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| International Financial Services Centre |
The GATS is divided into six parts, seven annexures and a preamble.
These parts comprise of 29 articles.
The Preamble to GATS wishes to promote liberalization in trade in
services. However, the Preamble does not wish to force this liberalization upon
the member countries. It recognizes that asymmetries exist with respect to the
degree of development of services regulations in different countries and hence
the countries have a right to regulate such aspects of their regulations. The
preamble aims not only to strengthen the participation between the developing
countries but also their domestic services capacity and its efficiency and
competitiveness.
Part I (Article I) talks about the scope of GATS and the various
definitions that need to be known for understanding the scope of GATS.
Part II talks about ‘General Obligations and Disciplines’. This includes
basic features of WTO such as MFN[1],
Transparency[2]
etc. It also includes exceptions, economic integration[3],
subsidies, monopolies etc.
Part III talks about the ‘Specific Commitments’. This includes Market
Access commitments, National Treatment Commitments and additional commitments.
Part IV talks about ‘Progressive Liberalization’. Progressive
Liberalization is very high on the agenda of GATS. This term is even mentioned
in the Preamble to GATS.
Part V talks about ‘Institutional Provisions’ that includes provisions
for Consultation, Dispute Settlement and Enforcement, Council for Trade in
Services, Technical Cooperation and relationship of this agreement with other
International Organizations.
Part VI talks about ‘Final Provisions’ that includes provisions relating
to denial of benefits, definitions and annexes.
Finally come the Annexes. This are on plethora of topics such as Air
Transport Services, Financial Services, Negotiations on Maritime Transport
Services, Telecommunications, and Movement of Natural Persons Supplying
Services under this Agreement etc.
Now, before venturing any further, let us understand the scope and ambit
of this agreement. Article I.1 states that GATS applies only to the measures
that affect trade in services by the member countries. This makes it amply
clear that GATS does not apply to those measures that do not affect ‘trade in
services’.
Article I.2 defines ‘trade in services’. It is defined as the supply of
a service:
Mode 1 – From the territory of one Member into the territory of any
other Member;
Mode 2 – In the territory of one Member to the service consumer of any other
Member;
Mode 3 – By a service supplier of one Member, through commercial
presence in the territory of any other Member;
Mode 4 – By a service supplier of one Member, through presence of
natural persons of a Member in the territory of any other Member.
Thus ‘trade in services’ is the ‘supply of a service’ using any or all
of these four modes. However, in the present paper, we are only concerned with
Mode 4 i.e. Supply of a Service by a service supplier, through the presence of
natural persons of a member in the territory of any other member.
Article I.3 talks explains the meaning of ‘Measures by Members’ i.e.
measures taken by central, regional or local governments and authorities and
the NGOs exercising powers delegated by these authorities.
Article I.3 (b) does not define ‘services’. However, it states that
‘services’ includes any services in any sector except services supplied in the
exercise of governmental authority. Thus, supply of a service by any government
is not included within the meaning of ‘services’.
Article I.3 (c) explains the meaning of “a service supplied in the
exercise of governmental authority”. Such a service means ‘any service which is
supplied neither on a commercial basis, nor in competition with one or more
service suppliers’.
This means that each member must accord MFN treatment to services and
services suppliers of other countries[4].
However, exemptions relating to MFN treatment have been provided under one of
the Annexes. Article II also states that this agreement must not be construed
to prevent any member from conferring ‘advantages’ to adjacent countries in
contiguous frontier zones of services that are local in nature.
Article V talks about Economic Integration. It states that GATS will not
prevent its members from being a party to other such agreements provided that
such an agreement has substantial sectoral coverage and it non-discriminatory
within the meaning of Article V.1 (b). Also, in such agreements involving only
developing countries, more favourable treatment may be granted to juridical
persons owned or controlled by natural persons of the parties to such an
agreement[5].
Article XVI talks about Market Access that prescribes that each member
shall accord MFN treatment to other members as mentioned in its schedule.
Article XVI.2 states that in sectors where market-access commitments are
undertaken, the measures which a Member shall not maintain or adopt includes “limitations
on the total number of natural persons that may be employed in a particular
service sector or that a service supplier may employ and who are necessary for,
and directly related to, the supply of a specific service in the form of
numerical quotas or the requirement of an economic needs test”.
Article XVIII (f) states that "service of another Member"
includes a service which is supplied, in the case of the supply of a service
through commercial presence or through the presence of natural persons,
by a service supplier of that other Member.
Article XVIII (k) explains the meaning of ‘natural person of another
member’. This expressions means a natural person who resides in the territory
of any other member of which he is a national or has the right of permanent
residence in case the member does not have nationals or accords same treatment
to its nationals and permanent residents in respect of measures affecting trade
in services.
Article XVIII (m) talks about ‘juridical person of another member’.
Juridical Person of another member includes a juridical person which is in the
case of the supply of a service through commercial presence, owned or
controlled by natural persons of that Member.
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