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Aspects relating to trade in services

This decision establishes a multilateral framework of principles and rules for trade in services with a view to promoting the expansion of this trade and its gradual liberalisation through negotiations whilst ensuring transparent regulations and the increasing participation of developing countries.

ACT

Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994).

SUMMARY

The General Agreement on Trade in Services (GATS) is the first set of rules and disciplines agreed at multilateral level to govern international trade in services. It consists of three elements: a general framework containing fundamental requirements for all World Trade Organisation (WTO) members, national schedules of specific commitments concerning market access and, finally, annexes laying down special conditions to be applied to different sectors.

General framework

The agreement is distinguished by its universal scope. It applies to all services in all sectors with the exception of services provided by the public authorities. It also applies to all measures applicable to services taken at all levels of government (central, regional, local, etc.). The agreement defines four methods of supplying a service:

  • supplying a service from the territory of one member into the territory of any other member (e.g. international telephone calls);
  • supplying a service in the territory of one member to a consumer of any other member (e.g. tourism);
  • supplying a service through commercial presence of a member in the territory of any other member (e.g. banking services);
  • supplying a service through presence of natural persons of a member in the territory of any other member (e.g. construction projects, fashion models, consultants).

The agreement is based on the principle of most-favoured-nation treatment (MFN), according to which each member must accord unconditionally services and service suppliers of any other member treatment no less favourable than that it accords to services and service suppliers of any other country. However, certain exceptions are envisaged in the context of specific service activities within the framework of a list of exemptions from the MFN requirement. In fact, each government has included in its schedule the services for which it guarantees access to its market by setting out the limits it wishes to maintain for such access.

Moreover, members entering into an agreement involving economic integration are authorised to liberalise trade in services between the parties without having to extend the agreement to the other GATS members provided that it has substantial sectoral coverage and provides for the absence or elimination of practically all discrimination.

In order to ensure maximum transparency, the agreement requires governments to publish all relevant laws and regulations. These measures must be administered in a reasonable, objective and impartial manner.

The bilateral agreements concluded between governments on the recognition of qualifications must be open to other members who wish to negotiate their accession to these agreements. In addition, each member must ensure that monopolies and exclusive service suppliers do not abuse their position. Similarly, members must enter into consultations on business practices that may restrain competition with a view to eliminating them.

International transfers and payments for current transactions relating to specific commitments entered into under the GATS, must not be restricted except in cases of balance-of-payments difficulties and under certain circumstances.

Specific commitments

The provisions on market access and national treatment are not general requirements but specific commitments included in schedules annexed to the GATS and they form an integral part of the agreement. These schedules identify the services and service activities for which market access is guaranteed and set out the conditions governing this access. Once consolidated, these commitments can only be modified or withdrawn following negotiation of compensation with the country concerned.

Thus, each member must accord treatment to services and service suppliers of any other member, no less favourable than that provided for under the terms specified in its schedule.

The agreement is also based on the principle of national treatment. In fact, in the sectors inscribed in each member's schedule, and subject to any conditions set out therein, each government must accord to services and service suppliers of any other member, treatment no less favourable than that it accords to its own services and service suppliers.

Progressive liberalisation

The GATS provides for negotiations, beginning within five years, to achieve a higher level of liberalisation of trade in services. This liberalisation will be aimed at enhancing the commitments in the schedules and reducing the adverse effect of the measures taken by the governments.

Sectoral questions

A number of annexes relating to different service sectors form part of the GATS. These annexes were designed to take account of certain specific characteristics of the sectors in question.

The annex on movement of natural persons authorises governments to negotiate specific commitments applying to the temporary stay of persons in their territory for the purpose of supplying services. The agreement does not apply to permanent employment nor to measures regarding citizenship or residence.

The annex on air transport services excludes from the scope of the GATS traffic rights and services related to these rights (mainly bilateral agreements on air services that grant landing rights). The GATS does apply, however, to aircraft repair and maintenance services, the selling and marketing of air transport services and computer reservation system services.

The annex on financial services (particularly banking services and insurance services) recognises a government's right to take measures to protect investors, depositors and insurance policy holders. The agreement excludes from its scope services supplied by central banks.

Finally, the annex on telecommunications stipulates that governments must accord any service supplier of any other member access to public telecommunications networks on reasonable and non-discriminatory terms and conditions.

Institutional provisions

These provisions relate, in particular, to consultations and dispute settlement and to the establishment of a Council for Trade in Services. The responsibilities of this Council are defined in a ministerial decision.

Continuation of negotiations

At the end of the Uruguay Round, the governments agreed to continue negotiations in four areas: basic telecommunications, maritime transport, movement of natural persons and financial services. Other negotiations are due to be held on subsidies, government procurement and safeguard measures.

REFERENCES

ActEntry into forceDeadline for transposition in the Member StatesOfficial Journal
Decision 94/800/EC

22.12.1994

-

OJ L 336 of 23.12.1994

RELATED ACTS

Council Decision 97/838/EC of 28 November 1997 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the WTO negotiations on basic telecommunications services [Official Journal L 347 of 18.12.1997].
In accordance with the commitments entered into under the GATS, a Protocol on basic telecommunications services was signed in Geneva on 15 April 1997. This agreement liberalises trade in traditional telephone and electronic data transfer services, telex services and fax services, and lays down a number of rules for telecommunication enterprises that invest outside the territory in which they are established.

Council Decision 99/61/EC of 14 December 1998 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the results of the World Trade Organisation negotiations on financial services [Official Journal L 20 of 27.1.1999].
At the end of the negotiations following the Uruguay Round on financial services aimed at including these services in the GATS on a permanent basis and in accordance with the principle of most-favoured nation (MFN), a Fifth Protocol on financial services was annexed to the GATS. It provides for the replacement of the financial services sections in the schedules of specific commitments and lists of MFN exemptions of the members concerned with the new negotiated lists, included in the annex to the protocol.

Last updated: 18.05.2011
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