General Information on GATS
The General Agreement on Trade in Services (GATS) is a multilateral agreement within the framework of the World Trade Organization (WTO) for the regulation and liberalization of international trade in services. GATS entered into force on January 1, 1995, and constitutes one of the three main agreements of the WTO alongside the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The goal of GATS is to promote free, fair, and transparent trade in services by removing tariff and non-tariff barriers to trade and by establishing a legally binding framework for service providers and governments.
Scope and Definition of Services
GATS applies to measures taken by member states concerning trade in services. According to Art. I GATS, services in all sectors are included, except for services provided in the exercise of governmental authority (so-called “governmental authority”—e.g., police and justice).
Scope of Trade in Services
GATS regulates four modes of supply for services:
- Cross-border supply: The service is supplied from one country to another without the service provider or consumer physically entering the respective country (e.g., online services).
- Consumption abroad: Consumers travel abroad to receive services there (e.g., tourism, studying abroad).
- Commercial presence: A foreign service provider sets up a branch or subsidiary in the host country (e.g., banks, insurers).
- Presence of natural persons: Natural persons of one WTO member provide services in the territory of another member (e.g., deployment of professionals).
Legal Structure and Operation
Structure of GATS
GATS consists of a framework agreement and annexes, as well as sector-specific schedules of commitments by individual members. The core legal elements include:
General Obligations and Disciplines
- Most-Favoured-Nation Principle (Art. II GATS): Each WTO member immediately and unconditionally grants the services and service providers of every other WTO member the most favorable treatment accorded to any country.
- Transparency (Art. III GATS): Obligation to publish all relevant laws, regulations, and administrative decisions concerning services.
- Domestic Regulation (Art. VI GATS): Regulates requirements for authorization, qualifications, and technical standards, which must not be more stringent than necessary.
Specific Market Access and National Treatment Commitments
- Market Access Commitments (Art. XVI GATS): Each member specifies in a schedule which restrictions on market access and participation rights exist in the service sector.
- National Treatment Commitments (Art. XVII GATS): Obligation to treat foreign service providers no less favorably than domestic service providers, provided this is specified in the schedule of commitments.
Exceptions
There are specific exceptions:
- Exceptions to the Most-Favoured-Nation Principle (Art. II para. 2 GATS): Members may register agreed exceptions (Annex on MFN Exemptions) upon signing the agreement.
- General Exceptions (Art. XIV GATS): Allows measures for the protection of public morals, public order, health, and to combat fraud.
Schedule System
GATS operates on a positive list system: Only the sectors, modes of supply, and commitments listed in the respective national schedule are subject to market access and national treatment obligations. Without explicit listing, there are no market access commitments.
Sector-Specific Annexes
GATS contains specific annexes for individual service sectors, including air transport, financial services, telecommunications, and the movement of natural persons.
Dispute Settlement Mechanisms
GATS falls under the general WTO dispute settlement system. In the event of an alleged breach, members may initiate proceedings before the Dispute Settlement Body (DSB), which can result in legally binding decisions and, if necessary, sanctions.
Relationship to National and Regional Law
Precedence and Harmonization
GATS obliges members to align national regulations with GATS provisions. Nevertheless, there remains discretion, particularly in sensitive areas such as education, culture, or public services.
Implementation in the European Union
The European Union coordinates its services policy and undertakes commitments as a supranational actor on a comprehensive basis, while member states may make their own offers only under certain conditions.
Development and Liberalization
GATS envisages the gradual liberalization of the services markets. In the course of negotiations (“GATS rounds,” e.g., Doha Round), service sectors are gradually further liberalized. The aim is the continual expansion of the list of liberalized sectors and horizontal commitments.
Criticism and Controversies
GATS has repeatedly been the subject of legal and political debate. Critical discussions focus, among other things, on the impact on national regulatory sovereignty, security of public service provision, and the democratic control of supranational negotiation processes.
References and Web Links
- Full text of GATS at the WTO website
- Further information at the Federal Ministry for Economic Affairs and Climate Action
- Overview and Explanations at EUR-Lex
Keywords: GATS, General Agreement on Trade in Services, World Trade Organization, WTO, trade in services, international economic law, market access, national treatment, most-favoured-nation, liberalization, dispute settlement.
Frequently Asked Questions
What legal obligations arise for WTO members under GATS?
With the entry into force of the General Agreement on Trade in Services (GATS), WTO members undertake specific and general legal obligations within the multilateral trading system. General obligations in particular include the Most-Favoured-Nation Principle (Art. II GATS), which prohibits treating the services and service providers from any WTO member less favorably than equivalent services and service providers from any other member. Additionally, members are obligated to ensure transparency by publishing all relevant measures (Art. III GATS) and providing information upon request. Under the specific commitments in the national schedules, members must grant market access (Art. XVI GATS) and national treatment (Art. XVII GATS) in accordance with the obligations undertaken. These schedules determine the scope of opening by sector and allow for exceptions. Compliance with these obligations is legally binding and can be enforced through the WTO dispute settlement process in case of violations.
How does national treatment under GATS differ from other WTO agreements?
The national treatment obligation (Art. XVII GATS) requires that foreign services and service providers—where a commitment exists—are treated no less favorably than domestic ones. Unlike the most-favoured-nation principle, however, national treatment is granted only to the extent that it is explicitly listed in the corresponding national schedule for the relevant service sectors. This differs especially from GATT national treatment, which fundamentally applies to all goods. In GATS, therefore, there is no horizontal application; instead, the obligation is sector-specific and may be subject to limitations and reservations. Exceptions, so-called ‘limitations,’ may be expressly stated and added.
Are measures on immigration regulation covered by GATS?
Legally, Art. I:2(d) and Art. VI GATS clarify that the agreement expressly does not impose obligations regarding the admission of natural persons as service providers, except to the extent such access is committed in the schedules. National rules on labor migration and residence remain unaffected, as long as there is no specific market access or national treatment commitment for the temporary presence of persons from foreign providers. However, national rules regarding qualification requirements, visas, and residence obligations may, under certain circumstances, be subject to GATS disciplines for “measures relating to qualification, standards, and licensing” (Art. VI).
How is dispute resolution carried out under GATS?
In accordance with the WTO dispute settlement mechanism under Art. XXIII GATS in conjunction with the ‘Understanding on Rules and Procedures Governing the Settlement of Disputes’ (DSU), members can bring alleged breaches of GATS obligations by other members to arbitration. Dispute settlement first provides for consultations, then for the establishment of a panel if necessary, and in some cases an Appellate Body. Importantly, panels assess only the agreed legal obligations of the parties. If they determine that a measure is not GATS-compliant, the affected member may be obliged to amend or discontinue it. In case of non-compliance, countermeasures (compensation or suspension of equivalent concessions) may be permitted.
Are there sectoral exceptions or safeguards in GATS?
Yes, in addition to general exceptions (such as Art. XIV GATS regarding, among other things, public security, order, morals, health protection), GATS also provides for sectoral exceptions and safeguards. Specifically protected are services “supplied in the exercise of governmental authority” (Art. I:3(b) GATS), including, for example, the activities of customs or tax authorities, which are not subject to GATS disciplines. Sectors can also be excluded from the specific schedules, or restrictions and reservations may be listed for them, so that no binding market access obligations arise. In addition, there are emergency clauses such as Art. X GATS (emergency safeguard measures concerning payments) and Art. XII GATS (balance-of-payments measures), allowing for temporary deviations.
To what extent does GATS require transparency and publication of regulations?
Pursuant to Art. III GATS, members are obliged to publish or otherwise make accessible all relevant laws and regulations affecting trade in services. There is also an obligation to provide specific information upon request from individual members. Planned changes to existing legal acts must also be communicated. This transparency mechanism serves to ensure legal certainty for foreign service providers and to prevent discrimination or concealed trade barriers.
What is the significance of the national schedules in GATS implementation?
The national schedules of each WTO member are central legal instruments in the GATS system. They record, by sector, whether and to what extent market access and national treatment are granted to foreign services and service providers. These commitments are legally binding and may be modified or withdrawn only through negotiations (Art. XXI GATS). Changes are generally tied to compensation obligations towards affected members. In the absence of a scheduled commitment, there is no legal obligation to open the market in that sector. The schedules thus largely determine the scope of a country’s obligations under GATS.
