General Agreement on Trade in Services (GATS) - Four Modes of Supply

An international agreement to begin to liberalize trade in services. GATS was set up as part of the Uruguay Round of trade negotiations which led to the creation of the World Trade Organization in 1995. It was intended to start the process of extending to international trade in services the liberalization of trade in goods which had been achieved under the General Agreement on Tariffs and Trade (GATT) since 1948. International trade in services is about a fifth of the value of trade in goods, but has been increasing faster. It is also much more subject to restrictions, partly for protectionist reasons, but also because of concern about problems of regulating foreign providers of services such as insurance. The initial results of GATS have not been great; countries stipulate which sectors are subject to liberalization, and can specify exempt parts of these. Developed countries have nominated about 50% of service sectors, but with many exemptions; less developed countries have been less forthcoming. As with GATT, several rounds of negotiation are likely to be needed to achieve major liberalization of trade in services.

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. Large segments of the services economy have traditionally been considered as domestic activities that are difficult to trade over borders, and some services sectors have been viewed as domains of government ownership and control, given their infrastructural importance and the perceived existence, in some cases, of natural monopolies.

Four Modes of Supply

The GATS agreement covers four modes of supply for the delivery of services in cross-border trade:

Countries can freely decide where to liberalize on a sector-by-sector basis, including which specific mode of supply they want to cover for a given sector.