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FOUR MODES OF WTO

The General Agreement on Trade in Services (GATS) is a treaty of the


World Trade Organization (WTO) that entered into force in January
1995 as a result of the Uruguay Round negotiations.
The treaty was created to extend the multilateral trading system to
service sector, in the same way the General Agreement on Tariffs
and Trade (GATT) provides such a system for merchandise trade.

All members of the WTO are signatories to the GATS. The basic WTO
principle of most favoured nation (MFN) applies to GATS as well.
However, upon accession, Members may introduce temporary
exemptions to this rule.
HISTORICAL BACKGROUND
While the overall goal of GATS is to remove barriers to trade,
members are free to choose which sectors are to be
progressively "liberalised", i.e. marketised and privatised,
which mode of supply would apply to a particular sector,
and to what extent liberalisation will occur over a given
period of time.
Members' commitments are governed by a "ratchet effect",
meaning that commitments are one-way and are not to
be wound back once entered into.
FOUR MODES OF SUPPLY

Modes Criteria Supplier Presence

Service delivered within the territory of the


Mode 1: Cross-border supply Member, from the territory of another
Member

Service supplier not present within the


Service delivered outside the territory of territory of the member
the Member, in the territory of another
Mode 2: Consumption abroad
Member, to a service consumer of the
Member

Service delivered within the territory of the


Mode 3: Commercial presence Member, through the commercial presence
of the supplier
Service supplier present within the territory
of the Member
Service delivered within the territory of the
Mode 4: Presence of a natural person Member, with supplier present as a natural
person.
MODE 1 - CROSS BORDER TRADE

Buying and Selling of goods and services between businesses in


different countries, with the seller being in one country and the buyer in
the other country
Services through its telecommunications or postal infrastructure
Supplies may include consultancy or market research reports, tele-
medical advice, distance training, or architectural drawings
Mode 1 contributes to 35% of services trade internationally
Measures affecting Mode 1 Trade:
- Commercial Presence Requirements, Residency Requirements,
Citizenship Requirements, Authorization and/or Licensing
Requirements, Limitations on insurance
MODE 1 - CROSS BORDER TRADE
India and France negotiations on declaration of Data Adequacy Status

Create a trustworthy environment


Avoid unnecessary barriers to cross-border information flows
Interoperability of data becomes easier
Smooth transfer of data without multiple safeguards
The bilateral trade between India and France stood at over US $9.4 billion in
2012
Uruguay and New Zealand added to the data adequacy list

CBT in financial services

Establishment of branches and subsidiaries in a host country benefit consumers


by contributing to more competitive and efficient markets
Promotes economic growth and development.
MODE 2: CONSUMPTION ABROAD
Service delivered outside the territory of the Member, in the territory of another Member, to a
service consumer of the Member

In other words
Consumers or firms making use of a service in another country (e.g. tourism) is officially
consumption abroad (mode 2)

Supplier Presence - Service supplier not present within the territory of the member
This mode of supply requires that the consumer of services move abroad.
EDUCATION SERVICES AND CONSUMPTION ABROAD
Possible Barriers to Trade in Education in Mode 2:
Visa Requirements
Recognition of Prior Qualifications
Foreign Currency and Exchange Requirements
Quota on Numbers of International Students
Restrictions on Employment while Studying
Recognition of new qualification by other countries
MODE 3: COMMERCIAL PRESENCE
Services supplied by a service supplier of one Member, through commercial presence, in the
territory of any other Member

In other words
locally-established affiliate, subsidiary, or representative office of a foreign-owned
and controlled company (e.g. Banks) is officially Commercial presence (mode 3)

Supplier Presence - Service supplier is present within the territory of the member through a
subsidiary or representative.
This mode of supply does not require the consumer of services to move abroad.

Measured mainly through instruments like FDI, values of assets, etc.


MODE 4: THE PRESENCE/MOVEMENT OF
NATURAL PERSONS IN GATS
Relevant framework
GATS main text: presence of natural persons
GATS Annex :movement of natural persons
Description of Mode 4 in main text and annex
Purpose of stay
Fulfilling directly a service contract, whether as a service supplier (self-employed) or as
an employee
Indirectly: Presence instrumental to supply of service: through commercial presence or
supply at a later stage
Duration of stay
Temporary: Rules regarding citizenship, migration, residence and permanent
employment are not covered
MODE 4 CATEGORIES IN STATISTICAL
FRAMEWORK?
Contractual service suppliers
Self-employed (independent) service suppliers
Employees of foreign service suppliers

Intra-corporate transferees and persons directly recruited by the foreign affiliate

Services sellers / Persons responsible for setting up commercial presence

Areas of uncertainty
difference between employment and service contract
what does constitute a service?
many commitments currently focus on highly-skilled workers
THE SIZE OF MODE 4 TRADE?
Small compared to total trade, and to other modes of trade in services (is the
most restricted)
Importance varies across countries and sectors
Mobility for skilled workers increasing and facilitated by special programs
Both developed and developing countries are traders where mode 4 can be
involved
THANK YOU

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