THE GATS BASICS

First multilateral agreement binding countries in international trade and investment in services. GATS one of about 15 agreements under Uruguay Round.

Negotiation of the Uruguay Round ended December 15, 1993.

Signing ceremony for all WTO agreements at Merakesh, Morocco in April 1994.

U.S. implementing legislation resulted in entry into force on January 1, 1995.

GATS is in three parts:

-- Framework agreement, about 30 pages, establishes MFN (most favored nation treatment), Transparency, progressive liberalization (requiring renewed negotiations in 2000), and articles 16 and 17 which are the basis for "market access" and "national treatment" negotiations.

--Annexes to the Framework agreement, about 10 pages, cover article II (MFN) exemptions, movement of natural persons (temporary entry), financial services, telecommunications, basic telecommunications, and air transport services.

-- Schedules of commitments of member countries (plus MFN Reservations), about 1800 pages, covering about 150 sectors and subsectors, and four modes of service delivery.

Every country must agree to the framework agreement and annexes. Countries have more freedom to write their Schedules of Commitments as they wish.

COUNTRY SCHEDULES OF COMMITMENTS
Schedules are organized as follows: (1) Horizontal commitments, which usually cover investment measures and movement of persons, (2) Sector-by-sector commitments, based on the Secretariat's document W/120, and the Central Product Classification of the UN.

Four modes for delivery of services are listed in the framework agreement: cross-border supply, consumption abroad, commercial presence (investment), and presence of natual persons (movement of persons).

In GATS schedule of commitments, countries are bound only to the extent they schedule a sector. This is the "positive list."

Contrast with NAFTA: NAFTA recognizes two modes of delivery, cross-border and commercial presence (investment). NAFTA covers all services sectors, except those a member country lists as an exception. This is the "negative list."

GATS schedules tend to be long and complex. For each sector scheduled, the schedule has four modes of delivery in each of the "market access" and "national treatment" columns, for a total of 8 elements. Thus, commitments can include several hundred elements. The EU schedule is 90 pages long.

In general, "market access" problems refer to quotas, and "national treatment" problems refer to subsidies.

The Secretariat's Scheduling Guidelines: Countries enter "None" meaning no restrictions on foreign service providers, "Unbound" meaning that the country reserves the right to adopt whatever measure it wishes in that sector, so long as it observes MFN, or lists restrictions applicable to that sector.

A country can also list in its schedule the restrictions it wants to retain for a given sector and mode of delivery.

Thus, a schedule that covers many sectors, and has "None" in both the "Market Access" and the "National Treatment" columns, and for the four modes of delivery, is a strong, liberalizing commitment.

According to the Guideline, a country intending to put "Unbound" in every mode of delivery for a sector should omit the sector entirely from its schedule.

MFN RESERVATIONS

For a few service sectors, a country may wish to retain the right to discriminate in its treatment of other WTO members. The sole way to retain this right is to file an MFN Reservation for each such sector in addition to the Schedule of Commitments.

As long as the MFN Reservation is in effect, the country is not committed, for the listed sectors, to follow the MFN principle.

MFN Reservations are discouraged, and in principle are to last no longer than 10 years.

Nonetheless, almost every country, including the United States, has filed a few MFN reservations. They are found, for example, in maritime transport to protect liner conferences from the MFN principle, and in audio visual works to bilateral protect co-production agreements from the MFN principle.

In general the schedules are not a major step forward in liberalization. Most schedules bind current rules, but liberalize little if at all. In a few cases, countries have bound more restrictive rules than current practice, so that they can make the rules more restrictive without violating GATS commitments. U.S. in immigration.

ACTIVITIES SINCE SIGNING IN APRIL 1994

o The council for Trade in Services manages GATS implementation. There are currently no major implementation problems.

o - "Unfinished business" as of the end of the UR. Negotiations on these issues led to agreements in basic telecom and financial services, but to no agreement in movement of persons and maritime. All these issues are likely to come up again in the GATS 2000 round.

- "Built-in agenda," which is built into the Framework Agreement. This agenda includes preparations for the next round of services negotiations in GATS 2000.

UNFINISHED BUSINESS

Continuing negotiations in four sectors where countries could not agree by the deadline of December 15, 1993:

-- Movement of persons ended 6/30/95. They ended as scheduled. The United States made no new commitment, but maintained the level of commitment in the U.S. Schedule. This commitment does not change current practice in admission of service providers. India and the Philippines wanted to exchange better developed country commitments in MOP for their better commitments in financial services.

-- Financial services ended in December 1997 with an agreement widely recognized as resulting in significant liberalization.

-- NOTE: Treasury is concerned with the "free rider problem," which occurs under the MFN principle if a few countries liberalize much less than most. Problem came well before the end of the Uruguay Round in December 1993. Asian countries large part of problem, e.g., Singapore's fears of Japanese banks. Japan itself.

-- Basic telecom negotiations, were extended until February 15, 1997, when they came to a successful conclusion from the U.S. perspective.

-- Maritime negotiations ended 6/30/96. The U.S. has made no market access or national treatment commitments in the sector. No new negotiations until the next services round in 2000, when negotiations under GATS required to begin again. United States made no offer during continuing negotiations, because it saw no "critical mass" of countries making good offers.

BUILT-IN AGENDA

Working Party on Professional Services concerned primarily with mutual recognition of professional licenses. First effort has been on accounting.

Working Party on GATS Rules (in the WTO’s Council for Trade in Services) . Should GATS rules include safeguards, government procurement and subsidies. U.S. has doubts a safeguard provision is even workable in services.

Planning for the next round of negotiations beginning in 2000 (or late 1999).

-- GATS Council met on July 22-23 and will meet again in September. The Secretariat is drafting papers on a number of sectors.

-- OSI has submitted draft comments on architectural, computer, and advertising services to Peter Collins at USTR. More work of this kind is to come.

ACCESSION TALKS

With about 20 countries (counting PRC), largest are Russia, Ukraine, China (PRC), and Taiwan.

A long process precedes a country's making a GATS offer, including Qs&As on the economy and trade rules. 

~John Siegmund