| The General Agreement on Trade in Services (GATS) is a treaty of the
World Trade Organization (WTO) that entered into
force in January 1995 as a result of the Uruguay Round negotiations to provide for the extension of the multilateral trading system to services. All
Members of the WTO are signatories to the GATS. The basic WTO principle of most favoured nation (MFN) applies to GATS as well. For a long time, no need was seen for a
trade agreement in services since large segments of the services economy have traditionally been considered as domestic
activities that are difficult to trade over borders, e.g. haircuts or seeing a doctor. Furthermore, 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, education and basic insurance services, are considered in many countries as governmental responsibilities,
given their importance for social integration and regional cohesion, which should be tightly regulated and 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
existing barriers to entry. The emergence of the Internet has helped to create a range of internationally tradeable product
variants — from e-banking to tele-health and distance learning. A growing number of governments has gradually exposed
previous monopoly domains to competition; telecommunication is a case in point. The GATS agreement covers four "modes of
supply":
- Cross border trade
- Consumption abroad
- Commercial presence, and
- Presence of natural persons.
Countries can freely decide where to liberalize on a sector-by-sector basis, including which modes of supply they want to
cover for which sector.
The GATS document has been criticized for allegedly replacing the authority of national legislature, with the authority of the GATS Disputes Panel. Such allegations argue that GATS intends to
override all "burdensome rules". The WTO and member governments disagree with such allegations. GATS hearings are closed
and held in secret.
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