The Explorer Islamabad: Journal of Social Sciences

ISSN: 2411-0132(E), 2411-5487(P)

Vol-1, Issue (10):390-393
www.theexplorerpak.org

AN OVERVIEW OF GENERAL AGREEMENT ON TRADE IN SERVICES AND PAKISTAN

Khurram Ellahi Khan1, Nida Khan2, Shaheer Ellahi Khan3, Muhammad Habib-ul-Arifeen4
1
Lecturer, PIDE University, Islamabad, 2Program Coordinator, Association for Social Development
Islamabad, 3Senior Lecturer, Bahria University Islamabad, 4Social Scientist, Association for Social
Development Islamabad
Corresping Author:
Khurram Ellahi Khan
PIDE University, Islamabad
Khurram_ellahikhan@gmail.com

Abstract: The first of the development concerns is the changed economic role of the services sector. It has been
common to describe these as Cinderella sectors, which are not getting appropriate attention from the researchers
and the professionals of the field. As the shares of services in national economies continue to prosper, and linkages
of these elements of the economy with other economic sectors are extended, this tendency to overlook services
has become less justifiable. There has been increasing effort to understand service activities since the early 1980s.

Key Words: Services, Agreement, Trade, Goods

INTRODUCTION
Services differ from trade in products and goods
as services are intangible and not visible as of
goods. Goods can be stored after production
however services cannot be stored and are
consumed
instantaneously
by
the
customer/consumer.
Services play an integral role for the growth of
developing countries and also of developed
countries, this strength of services industry lies in
their need in all major kinds of manufacturing
concerns. Services sector holds an important
place even in downstream manufacturing. Thus
regulatory services can hinder the growth of
services sector which can reduce the noticeable
gains which services can bring to the society.
Services have the biggest segment in GDP of
various developing countries: services account for
45% of GDP in countries with low-income but it
reaches up to 55% of GDP in countries with
middle-income and accounting 70% of GDP in
countries with high income.
Growth of services sector is the fastest In the
present day world and plays an important role in
global economy and it accounts for 70 percent of
world production, 40 percent of global
employment, 20 percent of trade at global level.

Income elasticity is observed for the demand of

services. Services sector working at par helps
achieving competitiveness also.
From 1990 to 2002 the world services trade grew
up to 155 percent while those for manufacturing
and agriculture were ninety seven percent and
forty percent respectively. From time span of last
twenty years services activities in low and
middle-income countries have been growing
faster than gross domestic product (GDP). The
growing trend in services sector is reflected by
the enhancing productivity of the economy due
to services.
The growth of services can be credited to several
factors including speedy urbanization, the growth
of the public sector and amplified demand for
intermediate and final consumer services. Access
to well-organized services has become an integral
factor for the productivity and competitiveness of
the economy.
FINDINGS
Global Trade in Services and GATS
Till year 1995 no multilateral agreement was
available for the services sector, the major reason
was the lack of knowledge for services sector and
decline in interest of researchers in the said field.

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Still various private sector groups triggered the

need to add up internationals services in Round
of negotiations in Uruguay.
The GATS is an inter-governmental agreement
while ensuring transparency and progressive
liberalization and this will result into economic
development of major stakeholders and progress
in developing countries. Commercially traded
services are encompassed under GATS but this
does not include services offered or exercised
under the authority of government.
Members of World Trade Organization (WTO)
have accepted on the responsibilities of the GATS
and support specific commitments accepted by
members. After accepting the terms of GATS a
member will not bring any rule which may bring
adverse effects on the trade. The main goal of
this agreement is to have common rules using
which service providers across the globe can
deliver services in the national economies and to
decreases the hindering forces which may affect
the trade (WTO nd)
The rising competition among the service
providers will result into effective and more
efficient service providers providing better
services in terms of quality and affordability.
Agreement under discussion does not encompass
services provided under government control.
The GATS differentiates between four
approaches of services in terms of supply;
Cross-border supply relates to movement of
services from one member country to the
geographical region of another member country.
Consumption abroad implies when a consumer
of one member country receives services in
another member country
Commercial presence refers when supplier of
one particular service ensures its presence in
another member country either through
franchise or lease
Presence of natural persons explains when
professionals from one country move to another
member country to provide services
GATS obligations can be kept under two major
sets out of which General obligations are
important to be considered here. General
obligations of GATS are applied to all Members of
the GATS and allied services sector. Every country
or the member has a different schedule which
changes as per the use of each member. The
relevant terms and concepts are similar to those

used in the GATT, but not necessarily identical.

For example, national treatment is a general
obligation in goods trade and not negotiable as
under the GATS. Another major imperative is to
establish procedures and rules to keep a check on
monopolies and suppliers of unique products.
Global Trade in Services:
Uneven growth is observed in trade of services.
Services achieved a boom from 1981 to 2004
which is visible in figure given below.
US$ 825 billion in 1980
US$ 4.36 trillion in 2004
Growth of trade in service:

Growth of the goods sector:

1980s: 8% goods / 10% services
1990s: 9% goods / 13% services
2001-2004: 15% goods / 17% services
Irregularity is present between the numbers of
developed and developing countries in the trade
of services.
Pakistans Services Sector:
Pakistan's service sector
accounts
for
approximately 53.8% of the economys GDP.
Transport, storage, communications, finance and
insurance account for 24% of this sector, and
wholesale and retail trade about 30%. The
contribution of service sector to Pakistans GDP is
gradually increasing. Growth can be observed by
having a strong services sector as during the
current period of financial downturn. While GDP
of Pakistan was growing with the rate of 2%
services sector was enjoying the growth of 3.6%
and had a large contribution up to 96% to the
GDP. Although the growth in service sector was
significantly better than the commodity
producing sector, it was 45% lower than the
growth rate recorded in the previous year
391

(Pakistan

nd).

National Steering Committee has been set up by

the Ministry of Commerce recognizing the export
potential of the services sector, to chal out a long
term strategic plan for enhancing the export of
Pakistani services:
providing consultation for enhancing
exports of services;
supporting national services export
strategy;
to keep an eye on national services
export and implementation of its plans;
To take stock of the current state of
affairs in the sector on the basis of
available objective evidence and to
identify research needs;
Allied matters associated to export of
services
The trade promotion agency (TDAP) has also set
up a Services Export Development Cell (SEDC) at
TDAP which has identified Financial Services,
Construction
&
Architectural
Services,
Professional Services, Health & Medical Services
and Information Technology as priority sectors.
SEDC works with all stakeholders to deal with
core issues and develop strategies for each
sector. A Services Export Development Fund is
being established under the Trade Policy 2009-10
to help services sector grow and expand. It will be
backing up by reimbursing grants to Pakistan
services exporters for strengthening their export
capacity.
Considering key areas like production, exports
and future development plans and the emerging
trends across the globe, certain key areas relating
to export potential have been acknowledged for
Pakistan and future development. Emerging field
of communications especially in particular
telecommunications is undergoing speedy growth
across the globe. Privatization has lead to sudden
explosion in the field of communication and
privatization has been allied and supported with
the enhancement in technology in said field.

Pakistan is also focusing to deregulate and

privatize the telecommunication sector. This has
attracted a lot of foreign direct investment and
growth in trade in Pakistan. The impact of this
policy can be measured by looking at the amount
Pakistan received in financial year 2005; Pakistan
received more than $300 million by the exports
of communication services while only paying of
$59 million only. The growth of this sector heavily
relies on development of facilities, bringing latest
technology, competitiveness, training human
resource, and through the adaptation of total
quality management. Another major field
identified is of transportation sector which is
strongly associated with industrial and
agricultural wings of any nation. It shares 25% of
trade globally. Stress should be given to growing
the national transportation fleet (ships and
aircrafts), reducing cargo handling cost and time
to handle cargo more effectively, improving the
facilities at ports and terminal, and ensuring
excellence of service. In the end, Pakistan has
been a major exporter of unskilled labor,
however the trend is demanding for professional
and skilled laborers. Hence Pakistan should
attend the need for the demand of skilled labor.
Pakistan and GATS:
Pakistan has the right to put in or to remove any
part of offer until they reach at final agreement
which may suit their objectives. Under the new
developments, Pakistan has shown commitment
to liberate ten major sectors out of twelve under
the GATS. These contain business services,
communications,
construction/engineering
services, financial services, health and tourism,
veterinary, education, accounting and legal
services.
Beside these commitments in aforementioned
sectors Pakistan has assured restrictions at
horizontal level applying at all the service sectors,
hence homogeneously applied to all the sectors.
Pakistan has submitted the conditional initial
offer lists to the WTO, Pakistan has also began
bilateral negotiations with WTO members
countries for receiving offers of their interest
before finally submitting the final list. Pakistan is
currently enjoying the share of services up to 53&
however this ratio touches the limit of 75% in
developing countries (Ahmed 2000).

392

REFERENCES
Ahmed, Mushtaq
2000 Pakistan and the GATS: An
Assessment of Policies and Future
Prospects
Retrieved
from
http://siteresources.worldbank.org/INTR
ANETTRADE/Resources/Ahmad.pdf

Pakistan, Government
nd Trade in Services Sector in Pakistan.
Retrieved from
http://www.commerce.gov.pk/Downlo
ads/Services_%20Export_Web_%20Pag
e.pdf
WTO
nd Global Trade in Services and GATS:
An Overview
retrieved from
http://wtopunjab.gov.pk/gats.html

2015The Explorer Islamabad Journal of Social Sciences-Pakistan

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