Introduction to GATS



The General Agreement on Trade in Services (GATS) is a treaty of the World Trade Organisation (WTO) that entered into force in January 1995 as a result of the Uruguay Round negotiations. The treaty was created to extend the multilateral trading system to service sector, in the same way The General Agreements on Tariffs and Trade (GATT) provides such a system for merchandise trade.

All members of the WTO are signatories to the GATS. The basic WTO principle of Most Favoured Nation (MFN) applies to GATS as well. However, upon accession, Members may introduce temporary exemptions to this rule.

The overall aim of GATS is to liberalize trade in services. The agreement covers four different modes (modes 1-4 trade in services)

Mode1: Cross-border trade

Mode2: Consumption abroad

Mode3: Commercial presence

Mode4: Presence of natural persons


Cross-border trade corresponds with the normal form of trade in goods and maintains a clear geographical separation between seller and buyer. In this case services flow from the territory of one member into the territory of another member crossing national frontiers. (E.g. banking or architectural services transmitted via telecommunications or mail).

 Mode 2

Consumption abroad refers to situations where a service consumer moves into another Member’s territory to obtain a service (e.g. consumer travelling for tourism, medical treatment, to attend educational establishment).

 Mode 3

Commercial presence is the supply of a service through the commercial presence of the foreign supplier in the territory of another WTO member. In this case a service supplier of one member establishes a territorial presence, including through ownership or lease of premises, in another member’s territory to provide a service. (E.g. the establishment of branch offices or agencies to deliver such services as banking, legal advice or communications)

 Mode 4

Presence of natural persons involves the admission of foreign nationals to another country to provide services there. An Annex to the GATS makes it clear, however, that the agreement has nothing to do with individuals looking for employment in another country, or with citizenship, residence or employment requirements. The members still has a right to regulate the entry and stay of the persons concerned, for instance by requiring visas.

Introduction to GATS

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