateral framework of principles and rules for trade in services;
 to expand trade under conditions of transparency and progressive liberalisation;
 to promote the economic growth of all trading partners and the development of developing countries.
The GATS not only aims to liberalize international trade in services, but also recognizes Members' right to maintain and develop new regulations to meet national policy objectives, and the particular need of
developing countries to exercise this right.
Requiring compliance with technical standards or qualification requirements, which may be intended to ensure the quality of the service or the protection of public interest, are legitimate forms of domestic policy intervention. Thus, the GATS does not entail deregulation.
Article I:1 of the GATS sets out the scope of the Agreement. Coverage is broad as the Agreement applies to
any measure applied by a WTO Member "affecting" trade in services. "Affecting" means that the scope of the Agreement encompasses not only measures designed to regulate trade in services directly, but also any other measures that might incidentally affect the supply of a service. The term ''measure'' is defined to include:
(i) any action taken at any level of government as well as by non-governmental bodies to which regulatory powers have been delegated ( Article I:3(a) ); and,
(ii) any form of measure including a law, regulation, rule, procedure, decision, administrative action, or any other form ( Article XXVIII of the GATS).
According to the Appellate Body, there are two things that must be assessed before consideration is given to the consistency of a measure with the provisions of the GATS: (1) whether there is "trade in services" in the sense of Article I:2 (see below) and (2) whether the measure at issue "affects" such trade in services within the meaning of Article I:1 ( Canada – Auto, Appellate Body Report , para. 155). Thus, no measures are
excluded a priori from the scope of the GATS.
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The GATS does not define ''services'', Article I:2 defines ''trade in services'' as the supply of a service
through any of the four modes of supply:
Modes of Supply of Services Examples
Mode 1 - CROSS-BORDER SUPPLY (a type of transaction analogous to trade in goods): from the territory of one Member into the territory of any other
Member.
Service provided without the movement of either the service provider or the service receiver
A user in country A (service receiver) receives services from abroad (service provider in country B) through its telecommunications or postal infrastructure. Such supplies may include consultancy or market research reports, tele-medical advice, distance training, or architectural drawings.
Mode 2 - CONSUMPTION ABROAD: in the territory of one Member to the service consumer of any other
Member (consumer moves to the territory of another country and buys services there).
Nationals of country A (service receiver) have moved abroad (service provider in country B) as tourists, students, or patients to consume the respective services.
Service provided through the movement of the service receiver to the country where the service provider locates
Mode 3 - COMMERCIAL PRESENCE: by a service supplier of one Member, through commercial presence, in the territory of any other Member.
Service provided through the establishment of a commercial presence by the service provider in the service receiving country
Service provider in country B establishes a commercial presence in the territory of country A.
The service is provided within country A by a locallyestablished affiliate, subsidiary, or representative office of a foreign-owned or - controlled company
(bank, hotel group, construction company, etc.).
Mode 4 — PRESENCE OF NATURAL PERSONS: by a service supplier of one Member, through the presence of natural persons of a Member in the territory of any other Member.
Service provided through the movement of the individual service provider to the country where the service receiver locates
A foreign national of country B provides a service within A as an independent supplier (e.g., consultant, health worker), contractual service supplier, intracorporate transferee of a transnational company, or employee of a locally established foreign service supplier (e.g. consultancy firm, hospital, construction company). Business visitors and services salespersons are not directly engaged in the delivery of a service but are often also included in Members' mode 4 commitments.
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As we will see latter on, for purposes of structuring their commitments, WTO Members have generally used a classification system comprised of 12 core Service Sectors:
SERVICE
SECTORS
Business services (including professional services and computer services);
Communication services;
Construction and related engineering services;
Distribution services;
Educational services;
Environmental services;
Financial services (including insurance and banking);
Health-related and social services;
Tourism and travel-related services;
Recreational, cultural and sporting services;
Transport services; and,
Other services not included elsewhere.
Despite the broad coverage of the GATS, Article I:3(b ) explicitly excludes its application to services
provided in the exercise of governmental authority. For a service to fall under this exclusion, it has to be supplied neither on a commercial basis, nor in competition with one or more service suppliers ( Article I:3(c) ).
Typical examples may include police, fire protection, monetary policy operations, mandatory social security schemes, and tax and customs administration.
Also excluded from coverage are measures affecting air traffic rights and directly related services. We will deal more closely with the air transport sector during our introduction to the GATS Annex on Air Transport
Services.
EXERCISES
1.
What are the main objectives of the GATS?
2.
What does the phrase "any measures affecting trade in services" mean?
3.
Describe the four modes of supply and provide one example for each one.
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WTO Members' Obligations under the GATS
A WTO Member's obligations under the GATS are defined by:
 the Agreement itself, including general obligations applying to all Members;
 Annexes addressing particular policy concerns or the particularities of individual service sectors and modes;
 Members' Schedules of specific commitments specifying market access and national treatment commitments per sector and mode of supply as well as additional commitments, if any.
General obligations under the GATS can be divided into two categories: unconditional and
conditional obligations. As you will see, many GATS Articles contain both types of obligations.
Unlike specific commitments on market access and national treatment, Members cannot modify or
negotiate the extent to which general obligations are applied. Each Member has to respect such general obligations in full.
Unconditional obligations apply immediately to all Members and to all service sectors, irrespective of the
existence of specific commitments. They include in particular:
Most-Favoured-Nation (MFN) Treatment
Transparency (e.g., general publication and information requirement)
Domestic Regulation (availability of legal remedies)
Monopolies & Exclusive Suppliers
Business Practices
Article II
Article III:1, 4
Article VI:2
Article VIII:1
Article IX:2
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Conditional obligations bind a Member only in those sectors or sub-sectors where it has undertaken a
specific commitment.
Transparency
Domestic Regulation
Monopolies
Payments and Transfers
Article III:3
Articles VI: 1, 3, 5, 6
Article VIII:2
Article XI
a.
M
-
-
(MFN)
&
(
RTICLE
The GATS requires WTO Members to extend immediately and unconditionally to services and service suppliers of any other Members "treatment no less favourable than that accorded to like services and service suppliers of any other country". Accordingly, Members shall grant to all WTO Members the best treatment granted to any other country, whether or not the latter is a Member of the WTO, except where the departure from the MFN treatment is permitted by the relevant GATS provision (see below).
The MFN obligation is applicable to any measure - as defined in Article I of the GATS - that affects trade
in services in any sector falling under the Agreement, whether specific commitments have been undertaken or not. As with the MFN rule under the GATT, the GATS MFN rule covers both de jure and de facto discrimination ( EC - Banana III , Appellate Body Report, paras. 232-233).
However, derogations from the MFN obligation are possible in the form of Article II-Exemptions. WTO
Members were allowed to maintain measures inconsistent with MFN if these were inscribed in a List of
Article II (MFN) Exemptions. The list had to be submitted at the date of entry into force of the Agreement.
New exemptions can only be granted to new Members at the time of accession or, in the case of current
Members, by way of a waiver under Article IX:3 of the Agreement Establishing the WTO.
Each Member is required to provide five types of information for each exemption listed: (i) description of the sector or sectors in which the exemption applies; (ii) description of the measure, indicating why it is inconsistent with Article II ; (iii) the country or countries to which the measure applies; (iv) the intended duration of the exemption; and, (v) the conditions creating the need for the exemption.
The MFN exemptions are subject to periodic review in the CTS. Until now, two periodic reviews have been conducted by the CTS in 2000 and 2006, respectively. The next review will be conducted in 2010.
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Example: Final List of Article II MFN Exemptions
Sector or Subsector
Description of measure indicating its inconsistency with Article II
Countries to which the measure applies
Intended duration
Conditions creating the need for the exemption
Audiovisual
Services
Production distribution cinematographic works television and programs and of
Measures based upon government-to-government framework agreements on coproduction of audiovisual works, which confer national treatment to audiovisual works covered by these agreements, in particular in relation to distribution and access to funding.
All countries with whom cultural cooperation may be desirable.
Indefinite The aim of such agreements is to promote cultural links countries between concerned.
Table 2: Example: final list of article II MFN exemptions
The GATS also allows groups of Members to enter into economic integration agreements ( Article V ) – explained below - , and to recognize foreign regulatory standards, criteria for authorization, licensing or certification of services suppliers ( Article VII ), subject to certain conditions. Measures covered under Article V and Article VII do not need coverage as MFN exemptions. The same applies to discriminatory measures taken in exceptional circumstances ( Article XIV ) or so-called prudential measures in financial services (Annex on Financial Services). b.
T
(
RTICLE
)
Transparency is one of the fundamental principles of the WTO. Sufficient information about potentially relevant rules and regulations is critical to the effective implementation of the GATS. Thus, each Member is required to comply with:
Unconditional Obligations (Articles III:1 & 4)
 publish promptly and at the latest by the time of their entry into force (except in emergency situations), measures of general application;
 respond promptly to all requests for information from other Members on any measure; and,
 establish enquiry point where WTO Members can obtain this information.
Conditional Obligations (Article III:3)
 inform the Council of Trade in
Services (CTS) of the introduction of any new, or any changes to existing laws, regulations or administrative guidelines which significantly affect trade in services covered by specific
commitments. c.
I
(A
IV)
Nearly four-fifths of WTO Members are developing countries. The GATS recognizes the major role of developing Members in services trade both as exporters and importers of services, notwithstanding the fact that their share of international trade in services, is still relatively small in general.
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The GATS recognizes the special needs of developing Members by providing in Article XIX:2 that the process of liberalization shall take place with due respect for national policy objectives and the level of
development of individual Members, both overall and in individual sectors. Developing Members have the flexibility to open fewer sectors and liberalize fewer types of transactions.
The GATS intends to promote the increasing participation of developing Members in services trade.
Members through negotiated specific commitments relating, inter alia, to the liberalization of market access in sectors and modes of supply of export interest to them. Special priority must be given to LDCs ( Article IV:3 ) whose difficulty in making specific commitments is to be taken particularly into account. d.
D
(
RTICLE
)
Regulations that are not intended to serve protective purposes under Articles XVI and XVII , may nevertheless restrict trade. Such restrictive effects may be justified in view of a prevailing policy objective, or they may be due to excessive and/or inefficient intervention. In cases where specific commitments have been made, the
GATS seeks to preserve the value of these commitments.
Unconditional Obligations (Articles VI:2)
 service suppliers in all sectors shall have access to judicial, arbitral or administrative tribunals or procedures for the prompt review of decisions affecting trade in services, and, when justified, appropriate remedies. In addition,
Members shall ensure that administrative reviews are objective and impartial.
Conditional Obligations (Articles VI:1, 3, 5, 7)
 all measures of general application affecting trade in services must be administered in a
reasonable, objective and impartial manner;
 applications for supplying a service must be considered within a reasonable period of
time;
 qualification requirements and procedures, licensing requirements and technical standards shall be based on objective and transparent criteria, not constitute unnecessary barriers to trade in services and, in the case of licensing criteria, not in themselves restrict trade in services;
Note: Ongoing negotiations are aimed at developing appropriate disciplines. Pending their outcome, a standstill applies.
 establish adequate procedures to verify the competence of professionals of other
Members.
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EXAMPLES OF MEASURES THAT MAY FALL UNDER THE SCOPE OF ARTICLE VI:4 DISCIPLINES - DOMESTIC
REGULATION
Requirements for obtaining a license
The applicant must demonstrate an adequate financial base & technical capacity to supply the services.
 Criteria relating to financial base: minimum capital requirement of US $50,000
 Criteria relating to technical capacity:
At least 2 staff must be certified engineers
Implication: A license can be denied if the applicant does not satisfy the criteria, even if commitments with no limitations are scheduled for that service.
e.
R
(A
VII)
Notwithstanding the MFN requirement, Article VII of the GATS provides scope for Members, when applying standards or granting licenses, certificates, etc., to recognize the education, experience or certification a supplier has obtained abroad. This may be done through harmonization, based upon an agreement with the country concerned or may be accorded autonomously. However, such recognition is subject to the following conditions:
 must not be exclusive, i.e. other Members are to be afforded an opportunity to negotiate their accession to such agreements or to negotiate comparable ones; or in the event of autonomous recognition, to demonstrate that their requirements should be recognized as well ( Article VII:2 );
 must not be applied as a means of discrimination between trading partners in the application of standards or criteria for the authorization, licensing or certification of services suppliers, or as a disguised trade restriction ( Article VII:3 ); and,
 use of multilaterally agreed criteria – in appropriate cases, Members shall work in cooperation with relevant organization towards the establishment of common international standards and criteria
( Article VII:5 ).
All Members are required to notify to the CTS their recognition measures and any significant changes, stating whether these are based on agreements or granted autonomously. Members are also required to inform the
CTS, as far in advance as possible, of the opening of negotiations on an agreement relating to mutual recognition in order to provide adequate opportunity to any other Member to indicate its interest in participating. f.
M
&
(
RTICLE
&
RTICLE
)
The Agreement defines “monopoly supplier of a service” as a person, public or private, which has been authorized or established in the Member concerned, formally or in effect, as the sole supplier of that service
( Article XXVIII(h) ).
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To varying degrees, governments around the world have involved monopolies or exclusive suppliers in the provision of certain basic services. There may be different, and perfectly legitimate, motivations for such arrangements.
Services supplied by monopolies often constitute inputs to other service activities. Obvious examples are: telecommunications; financial services; and transport. Article VIII does not prohibit the maintenance of a monopoly or the granting of exclusive rights to supply a service, but is meant to ensure that the behaviour of such service suppliers is always consistent with the general obligations and specific
commitments of the Member concerned. Business practices other than those falling under the monopoly-related provisions of Article VIII that restrain competition and thereby restrict trade are covered by
Article IX.
UNCONDITIONAL OBLIGATIONS
(Articles VIII:1 & IX:2)
CONDITIONAL OBLIGATIONS
(Articles VIII:2 & VIII:4)
 ensure that monopolies or exclusive service providers do not act in a manner inconsistent with the MFN obligation and specific commitments; and,
 ensure that a monopoly does not abuse its monopoly position to act in a manner inconsistent with the commitments, in services it provides outside its scope of exclusivity; and,
 consult with any other Member, upon request, with a view to eliminating business practices, other than monopolies.
 notify the formation of new monopolies to the
CTS (of service covered by its existing specific commitments) and negotiate compensatory adjustments with other Members (in accordance with Article XXI ). g.
P
(
)
Article XI:1 of the GATS requires Members to allow international transfers and payments for current transactions relating to services covered by their specific commitments. In other words, the purpose of the commitments must not be frustrated by preventing the movement of the funds necessary to supply the service. Furthermore, Article XI:2 prohibits Members from restricting capital transactions inconsistently with their specific commitments, except for balance-of-payments reasons ( Article XII - see below) or at the request of the International Monetary Fund (IMF).
As noted above, a WTO Member's obligations under the GATS consist of the provisions of the Agreement itself , its Annexes and the Schedules of Specific Commitments.
As with the Members' Schedules of tariff concessions for trade in goods, each WTO Member is required
under the GATS to submit a Schedule of specific commitments for trade in services ( Article XX of the
GATS). However, the GATS Schedules are quite different from the Goods Schedules (an example of GATS
Schedule has been provided in Appendix 1). The Schedules of Specific Commitments form an integral part of the GATS.
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What is a Schedule of Specific Commitments in Services?
A Schedule of specific commitments in services is a legal instrument which specifies the sectoral and modal commitments undertaken by each individual Member.
Each Member of the WTO is required to submit a Schedule which contains market access and national treatment commitments as well as any additional commitments. By scheduling specific commitments , a
Member guarantees other Members minimum conditions of access on an MFN basis, comparable to a tariff binding under the GATT. Since these are ceiling bindings, Members are not prevented from being more
'generous' (or less discriminatory) in practice.
Commitments can only be withdrawn or modified after negotiation and agreement on any compensatory adjustment with affected countries. Such modifications of commitments must be implemented on an MFN basis. New commitments and improvements to existing ones can be scheduled at any time.
Article XX:1 of the GATS requires each Schedule to specify, inter alia:
 terms, limitations and conditions on market access;
 conditions and qualifications on national treatment;
 undertakings relating to additional commitments;
 implementation timeframe (where appropriate); and,
 the date of entry into force of such commitments.
All Schedules conform to a standard format which is intended to ensure comparability. Commitments in a
Schedule are organized by sector and by mode of supply. For each sector or sub-sector inscribed, the
Schedule must indicate, with respect to the four modes of supply set out in Article I , any limitations on
market access or national treatment which may be maintained.
A commitment therefore consists of eight entries which indicate the presence or absence of market
access and/or national treatment limitations with respect to each mode of supply (an example of a
Schedule is provided below).
To avoid lengthy repetition throughout the sectors covered, most Schedules are divided in two parts. Part I
(''horizontal commitments'') contains limitations which apply to all service sectors included in the
Schedule. The purpose of having such a section is to avoid repeating the same entry many times in the
Schedule Part II presents the sector-specific commitments.
The GATS approach to scheduling commitments is commonly known as a "positive – list" approach since each individual Member decides which sector and modes to commit, and how much market access and national treatment to provide.
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AN OVERVIEW OF A SCHEDULE
Modes of supply: 1) Cross-border supply; 2) consumption abroad; 3) commercial presence; and, 4) presence of natural persons.
SECTOR OR SUB-
SECTOR
Limitations on market access
Limitations on national treatment
Additional commitments
I. HORIZONTAL COMMITMENTS
"All sectors included in this Schedule" or kept blank
Covering only those modes for which horizontal limitations are inscribed.
Covering only those modes for which horizontal limitations are inscribed.
Optional
(kept blank when no additional commitment)
II. SECTOR-SPECIFIC COMMITMENTS
SECTOR DESIGNATION 1) 1)
2)
3)
4)
2)
3)
4)
Covering all four modes in each service sector or sub-sector identified in column 1.
Covering all four modes in each service sector or sub-sector identified in column 1.
Table 3: An overview of a schedule
18

Entries in Schedules tend to conform to uniform conventions. ''None'', when used in the sector-specific part of the Schedule, means that there are no limitations specific to this sector under the relevant mode except the conditions set out in the horizontal section. ''Unbound'' means that a Member remains free in a given sector and mode of supply to introduce or maintain measures inconsistent with market access or national treatment.
In cases where a commitment is made with limitations, the entry should describe concisely the elements which make it inconsistent with Articles XVI (market access) and Article XVII (national treatment).
NOTE
All Schedules of Specific Commitments for WTO Members can be obtained from the WTO website: http://tsdb.wto.org/default.aspx
a.
S
-
1
As mentioned above, Members undertake specific commitments in those sectors listed in their
Schedules only (positive list approach).
SERVICES SECTOR – COLUMN 1
There is no mandatory nomenclature of service sectors and therefore, in principle, Members are allowed to use their own definitions. In practice, in the great majority of Schedules, commitments are structured in accordance with the Services Sectoral
Classification List as contained in document MTN.GNS/W/120 which consist of 12 broadly defined sectors and close to 160 sub-sectors (see column on the right).
In most cases, the sectoral entries are accompanied by numerical references to the provisional United
Nations Central Product Classification system (CPC) which gives a detailed explanation of the services covered by each listed sector or sub-sector.
Where this is not possible, Schedules are meant to provide a sufficiently detailed definition to avoid any ambiguity.
CLASSIFICATION OF SERVICE SECTORS (GNS/W/120)
1. Business services — professional, computer and related, research and development, real estate, rental/leasing without operators and other business services;
2. Communication services — postal, courier, telecommunication, audiovisual and other communication services;
3. Construction and related engineering services — general construction for buildings and civil engineering, installation, assembly building completion and finishing work;
4. Distribution services — commission agents', wholesale trade and retailing services, franchising;
5. Educational services — primary, secondary, higher and adult education;
6. Environmental services — sewage, refuse disposal, sanitation and similar services;
7. Financial services — insurance, banking and other financial services;
8. Health-related and social services — hospital, other human health and social services;
9. Tourism and travel-related services — hotel and
19

SERVICES SECTOR – COLUMN 1
One should note that a precise definition of sectors or sub-sectors is critical as it defines the scope of a commitment.
CLASSIFICATION OF SERVICE SECTORS (GNS/W/120) restaurants, travel agencies and tour operators, and tourist guides services;
10. Recreational, cultural, and sporting Services — entertainment, news agency, libraries, archives, museums, sporting services;
11. Transport services — maritime, internal waterways, air, space, rail, road, pipeline and auxiliary transport services; and,
12. “Other” services .
Example
A Member wishes to make a commitment in the sub-sector of ''Medical and dental services''. In the
Classification List, this service falls under "Professional Services" within "Business Services". The
Classification List also contains the relevant CPC category, 9312, where a more detailed description can be found. In its Schedule, the Member would thus make the following entry in the "Business
Services"/"Professional Services" section:
Medical and dental services (CPC 9312)
It would also be possible to limit the commitment to certain segments of this particular sub-sector or to specified regions of the country, which would then need to be indicated. b.
S
1. MARKET ACCESS
Services and service suppliers of any Member are guaranteed access to the market of another Member no
less favourable than specified in the latter's Schedule. Should a Member wish to maintain market access restrictions on a sector that has been committed in a Schedule, it may do so but must inscribe it as a
limitation.
Article XVI:2 contains an exhaustive list of six types of such restrictions; four are quantitative in nature
(sub-paragraphs a-d), one relates to limitations on the form of legal entity (sub-paragraph e) and another one to the existence of foreign equity ceilings (sub-paragraph f).
20

TYPES OF RESTRICTIONS a) Number of service suppliers
EXAMPLES
 number of licenses for universities is limited to 8 in total;
 issuance of licenses is based on an economic needs test; and,
 nationality requirements for suppliers of services (equivalent to zero quota for foreigners) b) Value of service transactions or assets Assets of foreign bank subsidiaries limited to 25% of total domestic assets of all banks
Assets of foreign bank subsidiaries limited to 25% of total domestic assets of all banks c) Number of service operations or quantity of service output
Restrictions on the number of branches that may be operated by each bank; limitations on total broadcasting time available for foreign films d) Number of natural persons employed
Number of foreign bank clerks limited to five per cent of total bank staff e) Type of legal entity or joint venture Foreign suppliers are permitted only to establish joint-stock or limited liability companies f) Participation of foreign capital Foreign equity participation limited to 49%
The QRs can be expressed in numerical terms or operated in the form of an economic needs test. Entries providing for such tests should indicate the main criteria on which they are based.
The QRs specified in sub-paragraphs (a) to (d) refer to maximum limitations. Minimum requirements such as those common to licensing criteria (e.g. minimum capital requirements for the establishment of a corporate entity) do not fall within the scope of Article XVI .
In US - Gambling, the Appellate Body stated that, by prohibiting the cross-border supply of gambling and betting services where specific commitments had been undertaken, the US was acting in a manner inconsistent with its market access commitments ( Art. XVI:1 and 2 ) since such a prohibition amounted to a "zero quota"
( US - Gambling , Appellate Body Report, paras. 251-252).
2. NATIONAL TREATMENT
Article XVII requires that, in scheduled sectors, services and service suppliers of any other Member are granted no less favourable competitive opportunities than those accorded to a Member's own like services
and service suppliers. Any departures would need to be inscribed as a limitation on national
treatment.
The national treatment rule covers cases of both de jure and de facto discrimination. The former relates to measures that discriminate explicitly on the basis of supplier's origin (e.g. domestic producers of audiovisual services are given preferred access to frequencies for transmission), while the latter concerns measures which, while not formally distinguishing on the basis of origin or nationality, effectively offer less favourable treatment to foreign service suppliers (e.g. prior residency is required for the issuance of a licence to supply a service).
See also explanation on de jure and de facto discrimination on trade in goods.
21

Unlike Article XVI , Article XVII does not contain an exhaustive list of the types of measure which would constitute limitations. However, looking into current Schedules, it appears that Members commonly consider the following cases to be relevant (Guidelines for the Scheduling of Specific Commitments under the GATS,
S/L/92 * ):
TYPES OF LIMITATION
Subsidies
Tax measures
Discriminatory fees, charges, etc.
Nationality and/or residency requirements
Licensing and qualification requirements
Technology transfer/training requirements
EXAMPLES
Eligibility for R&D subsidies reserved to nationals.
A federal excise tax is imposed on insurance premiums paid to non-domestically incorporated companies.
Charges taken for port services may be higher for foreign than for national-flag vessels.
The majority of board members must be citizens
(permanent residents) of the country concerned.
Barristers and commercial lawyers in national law are required to be graduates of national universities.
Foreign service suppliers must train a certain number
(percentage) of nationals.
Local content requirements
Ownership of property/land
Preferential use of local services that are available at competitive prices and levels of quality.
Foreigners are not permitted to own land.
* The objective of the Guidelines for the Scheduling of Specific Commitments under the GATS, adopted by the
CTS on 23 March 2001 (S/L/92) –, is to explain, in a concise manner, how specific commitments should be set out in Schedules in order to achieve precision and clarity. It is based on the view that a common format for
Schedules as well as standardization of the terms used in Schedules are necessary to ensure comparable and unambiguous commitments. The content of the Guidelines should not be considered as a legal interpretation of the GATS.
22

A Member may wish to maintain measures which are inconsistent with both Articles XVI (market access) and
XVII (national treatment). Article XX:2 stipulates that such measures shall be inscribed in the column relating to Article XVI . Thus, while there may be no limitation entered in the national treatment column, the
Member may be entitled to operate a discriminatory measure inscribed in the market access column. In accordance with Article XX:2 , any such measure is also to be regarded as scheduled under Article XVII and subject to the provisions of that Article.
3. ADDITIONAL COMMITMENTS
According to Article XVIII a Member may make commitments with respect to measures affecting trade in services not subject to scheduling under Articles XVI and XVII . Entries in this last column are not
obligatory. Such commitments can include, but are not limited to, undertakings with respect to qualifications, technical standards, licensing requirements or procedures, and other domestic regulations that are consistent with Article VI. Additional commitments are expressed in the form of undertakings, not limitations.
The purpose of commitments on services, comparable to tariff concessions under the GATT, is to ensure stability and predictability of trading conditions. However, as with the case for Goods Schedules, modifications of GATS Schedules may also be negotiated against compensation of affected trading
partners in accordance with Article XXI of the GATS.
Article XXI provides a framework of rules for modifying or withdrawing specific commitments. The relevant provisions may be invoked at any time after three years have lapsed from the date of entry into force of a commitment. In the absence of emergency safeguard measures, which are still under negotiation, this waiting period is reduced to one year under certain conditions. It is thus possible for Members, subject to compensation, to adjust their commitments to new circumstances or policy considerations. At least three months' notice must be given of the proposed change. The compensation to be negotiated with affected
Members consists of more liberal bindings elsewhere that "endeavour to maintain a general level of mutually advantageous commitments not less favourable to trade" than what existed before.
Application must be on a MFN basis. If the negotiations fail, Article XXI allows for arbitration. If the arbitrator finds that compensation is due, the proposed changes in commitments must not be put into effect until the compensatory adjustments are made.
In 1999, the CTS enacted detailed procedures for the modification of Schedules pursuant to Article XXI (see
S/L/80). Improvements to Schedules, i.e. inscription of new sectors or removal of existing limitations, are subject to more streamlined procedures, laid down in document S/L/84.
23

EXERCISES
4.
What are the different types of obligations under the GATS? Explain how they differ from each other.
5.
Describe the structure of a Member's Schedule of Commitments under the GATS. Explain the meaning of
"none" and "unbound".
6.
Classify the following measures according to the type of market access or national treatment limitation:
 a. Annual quota for licensing foreign medical practitioners;
 b. The majority of directors must be nationals;
 c. Commercial presence limited to joint-stock companies;
 d. Licence for a new restaurant based on an economic needs test;
 e. Investment grants available only for domestically-owned firms.
24

GATS Annexes form an integral part of the Agreement ( Article XXIX ). Trade in services is much more diverse than trade in goods. Several Annexes thus address the particularities of individual service sectors and modes and/or further refine relevant provisions of the GATS. They concern:
 Most Favoured Nations Exemptions;
 Air transport services;
 Movement of natural persons;
 Telecommunications; and,
 Financial services.
Several other Annexes mandated post-Uruguay Round negotiations in certain areas. Following the conclusion of these negotiations, they are no longer applicable.
The Annex on Air Transport Services specifies that the Agreement does not apply to measures affecting traffic rights nor to services directly related to the exercise of such rights. Only three activities in that sector are expressly covered by the GATS:
 aircraft repair and maintenance services;
 the selling and marketing of air transport services; and
 computer reservation system services.
The Annex contains a definition of these sub-sectors and provides for periodic reviews (at least every five years) with a view to the wider application of the GATS to air transport.
NOTE
To learn more about current state of play and Members' commitments on air transport services see http://www.wto.org/english/tratop_e/serv_e/transport_e/transport_air_e.htm
.
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The Annex on Movement of Natural Persons Supplying Services under the Agreement deals with
natural persons (as opposed to juridical persons) who supply services in the territory of another Member.
It is made clear that the Agreement does not apply to measures regarding citizenship, residence or
employment on a permanent basis, or to persons who travel abroad looking for work. Visa requirements per se are not inconsistent with obligations or commitments under the Agreement.
The Annex confirms that Members are still allowed to regulate the entry of natural persons into their territory and impose border controls, provided that such measures do not nullify or impair the benefits accruing under a specific commitment.
NOTE
To learn more about current state of play and Members' commitments on movement of natural persons see http://www.wto.org/english/tratop_e/serv_e/mouvement_persons_e/mouvement_persons_e.htm
.
The Annex on Telecommunications recognises the particular role of telecommunications as a distinct sector of economic activity and an infrastructural backbone for many other activities (e.g. e-banking, distance learning).
Access to telecommunications is crucial to the commercial viability of other services. The Annex requires each Member to ensure that the service suppliers of any other Member have reasonable and non-discriminatory access to public telecommunications networks and services for the supply of a
service listed in its Schedule. The Annex also includes provisions on transparency and technical cooperation for developing countries.
NOTE
To learn more about current state of play and Members' commitments on telecommunications services see http://www.wto.org/english/tratop_e/serv_e/telecom_e/telecom_e.htm
.
Financial services include: (i) insurance and insurance-related services; (ii) banking; and, (iii) other financial services.
26

The Annex on Financial Services adapts some of the basic provisions of the GATS to the specificities of the financial sector. The Annex also includes a set of definitions and a detailed list of financial services that have been used by many Members in the preparation of their Schedules of specific commitments in this sector.
Possibly the most important substantive provision of the Annex relates to prudential measures. Members are
allowed to take measures which may not conform with the provisions of the GATS in order to protect investors, depositors and policy holders, and to ensure the integrity and stability of the financial system. Such measures must not be used, however, as a means of avoiding the Member's commitments or obligations under the GATS.
Other specific provisions in the Annex relate, inter alia, to the protection of individual customer information and other confidential or proprietary information. Further, the Annex explicitly lists certain activities, including the monetary operations of central banks, that are deemed to constitute 'governmental services' for the purposes of Article I:3 (section III.B.3).
The Understanding on Commitments in Financial Services ( LT/UR/U/1 ) contains an alternative approach for scheduling market access and national treatment commitments that can be used by Members on an optional basis. It contains certain formula-type undertakings to liberalize particular sub-sectors and activities
(e.g. government purchases of financial services from foreign established banks) that apply automatically unless specifically excluded by the Member concerned. Most OECD countries and a number of other Members have chosen to schedule on the basis of the Understanding.
NOTE
To learn more about current state of play and Members' commitments on financial services see http://www.wto.org/english/tratop_e/serv_e/finance_e/finance_e.htm
.
Professional services include legal services, accounting, architectural services, medical and dental services, as well as services provided by mid-wives, nurses, physiotherapists and para-medical personnel. These sub-sectors have been covered in the Schedules of Specific Commitments of Members to a varying degree.
It was felt towards the end of the Uruguay Round that, because of the importance of regulation for professional services, commitments on market access and national treatment alone would not be sufficient to allow for effective access. For this reason, the Ministerial Decision on Professional Services ( LT/UR/D-5/7 ) established a Working Party on Professional Services in order to develop additional disciplines governing the regulation of professional services within the framework of Articles VI and VII . The Decision stipulated that as a matter of priority the Working Party would deal with the accountancy sector, which includes accounting, auditing and bookkeeping services.
As a result, the CTS approved in December 1998 the Disciplines on Domestic Regulation in the
Accountancy Sector – not yet in force - (S/L/64) to facilitate trade in accountancy services by ensuring that domestic regulations affecting these services meet the requirements of Article VI:4 of the GATS. A core feature of the disciplines is their focus on (non-discriminatory) regulations that are not subject to scheduling under Articles XVI (Market Access) and XVII (National Treatment). The relevant CTS Decision (S/L/63)
27

provides that the "accountancy disciplines" are applicable only to Members who have scheduled specific commitments on accountancy. The disciplines are to be integrated into the GATS, together with any new results the Working Party on Domestic Regulation (WPDR) may achieve in the interim, at the end of the current
Round.
In addition, the Guidelines for Mutual Recognition Agreements or Arrangements in the Accountancy
Sector ( S/L/38 ) adopted in May 1997, provide practical guidance for governments, negotiating entities or other entities entering into mutual recognition negotiations on accountancy services. The objective of the guidelines is to make it easier for parties to negotiate recognition agreements and for third parties to negotiate their accession to these agreements or to negotiate comparable ones.
NOTE
To learn more about current state of play and Members' commitments on professional services, see: http://www.wto.org/english/tratop_e/serv_e/accountancy_e/accountancy_e.htm
(Accountancy services); http://www.wto.org/english/tratop_e/serv_e/advertising_e/advertising_e.htm
(Advertising services); http://www.wto.org/english/tratop_e/serv_e/architecture_e/architecture_e.htm
(Architectural and engineering services); http://www.wto.org/english/tratop_e/serv_e/computer_e/computer_e.htm
(Computer and related services); http://www.wto.org/english/tratop_e/serv_e/legal_e/legal_e.htm
(Legal services).
28

As in the case of the GATT, the GATS also allows Members to introduce measures, which would otherwise be inconsistent with relevant GATS obligations, subject to certain requirements. These provisions are mainly contained in Article XIV (General Exceptions). The measures concerned must not be used, however, as a means of arbitrary or unjustifiable discrimination between countries where like conditions prevail, or a disguised trade restriction. Article XIV bis deals with security exceptions. The GATS also allows Members to restrict international transactions for the purpose of safeguarding their BOPs ( Article XII ).
Article V of the GATS (Economic Integration) allows the creation of preferential trade agreements. If relevant conditions are met, such agreements are deemed compatible with the MFN requirement in Article II , despite the preferential elements involved – see box below. The same applies to recognition agreements or arrangements relating to foreign licenses, qualifications, etc. which are governed by Article VII .
Exception for Economic Integration Agreements (Article V of the GATS)
Like in the case of GATT Article XXIV for goods, the GATS also allows Members to depart from the MFN principle in order to enter into agreements to liberalize trade in services among each other. Article V of the
GATS provides that these agreements shall have “substantial sectoral coverage” and provide for the
"elimination of substantially all discrimination” between participants in the sense of Article XVII (National
Treatment). Furthermore, such agreements must not raise the overall level of trade barriers vis-à-vis other
Members of the WTO.
As mentioned earlier, the Annex on Financial Services also allows Members to take measures which may not conform with the provisions of the GATS in order to protect investors, depositors and policy holders, and to ensure the integrity of the financial systems (prudential measures). However, such measures must not be used as a means of avoiding the Member's commitments or obligations under the GATS.
29

The Uruguay Round marked only a first step in a longer-term process of services liberalization within the multilateral framework. The importance of the Round lays less in its improving actual market conditions, but in
creating a completely new system of rules and disciplines for future trade liberalization.
Article XIX of the GATS mandates Members to enter into successive rounds of negotiations in services with a view to achieving a progressively higher level of liberalization. As provided for in Article XIX:1 , the first such round begun in early 2000.
Article XIX:3 requires Members, before the beginning of each round, to carry out an assessment of trade in services in overall terms and on a sectoral basis, for the purpose of establishing the negotiating guidelines and procedures for the round. Such Guidelines and Procedures for the Services Negotiations have been adopted by the CTS in March 2001 ( S/L/93 ). The Assessment of Trade in Services has remained a standing item on the agenda of the Council for Trade in Services (Special Session).
Based on relevant GATS Articles, the Negotiating Guidelines further specify the objectives, scope and
methods for the negotiations. Major elements include a reaffirmation of the right to regulate and to introduce new regulations on the supply of services, the overarching principle of flexibility for developing and
least-developed countries, as well as the preservation of the existing structure and principle of the GATS. It refers to the "Request-Offer Approach" as the main method of negotiation.
PREPARING REQUESTS
Requests may be addressed to a group of participants or to an individual Member. They may be intended to achieve the inclusion of sectors that are not covered by a current schedule, the removal or relaxation of existing limitations on market access or national treatment; the inscription of additional commitments; and the removal of MFN exemptions.
A request may be presented in the format of a simple letter; there is no generally agreed format,
nor are there any common notification requirements.
PREPARING OFFERS
Offers would normally address the same issues as listed above, taking into account the requests received and the Member's growth, developmental and other relevant policy objectives.
30

Offers normally consists of a draft schedule of commitments, with the relevant changes inscribed
in existing Schedules. Members have used, as a starting-point, consolidated Schedules that incorporate not only the Uruguay Round outcome, but any later amendments and extensions, including those resulting from the negotiations on basic telecommunications and financial services. The draft offers constitute negotiating documents with no legal status and have no binding effects on the participant
concerned.
Offers are circulated among all Members. This is useful for transparency purposes, but also from an institutional point of view because, if implemented, the changes proposed would be applied on an MFN basis.
The Doha Ministerial Declaration of November 2001 contains target dates for the circulation of initial requests
(30 June 2002) and initial offers (31 March 2003) of specific commitments, and envisages all negotiations, which form part of a single undertaking, to be concluded not later than 1 January 2005. For well-known reasons, these expectations did not materialize.
In keeping with another mandate under Article XIX:3 , the Negotiating Guidelines of 2001 were complemented later by the "Modalities for the Special Treatment for Least-Developed Country Members". The
Modalities are intended to ensure "maximum flexibility" for LDCs in the negotiations. Moreover, all
Members are committed, inter alia, to exercising restraint in seeking commitments from LDCs as well as, in preparing their own Schedules, giving special priority to sectors and modes of export interest to them. In turn,
LDCs are called upon to indicate their priority sectors and modes so that these can be taken into account.
Referring to Mode 4, Members envisage, to the extent possible and consistently with Article XIX of the GATS, to undertake commitments on that mode taking into account "all categories of natural persons identified by
LDCs in their requests".
The Hong Kong Ministerial Declaration of December 2005 reaffirms key principles and objectives of the services negotiations and calls on Members to intensify the negotiations in accordance with the objectives, approaches and timelines set out in Annex C to the Declaration. The Ministerial Declaration also acknowledges that LDCs are not expected to undertake new commitments.
Annex C contains a more detailed and ambitious set of negotiating objectives than any previous such document. While ensuring appropriate flexibility for individual developing country Members, it provides a framework for the offering of new or improved commitments under each mode of supply, the
treatment of MFN exemptions, and the scheduling and classification of commitments. Among other things, the Annex also calls on Members to develop methods for the full and effective implementation of the
Modalities for the Special Treatment for LDC Members. With respect to negotiating approaches, Annex C affirmed that in addition to bilateral negotiations, request-offer negotiations should also be pursued on a
plurilateral basis and provides guidelines for the conduct of these negotiations. In keeping with this mandate, several rounds of plurilateral negotiations have been conducted since it was adopted.
The CTS (meeting in “special session”) is the body responsible for overseeing the negotiations. All subsidiary bodies, such as the WPDR and the Working Party on GATS Rules, report to the CTS.
31

NOTE
To learn more about current Doha Round negotiations on services see http://www.wto.org/english/tratop_e/serv_e/s_negs_e.htm
.
The GATS itself provides for continued negotiations in four rule-making areas which could not be completed within the timeframe of the Uruguay Round (‘built in agenda’). These negotiations concern the development of disciplines on domestic regulation, pursuant to Article VI:4 , as well as emergency
safeguards, subsidies and government procurement. While the former negotiations are conducted in the
WPDR, the latter three areas are addressed in the Working Party on GATS Rules (WGPR).
Built-in Agenda
Domestic Regulation
Due to the importance of the domestic regulatory environment as a context for trade, the CTS has been given a particular negotiating mandate in Article VI:4 so as to develop, in appropriate bodies, any necessary disciplines to prevent domestic regulations (qualification requirements and procedures, technical standards, and licensing requirements) from constituting unnecessary barriers to trade. The disciplines envisaged under
Article VI:4 are intended to ensure that domestic regulations are, inter alia: (a) based on objective and transparent criteria, such as competence and the ability to supply the service; (b) not more burdensome than necessary to ensure the quality of the service; and, (c) in the case of licensing procedures, not in themselves a restriction on the supply of the service.
Pending the entry into force of the disciplines under Article VI:4 and in cases where a measure does not either fall into the scope of Article XVI or is not discriminatory within the meaning of Article XVII , Members are subject to the (temporary) disciplines of Article VI:5 .
Emergency Safeguards
Emergency safeguards in services may be expected to allow for the temporary suspension of market access, national treatment and/or any additional commitments that have been assumed in individual sectors. A safeguards clause might be used to ease adjustment pressures in situations where a particular industry is threatened by a sudden, unforeseen increase in foreign supplies. Any such mechanism, should it be agreed to by Members, would need to be based on the principle of non-discrimination.
While the negotiating mandate in Article XIV of the GATS refers to the "question of emergency safeguard measures", it also provides that the results shall enter into effect within three years from the establishment of the WTO. This deadline has been extended several times since and was last renewed on 17 March 2004
( S/L/159 ).
Subsidies
Like other measures affecting trade in services, subsidies are already subject to the GATS. The unconditional general obligations, including MFN treatment, thus apply. In scheduled sectors, these are complemented in particular by the national treatment obligation, subject to any limitations that may have been inscribed, and a
32

variety of conditional obligations.
Article XV of the GATS mandates negotiations on disciplines that may be necessary to avoid trade-distortive effects. The appropriateness of countervailing measures shall also be addressed.
Government Procurement
Article XIII provides that the MFN obligation ( Article II ) and any existing commitments on market access and national treatment (Articles XVI and XVII ) do not apply to the procurement of services for governmental purposes. This Article also contains a negotiating mandate.
Due to the importance of the domestic regulatory environment as a context for trade, the CTS has been given a particular negotiating mandate in Article VI:4 so as to develop, in appropriate bodies, any necessary disciplines to prevent domestic regulations (qualification requirements and procedures, technical
standards, and licensing requirements) from constituting unnecessary barriers to trade.
The disciplines envisaged under Article VI:4 are intended to ensure that domestic regulations are, inter alia:
(a) based on objective and transparent criteria, such as competence and the ability to supply the service;
(b) not more burdensome than necessary to ensure the quality of the service; (c) in the case of licensing procedures, not in themselves a restriction on the supply of the service.
Pending the entry into force of the disciplines under Article VI:4 and in cases where a measure does not either fall into the scope of Article XVI or is not discriminatory within the meaning of Article XVII , Members are subject to the (temporary) disciplines of Article VI:5 . Accordingly, Members shall not apply licensing and qualification requirements and technical standards that would nullify or impair specific commitments in a manner inconsistent with the above criteria and which could not reasonably have
been expected at the time when the relevant commitments were made.
EXERCISES
7.
Does the Annex on Movement of Natural Persons Supplying Services under the Agreement applies to measures regarding employment on a permanent basis or to people who travel abroad looking for work?
8.
Explain the negotiating mandate in Article VI:4 of the GATS concerning domestic regulation.
33

SCHEDULE OF SPECIFIC COMMITMENTS
Modes of supply: 1) Cross-border supply 2) consumption abroad 3) commercial presence 4) presence of natural persons
SECTOR OR
SUB-SECTOR
Limitations on market access
I. HORIZONTAL COMMITMENTS
ALL SECTORS
INCLUDED IN THIS
SCHEDULE
Limitations on national treatment
1), 2), 3), 4) Unbound for subsidies and grants.
3) Foreign firms must be locally incorporated.
All juridical persons are required to have a licence issued by the relevant authorities.
3), 4) Foreign natural and juridical persons are not allowed to own land.
4) Unbound, except for measures concerning the entry and maximum stay of two years of natural persons who possess knowledge that is necessary for the provision of the service and fall within the following categories:
4) Unbound, except for measures concerning the categories of natural persons referred to in the market access column.
Intra-Corporate Transferees (ICT):
Only for Executives, Managers and
Specialists. ICTs must be natural persons of another Member who are being temporarily transferred in the context of the supply of a service through commercial presence in the territory of another Member. They must have been employed by a juridical person of a Member for a period of not less than one year prior to the transfer.
The number of foreign employees of an enterprise may not exceed 15% of the total.
Additional commitments
34

II. SECTOR-SPECIFIC COMMITMENTS
1. BUSINESS SERVICES
A. Professional Services
(a) Legal Services
Legal consultant's advisory services on international public law and home country law (part of CPC 861)
(b) Accounting,
Auditing and
Bookkeeping Services
(CPC 862)
1) Unbound
2) None
3) None
4) Unbound, except as indicated in the horizontal section.
1) Unbound
2) Unbound
3) Maximum 49% foreign equity participation.
4) Unbound, except as indicated in the horizontal section.
1) Unbound
2) None
3) None
4) Unbound, except as indicated in the horizontal section.
1) None
2) None
3) None
4) Unbound, except as indicated in the horizontal section.
(h) Medical and Dental
Services (CPC 9312)
1) Unbound *
4) Unbound, except as indicated in the horizontal section.
1) Unbound
2) Public medical insurance programmes do not cover cost of medicare supplied abroad.
3) Obligation to have a training programme for auxiliaries.
4) Unbound, except as indicated in the horizontal section.
Table 4: Schedule of specific commitments
* Due to lack of technical feasibility.
35

Note
 In the case of a sector-specific restriction, the entry must be read as the combination of the horizontal limitation, if any, and the sector-specific restriction unless explicitly provided otherwise.
 All exemptions to MFN obligation are recorded in the List of Article II MFN Exemptions.
 Uniform terminologies are used for the Schedule:
''None'' - means that there are no limitations on market access and/or national treatment;
''Unbound'' means that the Member has undertaken no obligations under the mode concerned, thus retaining full policy discretion. The omission of a sector from a Schedule is tantamount to a
(hypothetical) situation where a Member inscribes ''unbound'' for all modes under both market access and national treatment and not assuming any additional commitments; and,
''Unbound*'' (unbound due to lack of technical feasibility) – where transactions under a particular mode of supply may not be technically feasible (e.g. cross-border supply of hair-dressing services/ bridge-building services); should such supplies become feasible, the legal status of this entry
("unbound") remains unaffected.
36

In response to the increasing need for an internationally recognized rules on services trade, the GATS was negotiated and concluded during the Uruguay Round of Negotiations. The GATS is the first Multilateral
Trade Agreement to cover trade in services. All WTO Members are subject to the rules and disciplines set out in the GATS.
The GATS aims to establish a multilateral framework of principles and rules for trade in services, expand trade under conditions of transparency and progressive liberalization and to promote the economic growth of all trading partners and the development of developing countries. At the same time, the GATS recognizes Members' rights to maintain and develop domestic regulations which are necessary to pursue national policy objectives and the particular need of developing countries to exercise this right. Thus, the
GATS does not entail deregulation.
A WTO Member's obligations under the GATS are defined by: (1) the Agreement itself; (2) annexes addressing the particular policy concerns or the particularities of individual services sectors and modes; and, (3) Members' Schedules of Specific Commitments specifying market access and national commitments per sector and mode of supply as well as additional commitments, if any.
The GATS contains unconditional and conditional obligations. Unconditional obligations apply to all Members and across all service sectors (e.g. MFN), while conditional obligations apply only to those sectors where the
Member concerned has undertaken specific commitments. Several Articles contain both types of obligations
(e.g. transparency and domestic regulation).
Each WTO Member is required to submit a Schedule of specific commitments. Schedules may vary widely in their sector scope and the levels of commitments implied, reflecting Members' national policy objectives and constraints. However, there is a common format consisting of four columns: Description of the Sector;
Commitments on Market Access ( Article XVI ); Commitments on National Treatment ( Article XVII ); and
Additional Commitments ( Article XVIII ), if any. Members are free to inscribe six specified types of limitations on market access and any departures from national treatment under the four modes of supply.
Domestic regulations not falling under Articles XVI or XVII must not be scheduled. They are nevertheless subject to certain disciplines set out in Article VI of the GATS. Commitments may be modified in accordance with specified procedures ( Article XXI ).
A Member may maintain a measure inconsistent with the MFN principle, provided that such a measure is listed in, and meets the conditions of, the Annex on Article II Exemptions. Thus, the GATS allows for several departures from the MFN requirement, in addition to a range of general exceptions. For example, the MFN rule is waived in the case of economic integration agreements ( Article V ) and recognition measures
( Article VII ) that comply with certain criteria.
The Agreement seeks to promote the progressive liberalization of world services trade through successive rounds of negotiations.
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PROPOSED ANSWERS
1.
The main objectives of the GATS are: (i) to establish a multilateral framework of principles and rules for trade in services; (ii) the expansion of trade under conditions of transparency and progressive liberalization, and (iii) to promote the economic growth of all trading partners and the development of developing countries.
2.
The use of the term "affecting" means that the scope of the GATS encompasses not only measures designed to regulate trade in services directly, but also any other measure that might incidentally affect the supply of a service. Thus, no measures are excluded a priori from the scope of the GATS as defined by its provisions.
3.
Mode 1: Cross-border supply: From the territory of one Member into the territory of any other Member
(Example: A user in country A (service receiver) receives services from abroad (service provider in country B) through its telecommunications or postal infrastructure).
Mode 2: Consumption abroad: In the territory of one Member to the service consumer of any other
Member (Example: Nationals of country A (service receiver) have moved abroad (service provider in country B) as tourists, students, or patients to consume the respective services).
Mode 3: Commercial presence: By a service supplier of one Member, through commercial presence, in the territory of any other Member (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.)).
Mode 4: Presence of natural persons: By a service supplier of one Member, through the presence of natural persons of a Member in the territory of any other Member (Example: A foreign national of country
B provides a service within A as an independent supplier (e.g. consultant, health worker) or employee of a service supplier (e.g. consultancy firm, hospital, construction company)).
4.
Unconditional obligations apply immediately to all Members and across all sectors, irrespective of the existence of specific commitments. Conditional obligations bind a Member only in those sectors or sub-sectors where it has undertaken a specific commitment.
OBLIGATIONS
Most-favoured-nation treatment
UNCONDITIONAL
Article II
CONDITIONAL
Transparency
Domestic Regulation
Monopolies & Exclusive Suppliers
Articles III:1 & 4
Article VI:2
Article VIII:1
Article III:3
Articles VI:1, VI:3, VI:5, VI:6
Article VIII:2
Other Business Practices
Payments and Transfers
Article IX:2
Article XI
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5.
All Schedules conform to a standard format which is intended to ensure comparability. Commitments in a
Schedule are organized by sector and by mode of supply. For each sector or sub-sector inscribed, the
Schedule must indicate, with respect to the four modes of supply set out in Article I , any limitations on market access or national treatment which may be maintained.
Most Schedules are divided in two parts. Part I (''horizontal commitments'') contains limitations which apply to all service sectors included in the Schedule. The purpose of having such a section is to avoid repeating the same entry many times in the Schedule. Part II presents the sector-specific commitments.
A commitment therefore consists of eight entries which indicate the presence or absence of market access and/or national treatment limitations with respect to each mode of supply.
Entries in Schedules tend to conform to uniform conventions. ''None'', when used in the second or sector-specific part of the Schedule, means that there are no limitations specific to this sector except the conditions set out in the horizontal section. ''Unbound'' means a Member remains free in a given sector and mode of supply to introduce or maintain measures inconsistent with market access or national treatment.
6.
a) Annual quota for foreign medical practitioners (Market Access, limitations on the number of service suppliers); b) the majority of directors must be nationals (National Treatment); c) commercial presence limited to joint-stock companies (Market Access, restriction or requirement regarding type of legal entity or joint venture); d) licence for a new restaurant based on an economic needs test (Market Access, limitations on the number of service suppliers); and, e) investment grants available only for domestically owned firms (National Treatment).
7.
The Annex on Movement of Natural Persons Supplying Services under the Agreement deals with the movement of natural persons (as opposed to juridical persons) who supply services in the territory of another Member. It is made clear that the Agreement does not apply to measures regarding citizenship, residence or employment on a permanent basis, or to people who travel abroad looking for work.
8.
Due to the importance of the domestic regulatory environment as a context for trade, the CTS has been given a particular negotiating mandate in Article VI:4 to develop, in appropriate bodies, any necessary disciplines to prevent domestic regulations (qualification requirements and procedures, technical standards, and licensing requirements) from constituting unnecessary barriers to trade.
The disciplines envisaged under Article VI:4 are intended to ensure that domestic regulations are, inter
alia: (a) based on objective and transparent criteria, such as competence and the ability to supply the service; (b) not more burdensome than necessary to ensure the quality of the service; and, (c) in the case of licensing procedures, not in themselves a restriction on the supply of the service.
Pending the entry into force of the disciplines under Article VI:4 and in cases where a measure does not either fall into the scope of Article XVI or is not discriminatory within the meaning of Article XVII ,
Members are subject to the (temporary) disciplines of Article VI:5 . Accordingly, Members shall not apply licensing and qualification requirements and technical standards that would nullify or impair specific commitments in a manner inconsistent with the above criteria and which could not reasonably have been expected at the time when the relevant commitments were made.
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E-Learning short videos – Trade in Services - http://etraining.wto.org/admin/files/Course_278/Videos/GATS.mp4
Other videos - http://www.youtube.com/user/WTO
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