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GATS – Services Liberalization & India’s Role

Services like banking, telecom, tourism, IT, education are major part of modern economies. GATS provides rules for international trade in services.

1. Meaning / Background

GATS (General Agreement on Trade in Services) is a WTO agreement that provides a legal framework for trade in services, similar to how GATT covers trade in goods.

  • Came into force with WTO in 1995.
  • Covers broad range of services sectors.

2. Modes of Supply (4 Ways of Trading Services)

GATS identifies four modes by which services can be traded:

  1. Mode 1 – Cross‑border Supply

    • Service moves, not the consumer (e.g., online consultancy, software delivered over internet).

  2. Mode 2 – Consumption Abroad

    • Consumer moves abroad (e.g., tourism, students studying in foreign university).

  3. Mode 3 – Commercial Presence

    • Foreign service supplier sets up branch/subsidiary in another country (e.g., foreign bank branch).

  4. Mode 4 – Movement of Natural Persons

    • Individuals travel to another country to provide services (e.g., IT professionals on onsite projects).
1"Cross‑border (service moves)"
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2"Consumption abroad (consumer moves)"
↓
3"Commercial presence (firm moves)"
↓
4"Movement of persons (worker moves)"

3. Key Features of GATS

  • MFN Principle – in general, members extend any service trade advantage to all others (with some exceptions).
  • Specific Commitments – countries list sectors and modes where they offer market access and national treatment.
  • Progressive Liberalisation – further negotiations to widen commitments.

4. India’s Role and Interests

  1. Strong in Mode 1 and Mode 4

    • IT and BPO exports (Mode 1).
    • Movement of professionals (Mode 4).

  2. Seeks Greater Access for Services Exports

    • Wants partner countries to ease visa, work permit, recognition of qualifications.

  3. Balanced Approach for Sensitive Sectors

    • Careful liberalisation in banking, insurance, retail, education to protect domestic interests.

📋 Case Study: Indian IT Services under GATS

❗ Scenario:
Indian IT companies want predictable access to foreign markets for onsite and offshore services.
💡 Analysis:
Through GATS negotiations, India pushes for commitments from trading partners on market access and movement of professionals, while making its own offers in sectors like telecom and financial services.
✅ Outcome:
IT exports have grown significantly, though issues like immigration rules and data protection remain beyond GATS alone.
🎓 Key Learnings:
  • GATS provides broad rules, but national regulations on visas etc. still matter
  • India has offensive interests in services where it is competitive
  • Students should connect GATS with growth of IT/BPO sector

5. Quick Revision Points

  • GATS = WTO agreement governing trade in services.
  • Four modes: cross‑border, consumption abroad, commercial presence, movement of persons.
  • India seeks greater services market access, especially for IT and professionals.

6. Quiz Time 🎯

Test Your Knowledge

Question 1 of 5

1. GATS deals with:

Goods
Services
Agriculture
Intellectual property
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