General Agreement of Trade in Services (GATS)

Services
Intangible output of a production process
PRODUCTS GOODS (tangible) SERVICES (intangible)

PRODUCTION

USERS NEED

Key role in the economy transport, telecommunications long term effects - environmental, educational services Services value added = 2/3 Global GDP

Share of Services Value Added in GDP

Country groups and selected countries, 2001 (percentage)
100 90 80 70 60 50 40 30 20 10 0

or ld

Ja pa

Br az

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in co

In

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Hi g

Services

id d

Lo

Agriculture

Industry

Ni g

er ia

m e

EU

US

di a

il

Share of Services Employment, 1990 and 2001

(percentage of total employment)

80 70 60 50 40 30 20 10 0

m e

EU

U S

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es ia

la nd

B ra z

ar ag u

co

do n

Po

N ic

In

H ig

1990

2001

Ta

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C hi

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Share of goods and services in exports of major countries, 2008

Country Value in $bn Total 1823 1700 926 741 1565 410 285 Share in % Goods Services 71 29 86 14 84 16 62 38 91 9 82 18 63 37

United States Germany Japan UK China Singapore India

Services and TIS

Exports of Goods and Services, 1980-2004

Goods Services

600 500 400

(1980=100)

12000 10500

Goods Services

9000 7500 6000

Billion $

300 200 100 0

GDP

4500 3000 1500 0

19 80

20 00 20 02 20 04

82

84

86

88

90

92

94

96

98

World Exports of Services by Major Categories

Exports of transportation services in 2007 (22.8% of the total services exports).

Exports of travel services in 2007 (26.0% of total services exports). Exports of other commercial services, the largest and most heterogeneous group of the three major services categories in 2007 (51.2% of total services exports). Indias share in OCS- 4.1% and IT- 17.8% (2006).

Export of Services
*

World exports in com. services in 2008 rose by 11% and amounted to $3.730 trillion (1/4th of goods exports)
(Source: WTO)

Exports by India in 2008 - $106 billion as compared to only $6.7 billion in 1995 (16-fold increase). Imports by India in 2008- $91 billion. BOT favourable.
(Source: WTO)

2007-08, Services accounted for 63% of GDP in India (Agri-18 & Ind-19%)
(Source: RBI Report on Currency and Finance- Sept 08 ).

Indias Services Trade

Value in US$ Million
2006-07 Services Travel Transportation Insurance G.n.i.e. Miscellaneous of which Software Services Business Services Financial Services Communication Services Private Transfer Invisibles (Total) Merchandise Credit 9123 7974 1195 253 55235 31300 14544 3106 Debit 6684 8068 642 403 28514 2267 15866 2991 Net 2439 -94 553 -150 26721 29033 -1322 115 Credit 11349 10014 1639 330 66745 40300 16771 3217 2007-08 PR Debit 9254 11514 1044 376 30324 3058 16715 3138 Net 2095 -1500 595 -46 36421 37242 56 79 Credit 10894 11066 1409 389 77466 47000 16251 3939 2008-09 P Debit 9432 12777 1131 791 27275 2814 15269 2961 Net 1462 -1711 278 -402 50191 44186 982 978

2262
30835 114558 128888

796
1010 62341 190670

1466
29825 52217 -61782

2408
43506 148604 166163

859
1801 74012 257789

1549
41705 74592 -91626

2170
46380 162556 175184

996
2333 72970 294587

1174
44047 89586 -119403

P: Primary, PR: Partially revised Source: RBI Bulletin, Oct. 2009

Specific Features of Trade in Services

Services represent 20% of total world trade and account for the 2/3 of GDP Intangible nature Many services require physical proximity of provider and consumer: services perceived as less easily tradable than goods. Conventional trade statistics do not cover all international trade in services Services delivered by foreign affiliates > conventional international trade in services.

The GATS
Set of rules covering international trade in services

Set of general obligations and disciplines GATS Pillars Countries schedules of specific commitments

Annexes on specific issues

Commitments under GATS By services sectors

By mode of supply

GATS

The 4 Modes of Supply Under GATS (1/2)

MEMBER A MEMBER B
Service supplier

Mode 1: Cross border supply

Consumer from A
The service crosses the border

Mode 2: Consumption abroad

Consumer from A
The consumer is abroad

Consumer from A

Service supply

Service supplier

Mode 3: Commercial presence

Consumer Service Commercial from A supply presence
Establishes a commercial presence in A

Juridical person

GATS

The 4 Modes of Supply Under GATS (2/2)

MEMBER A MEMBER B

Mode 4: Presence of natural persons

Consumer from A
Service supply Self-employed goes to Member A

Natural person

Natural person

Employee sent by firm from B

Consumer from A

Service Commercial supply presence

Juridical person

UNBOUND Commitments
All commitments in a schedule are bound unless otherwise specified. In such a case, where a Member wishes to remain free in a given sector and mode of supply to introduce or maintain measures inconsistent with market access or national treatment, the Member has entered in the appropriate space the term UNBOUND.

In some situations a particular mode of supply such as the cross-border supply of bridge-building services may not be technically possible or feasible. In such cases the term UNBOUND* has been used, usually in conjunction with an explanatory footnote stating Unbound due to lack of technical feasibility

Relative importance of Modes with respect to trade flows in services

Cross-border supply-35% Consumption abroad-10-15% Commercial presence-50% Presence of natural persons-1-2%

GATS: A WTO Framework Agreement

GATS is both similar to and unlike GATT.
SIMILAR ASPECTS

GATS has schedules that reflect the commitments of Member States (Art. XX) (GATS, unlike GATT, put limitations in the scheduling) Transparency (Art. III) Negotiations to reduce barriers (Art. XIX) Compensation if a WTO Member State modifies its commitments (Art. XXI)

GATS: SECTORAL COVERAGE 12 Sectors and 161 Sub-Sectors

Business Services Communication Services Construction Services Distribution Services Education Services Environmental
Services

Health Related Services Financial Services Tourism Services Recreation, Culture, Sports
Services

Transport Services Other Services

GATS SCHEDULE
How they Operate and Look Like Illustration:
Sector / Subsector Mode of Supply Market Access National Treatment Additional Commitments

Financial Services
Banking

Cross Border

Commercial Presence

An establishment subject to Prudential regulations

Preference exist for national banks-at level of capitalization under US $ 20 million

GATS SCHEDULE
How they Operate and Look Like Illustration:
Modes of supply: 1) Cross-border supply 2) Consumption abroad 3) Commercial presence 4) Presence of natural persons

Sector or subsector
8. HEALTH RELATED AND SOCIAL SERVICES A. Hospital Services (CPC 9311)

Limitations on market access

1) Unbound 2) Unbound 3) Only through incorporation with a foreign equity ceiling of 51 per cent 4) Unbound except as indicated in the horizontal section

Limitations on national treatment

1) Unbound 2) Unbound 3) None 4) Unbound except as indicated in the horizontal section

Additional commitments

Role of Additional Commitments (Article XVIII)

Scheduling of measures not falling under Articles XVI or XVII. Such measures may relate to qualifications, standards, licenses,competition disciplines, etc.

Business and professional services

Accountancy Services Advertising Services Architectural and Engineering Services Computer and related services Legal services