1.5.1. General Agreements on Trade in Services (GATS)

The GATS was inspired by essentially the same objectives as its counterpart in merchandise trade, GATT: creating a credible and reliable system of international trade rules; ensuring fair and equitable treatment of all participants (principle of non-discrimination); stimulating economic activity through guaranteed policy bindings; and promoting trade and development through progressive liberalization.

Services negotiations in the WTO follow the so-called positive list approach, whereby members’ schedules of specific commitments list all of the services sectors and sub-sectors where they undertake to bind the market opening and the granting of national treatment to foreign service suppliers, apart the listed barriers that remain. Sectors and sub-sectors not included in the schedule are exempt from any obligations as regards market access and national treatment.

West is pushing hard to move from positive list approach to negative list approach. In negative list approach, services where GATS is not applicable will have to be negotiated, agreed upon and specified. India is against this concept as it will throw open almost whole Indian services sector to western multinational giants.

Negotiations in services under GATS are classified in 4 modes, interests of different countries depend upon this classification –

♤ Mode 1 – It includes cross border supply of services without movement of natural persons. For eg. Business Process Outsourcing, KPO or LPO services. Here, it’s in India’s interest to push for liberalization given its large human resource pool and competitive IT industry.

♤ Mode 2 – This mode covers supply of a service of one country to the service consumer of any other country. E.g. telecommunication

♤ Mode 3 – Commercial presence – which covers services provided by a service supplier of one country in the territory of any other country. This opens door of relevant sector in one country to investments from another country. Accordingly, it is in west’s interest to push for liberalization here. There has been sustained pressure to open up higher education sector, insurance sector, Medical sector etc through this mode.

♤ Mode 4 – Presence of natural persons – which covers services provided by a service supplier of one country through the presence of natural persons in the territory of any other country. E.g. Infosys or TCS sending its engineers for onsite work in US/Europe or Australia. Here again it’s in India’s interest to push for liberalization. In 2012, India dragged the US to the World Trade Organization’s (WTO’s) dispute settlement body (DSB) over an increase in the professional visa fee (H1B/L1).