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THE IMPLEMENTATION MECHANISM OF THE GENERAL AGREEMENT ON TRADE IN
SERVICES
Surаyyo Usmаnovа
Аssoсiаte Professor, PhD, WTO Сhаirs progrаm, University of World Eсonomy аnd Diplomасy
, Uzbekistan
ORCHID ID: -https://orcid.org/0000-0002-6624-7685
AB O U T ART I CL E
Key words:
Generаl Аgreement on Trаde in
Serviсes, implementation,
liberаlizаtion, Services,
World Trаde Orgаnizаtion
.
Received:
02.12.2024
Accepted
: 07.12.2024
Published
: 12.12.2024
Abstract:
Regulаtion of serviсes under the
Generаl Аgreement on Trаde in Serviсes plаys аn
importаnt role in further сooperаtion of the stаtes
in the world сommunity. The reseаrсh pаper
emphаsizes
the
legаl
аssessment
of
implementation mechanism of the GATS during
t
his сooperаtion proсess. Preсisely, сompаrаtive
аnаlyses of the main articles of the agreement
hаve been сonduсted. The GАTS hаs асhieved а
progressively higher degree of liberаlizаtion
through the eliminаtion or reduсtion of trаde
bаrriers. With this regаrd, аnаlyses bаsed on the
World Trаde Orgаnizаtion’s legаl norms, sсientifiс
sourсes, whiсh саn be implemented in the
сonditions of new сountries joining process the
GАTS аgreement hаve been reseаrсhed
.
INTRODUCTION
Modern international law as a set of norms for regulating international cooperation in solving
international issues of an economic, social, cultural, and humanitarian nature (paragraph 3 of Article 1
of the UN Charter) essentially directs states in the format of certain correct behavior. All subject
structures of modern international law (states, international organizations) based on the conditions of
their requirements, taking into account their specific participation in the processes of legal defense and
law enforcement, conduct their behavior in a principled mode. The World Trade Organization (WTO)
as a full-fledged subject of modern international law actively participates in the implementation of
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cooperation between countries in the political, economic, and social spheres within the framework of
the general goals of the UN.
The rules of the WTO provide for certain opportunities for the protection of the national economy of
the members of this organization, while in the methods of protection of national interests, priority is
given only to multilateral rules (not to unilateral or narrow group actions of states). The provisions of
GATT and GATS allow WTO members to apply comprehensive measures aimed at protecting certain
national interests of WTO members, as long as these measures are not based on arbitrary or unjustified
discrimination or covert restriction of international rights. These measures include, in particular, the
right of each WTO member to take any action it deems necessary to protect its most important security
interests.
Under WTO law, the General Agreement on Trade in Services (GATS) is the first set of legally binding
multilateral rules governing international trade in services. It contains the main principles and
conditions for the liberalization of the internal markets of countries to support the economic growth of
all trading partners and the further development of developing countries. GATS rules can be divided
into two main blocks, which constitute the main agreement. The first block shows the general principles
and mutual obligations of the member states in the field of trade in services, including the Annex on
exemption from obligations under Article II, as well as the Annexes related to certain areas of regulation
of trade in services
–
services on trade in services. The second block includes a list of initial mutual
benefits for access to service markets.
The GATS rules apply to all international trade services, with the exception of services provided in the
exercise of governmental functions, which are provided on a non-commercial and non-competitive
basis. In the financial sector, services provided in the exercise of governmental functions are defined as
the types of activities performed by the central bank, monetary authority or other governmental
structure in the conduct of monetary or exchange rate policy. As for other services of this type, they
include activities that are part of the social security system or of the state pension system, as defined by
law, as well as other activities carried out by the government div at the expense of government
financial resources, guaranteed or at the expense of their use. However, if a Member State allows any of
these activities to be carried out by its financial service providers in competition with a public authority
or other entity.
METHODS
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To search the answers for research questions from legal perspective it was used qualitative data from
primary and secondary sources. As for the methods of data collections have been used comparative and
legal analyses of international-legal norms in the sphere of GATS. The research papers and written
books (secondary sources) that have been conducted on some aspects of this particular research before
have been analyzed and systematized. In order to engage the practicability of the research, different
analysis methods such as content analyses and comparative-legal, normative-legal analyses of
international agreements are used. The content of the international legal norms are analyzed and form
an integral part of the research.
The important method for the research the research papers, statistics to develop qualitative data of the
research. It was prepared the general questions on WTO and GATS, and specific questions considering
the specialty of interviewers also had been posed. The implementation of the particular methodology
served to make the research more effective and enrich its scientific and practical values.
RESULTS
The agreement does not apply to international trade in certain types of air transport services. By Clause
2 of the Annex on Air Transport Services, the Agreement does not cover transport and service rights
directly related to the exercise of these rights, with certain exceptions.
Various measures are used to regulate the entry of foreign services and their suppliers into the national
market, depending on one or another form of supply. The agreement applies to all measures related to
the trade of services performed by central, regional, and local state authorities and management bodies,
as well as non-governmental non-commercial bodies.
It should be noted that the most common measures used by states in the field of regulation of trade in
services are quantitative restrictions, which limit the number or price of specific products containing
services, the share of foreign service providers, the number of services for the import of services foreign
currency provided and taken out of the country; procedures for issuing passports, visas, medical
certificates; confirmation of the availability of financial resources necessary for living and traveling;
foreign language requirements; licensing system for certain professional activities; exit fees; increase
in hotel rates; national rules for the establishment of foreign companies and their activities, taxation,
currency transactions; including requirements to hire local workers. The Annexes to the Agreement
specify the measures of the members to which it is applied, as well as the measures to which it is not
applied. For example, by the Annex on the movement of natural persons providing services, the
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Agreement does not apply to measures relating to natural persons seeking to enter the labor market of
a Member and to measures related to citizenship, permanent residence, or permanent employment.
This Annex applies to measures affecting the provision of services to natural persons who are service
suppliers of a Member State and to natural persons of a Member State employed by a service supplier
of a Member State. General exceptions to the GATS regime are provided for in Article XIV, which allows
member states to take measures to protect public morals, public order, human and animal life, and
health. At the same time, the measures specified in the Article should not be used as a means of arbitrary
or unjustified discrimination between countries with similar conditions, or should not create hidden
restrictions on trade in services. There are also exceptions for security reasons (Article XIV).
Article XXVII gives the participating States the right to withdraw from GATS benefits applied to non-
member public services and service providers. This is especially true for sea transport services.
It is misunderstood that the rule on the origin of goods also applies to services (Article XXVII).
For example, if the service is provided by a transnational organization that does not have a national
identity, it is not possible to implement it if the specified Article does not specify formal criteria for
registration, location of the head office, etc. Given that GATS is, in fact, an agreement within a certain
framework, it is too early to talk about the established principles of universal multilateral regulation of
trade in services. In any case, the principles developed under the GATT trade system, although they are
present in the GATS, are very incomplete.
The international legal regulation of trade in services consists of defining a set of legal standards, forms,
and procedures that guarantee the orderliness of trade-legal relations in the field of trade in services
with international documents, as well as certain types of them. A distinctive feature of the legal
regulation of international trade in services is the use of “indirect unification”, which does not reflect
the norm itself that should be applied in an international agreement but is a regulation of the country's
legal relations, which interprets its specific obligations. The important principles and rules of
cooperation in the field of international trade of services between the member states of the World Trade
Organization are consolidated in the General Agreement on Trade in Services included in Annex 1B to
the Marrakesh Agreement Establishing the World Trade Organization.
Taking into account the structure of the GATS, we can highlight that it consists of the following:
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• The main agreement, which includes the general obligations of the participating countries on trade in
services;
• Applications that complement certain service networks;
• List (tables) of specific obligations of the countri
es that the GATS have signed.
The provisions of GATS can be divided into two major blocks that are a reasonable agreement. The first
block contains the main principles and mutual obligations of states in the field of international trade in
services, while it also includes rules for the separate regulation of trade in services: negotiations on
maritime transport services, actions of individuals providing services, etc. The second block contains a
list of initial preferences for access to their domestic service markets by country.
The classification of the service sector is intended for information purposes and is not included in the
GATS. On this basis, the member states are free to define the spheres of service themselves. A clear and
important disadvantage of this classifier is that many services remain unclear due to their inclusion in
the “other” section, which makes it difficult to apply in practice. GATS defines trade in services as the
“supply of services”. At the same time, providing services include
s the entire process of providing
services: production, distribution, marketing, sales, and delivery. One of the features of GATS is an
integrated approach, which is expressed in defining the concept of “service” through the methods of its
delivery.
After analyzing the content of the General Agreement on Trade in Services, we can highlight the
following main principles of the GATS:
• the most favorable state regime;
• granting a national regime;
• transparency;
• the principle of a special attitude towards developing countries, which helps to develop their
participation in the trade of services;
• ensuring the general balance of rights and obligations of countries and protecting their national
interests;
• non
-discrimination and market competition in domestic regulation of countries;
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• gradual liberalization of trade in services.
The principle of granting the most favored nation treatment is enshrined in Article II of the GATS. As
noted above, when considering the general obligations of the WTO countries, by this principle, each
member country shall provide services and suppliers of services of another country no less favorable
than that country provides for the same services or service providers, undertakes to provide the regime.
Analyses
Liberalization is a process that ensures the opening of the national economies of countries to the world
market of services through the adoption of relevant regulatory and legal documents. The opening of the
national market to international competition implies the removal of barriers regulating the free
movement of services across borders, which leads to the improvement of the national regulatory
system in this sphere. This process of liberalization also involves paying attention to national policy
goals and the development of certain countries, in general, and in certain service sectors. The process
of liberalization continues even when a country renounces its previous commitments under Article XXI.
The General Agreement on Trade in Services defines several exceptions to the obligations of member
states. These exceptions include:
1) In the form of temporary preferences recorded in the list of exemptions of WTO member states about
the most-favored-nation regime provided for in Article II of the GATS and with exceptions consistent
with the conditions of the Annex on preferences in Article II or with an economic integration agreement
(Article V of GATS);
2) Removal of public procurement from GATS;
3) General exceptions by Article XIV of the GATS;
4) Restrictions to protect the balance of payments;
5) Security exceptions under Article XIV bis of the GATS.
Protection of the national interests of a WTO member state: human health, public order, public morals,
national security, environmental protection, and trade restrictions that may directly conflict with GATS
obligations require taking certain measures. General exceptions enshrined in Article XIV of the GATS
allow countries to achieve their national policy goals. Article XIV allows countries to take and introduce
measures contrary to the GATS, taking into account the requirements and objectives outlined in this
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Article. On this basis, the provisions of the General Agreement on Trade in Services offer a general
“framework” for such ex
ceptions, consistent with the GATS and the obligations undertaken by States.
If we compare the GATS with the General Agreement on Tariffs and Trade and the Agreement on Trade-
Related Aspects of Intellectual Property Rights, we can observe a more flexible approach that allows
the WTO member states to take into account specific obligations in their policies. Several Articles are
devoted to exceptions in the General Agreement on Trade in Services. In particular, Article V of the GATS
is devoted to issues of economic integration of WTO member states. According to Article V, states may
participate in or enter into agreements aimed at liberalizing trade in services among members. At the
same time, the GATS provides conditions for such an agreement between countries: the agreement
should cover important sectors and not allow discrimination between the participants about the
national regime in the sense of Article XVII of the GATS. The purpose of these economic integration
agreements is to facilitate trade between the participating countries, but such an agreement should not
create barriers to trade in services in certain sectors concerning other countries not participating in the
agreement. According to the general rule enshrined in Article XI of the GATS, any member state does
not apply any restrictions on international money transfers and current account payments related to
its special obligations.
However, Article XII provides for specific obligations to a country in the event of a “serious balance of
payments an
d external financial difficulties or the threat thereof”, including restrictions on trade in
services with related payments or transfers, or providing support. In such a situation, it is possible to
emphasize the flexibility of the GATS for countries that are in the process of economic development or
transition and can introduce the necessary restrictions to maintain a certain level of material reserves
that ensure their implementation. Each member state makes a list of specific obligations in specific
service areas for each of the methods of providing services related to the provision of the national
regime, not only access to the internal market of services. At the same time, the agreed positions remain
binding and may be amended or revoked in the future only by agreement with the countries concerned.
Terms may be changed at any time if they facilitate access to the market for services. Article XII of the
GATS stipulates that any country may establish or maintain restrictions on trade in services to which it
has assumed specific obligations if it is limited by financial difficulties in the process of economic
transformation. However, such measures should be non-discriminatory and temporary and should not
be adopted or used to protect a particular service sector.
Article XIII of the GATS provides that most-favored-nation, market access, and national treatment rules
do not apply to public procurement laws or requirements. These purchases must be for government
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purposes only and not for commercial resale or commercial distribution. Similar to the General
Agreement on Tariffs and Trade, GATS includes exceptions to obligations, as well as additional
conditions for waiving benefits under certain conditions (escape clause). On this basis, Article XVII of
the GATS stipulates that any country may withdraw from the GATS benefits if it is determined that
services are provided “from the territory of a member state or to a territory or territory other than the
territory of a member state that does not apply the WTO Agreeme
nt”.
Article XIV allows member states to take or apply measures necessary to protect the life or health of
people, animals, or plants, protect public morals, and maintain public order in the state. At the same
time, this Article stipulates that countries may not apply these measures as disguised restrictions on
trade in goods or services that are arbitrary or unjustifiably discriminatory between members with
similar conditions. It should be noted that it is very difficult to apply Article XIV in practice. The
government of a particular country must prove that any necessary public regulation is, in the opinion
of that government, consistent with the concept of public policy for the maintenance of public order,
public morals, or public health.
DISCUSSIONS
The structure of obligations of the General Agreement on Trade in Services differs from other WTO
agreements. GATS defines not only general obligations that apply to all imported services but also
specific obligations that are reflected in the List of each member state and apply only to sectors that the
government of a particular country agrees to include in its List. Part II of the GATS is devoted to the
general obligations of the members.
General obligations of the state apply to all types of services. On this basis, the general obligations that
each member of the WTO must fulfill include:
• the most favorable state regime;
• ensuring transparency;
• to help increase the participation of developing countries in the international trade of services;
• to ensu
re reasonable, objective use of commonly used measures related to the trade of services in
sectors where appropriate specific obligations have been accepted, etc.
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The main general obligation enshrined in Article II of the GATS is that a country should treat the services
or suppliers of services of another WTO member no less favorably than it accords to the suppliers of
similar services or services of any other country. The most favorable state regime prohibits any form of
discrimination against foreign service or service providers. Based on the above, the most favorable state
regime is provided for both the services and the service providers of another WTO member state. As
noted by Professor Peter Van den Bosche, the most-favored-nation obligation is the single most
important rule in WTO law. Without this provision, the multilateral trading system will not exist.
Most-favored-nation treatment and national treatment under the GATT and GATS prohibit
discrimination based on the “nationality” or “national origin or current address” of suppliers of goods,
services, or service providers. Accordingly, in Article VI of the GATS, each member of the WTO is obliged
to ensure the reasonable and impartial application of laws, court decisions, administrative procedures,
and other generally applicable measures affecting trade in services.
This regime is given to measures related to trade in services, that is, to the rules and procedures for the
delivery of services carried out by one of four fixed delivery methods. It should be noted that the Most
Favored Nation regime applies only to measures related to trade in services that are the subject of the
GATS. As for the GATT and trade in goods, this regime does not mean that there are no barriers to the
import of goods in the territory of WTO member countries, which means that, the import of goods
“cannot be subject to barriers other than those based on WTO documents.”. The obligation to provide
the most favorable country regime is unconditional, it cannot depend on the fulfillment by one country
of any requirements of another WTO member. The regime enshrined in Article II of the GATS does not
determine the conditions of market access, it only guarantees the non-discriminatory basis of national
market access. In other words, if access to the domestic market of a certain member state is limited,
then it is equally limited for all other WTO members. The most favorable state regime is included in the
list of common obligations of all WTO countries. This obligation has a specific character because the
development of a list of exceptions to this regime
“makes this obligation specific, depending on the will
of a certain state concerning a certain sector (sub-sector) of services and depending on the type of
service “
.
Proposals consider the most favorable state regime as a specific obligation “affecting
the actual
understanding of the scope of obligations undertaken by specific members of the WTO, as well as the
legal consequences of their application.” Comparing the most favorable state regime under GATT and
GATS, it should be noted that this regime in international trade of goods by Article I of GATT includes
customs fees for import and export of goods, import and export of goods, duties, and fees. including any
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fees for collection methods, remittance of import or export charges, and regulations governing imports
and exports. On this basis, the GATT contains several articles that provide for the provision of most-
favored-
nation treatment or treatment “similar to” most
-favored-nation treatment: Article III,
paragraph 7 (domestic quantitative regulation section on), V (on freedom of transit), paragraph 1 of
Article IX (on marking requirements), XIII (on non-discriminatory application of quantitative
restrictions), XVII (state trading enterprises about). In turn, Article XX of the GATT, which establishes
gene
ral exceptions, also contains an obligation “similar” to the obligation to grant most
-favored-nation
treatment. The GATS, like the GATT, contains provisions on the granting of most-favored-nation
treatment or treatment “similar to” most
-favored-nation treatment:
• Article VII (on recognition of knowledge or acquired experience);
• VIII (on monopolies and special service providers);
• X (according to the rules of protection against future emergencies);
• XII (on measures on the balance of payments);
• XXI (
on changes in the lists);
• XIV (obligation “similar” to the obligation to provide the most favorable state treatment) .
As noted above, the GATS does not contain a definition of the term “services”, but Article XXVIII of the
GATS defines a “service provider” as any person, including natural and legal entities, that provides
services, as well as branches or representative offices in the case of providing services through
commercial participation. At the same time, the GATS does not contain definitions of the concepts of
“like services” or “suppliers of similar services”.
Establishing “similarity” of services or service providers should be based on factors including:
1) Characteristics of the service provider or service provider supplier;
2) Classification and description of the service in the UN Provisional Basic Product Classification;
3) Habits and preferences of consumers concerning the service or service provider.
Furthermore, two service providers supplying “similar services” are not necessarily “similar
service
providers”. Factors such as the size of companies, their assets, their use of technology, and the nature
and scope of their experience should also be taken into account.
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According to Article II of the GATS, any country may continue to apply a measure that is not compatible
with most-favored-
nation treatment if the measure is included in the country’s list of exceptions and
complies with the terms of the Annex to Article II exceptions. Accordingly, the Council for Trade in
Services should consider all exceptions to the obligations; check whether such conditions that led to the
exemption still exist, as well as set a date for their next review. It is noted in the Annex of Privileges to
Article II of the GATS that, exemptions from the country's obligations under a specific measure expire
at the time indicated in such privileges. But at the same time, it was noted that the concessions should
not exceed 10 years and that the next stages of trade liberalization would be negotiated.
CONCLUSION
With this regard, the GATS allows the following exemptions from the most favorable treatment:
1. Benefits included in the list of exceptions from the most favorable state regime of WTO countries;
2. Privileges to facilitate trade in services in border areas;
3. Privileges according to the rules on public procurement;
4. Privileges for participation in integration associations aimed at liberalization of trade in services;
5. Benefits related to participation in contracts that provide for the full integration of the labor markets
of the participants.
Such MFN preferences are important for WTO law and policy because they allow trade liberalization to
be “aligned” with other economic and non
-economic interests and values. Article III of the GATS
reinforces the requirement of transparency in domestic regulation. This requirement is that all
regulatory legal documents, administrative orders, and international agreements signed by the state
must be published. The requirement to ensure transparency is disclosed as a set of obligations of states
in the GATS, including all regulatory documents related to the regulation of trade in services disclosed
as an obligation of WTO member countries; The Council for Trade in Services shall be notified of the
adoption of “new or amended la
ws, regulations, or administrative orders in effect each year that
materially affect trade in services covered by its specific obligations under this Agreement”, obligation
to notify and included a form of rapid response to all requests from other WTO memb
ers for “any
specific information relating to measures of general application or international agreements”
concerning to trade in services.
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It should be noted that Article VII uses the term “specific country” which means that, it does not apply
to all WTO countries, so there is a violation of the most favored nation regime.
In conclusion, we can identify important methods of recognition of documents enshrined in the GATS.
These include harmonization, bilateral agreements between countries, or unilateral recognition of
documents. At the same time, no country should act as a “means of discrimination between countries in
the application of standards or criteria for licensing, licensing or certification of service providers” or
as a disguised restriction on trade in services. According to Article VIII of the GATS, each WTO country
shall ensure that the monopoly supplier of services does not act inconsistently in the provision of
monopoly services in a certain service market in the territory of this country with the state's obligations
to ensure the most favorable state regime and its specific obligations. According to Article VIII of the
GATS, each WTO country shall ensure that the monopoly supplier of services does not act inconsistently
in the provision of monopoly services in a certain service market in the territory of this country. On this
basis, it can be concluded that the GATS allows monopoly and exclusivity of service providers, but on
the condition that they do not violate specific obligations and provide the most favorable state
treatment in the WTO countries. On this basis, by the General Agreement on Trade in Services, countries
entered the foreign market to ensure that national service providers do not abuse their monopoly
position. The GATS recogniz
ed in Article IX that “certain business practices of service providers ... may
restrict competition.” Consequently, to put an end to such practices, the obligation of the WTO countries
to enter into consultations to eliminate unfair practices in the field of service provision has been
strengthened. States are also encouraged to cooperate by providing non-confidential information on
this issue.
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