The General Agreement on Trade in Services
Trade in services currently makes up 20% of
all international trade and has grown at a faster rate in
the last 2 decades than trade in goods. For 1999-2000, trade
in services accounted for 46.4% of India’s GDP and
30% of our foreign exchange earnings. Realising the significance
of the services sector in world trade, member countries
of the WTO signed the General Agreement on Trade in Services
(GATS) in 1994 for the purpose of promoting the economic
growth of all trading partners and the economic advancement
of developing countries through expansion of trade in services.
Objectives of GATS
The GATS aims to: -
It gives special considerations to developing
and less-developed member-countries whose services sectors
and related regulatory frameworks are not fully developed.
It seeks to assist these countries in strengthening their
domestic services capacity and competitiveness.
Modes of delivery
There are 4 modes of delivering services under
the GATS: -
Member-countries have given their commitments
in these 4 modes in relation to national treatment of other
members, granting the Most Favoured Nation (MFN) status
and market access.
Traditionally, the services sector in most
countries, including India, has been protected from foreign
investment. Developed countries typically seek market access
through commercial presence, while developing countries,
which lack adequate investment capital seek market access
through movement of natural persons.
India’s commitment under GATS
India has given commitment under GATS in 33
areas including business services, communications, construction
work (civil), financial services, health-related services,
social services and tourism services. it has no commitments
in the areas of education, environment, recreational, cultural
and sporting, transport and other services, which have not
been mentioned anywhere in the agreement. Developing countries
have made commitments in 23 areas on an average.
The GATS permits members to exempt certain
services from being included in MFN as well as to improve,
change or retract any or all its commitments. This should
be done within 60 days of 4 months after the Uruguay Round
agreement has been implemented.
India consequently sought exemption from MFN
for certain services and also sought to give preferential
treatment to some members over others in the areas of communication,
recreation and transport.
Further, India liberalised the telecommunication
sector in 1998 and the insurance sector in 2000. It was
also was one of 43 members to sign the Information Technology
Agreement relating to computers, telecommunication equipment,
semiconductors, manufacturing equipment for semiconductors,
software and scientific instruments.
