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TiSA Precursor: The GATS

The General Agreement on Trade in Services, or GATS, is an agreement made by the members of the WTO to create a system of international trade rules for services. Because no tangible products are exchanged in the services trade, the barriers to trade and necessary regulations are different for the services trade than for the goods trade, and so a separate agreement was needed to cover these areas. The GATS entered into force in January 1995.

Modes of Supply

The GATS applies to all modes of service supply: cross-border supply, consumption abroad, commercial presence, and presence of natural persons. Much of the international trade in services is provided when the supplier or consumer travels to another country, or when a service provider establishes a business in another country, so additional rules were enacted to cover these situations.

Obligations under the GATS

The GATS includes both general obligations, which apply to all members and service sectors, and specific commitments, with individual country schedules of varying scope.

General obligations

GATS members are all accorded Most Favored Nation status in all other GATS nations, meaning that no country may receive preferential treatment. In addition, GATS members are required to publish their rules for the services trade, to respond to other GATS members’ requests for information, and to establish procedures for appeals.

Specific commitments

A goal of the GATS is to improve market access for services among GATS members. However, some limitations are allowed under the agreement, including limits on the number of services suppliers, the value of transactions, and the participation of foreign capital.

Another commitment involves national treatment, the principle that the state does not differentiate between imported services and like domestic services.

Limits of the GATS

The GATS was only intended to be the first step in services trade liberalization, and experts agree that its effects have been relatively modest. The importance of the services trade has continued to rise, particularly in developed economies, and new technologies are outside the scope of the GATS. Currently-in-progress agreements, such as the Trade in Services Agreement (TiSA) seek to remedy these limitations and provide increased opportunities for the growth of international trade in services.

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Inside Services Trade

Introduction

In order to demonstrate how the Trade in Services Agreement (TiSA) would benefit America, Team TiSA has compiled government trade data to show services exports to many of the countries currently negotiating the TiSA.

Overall, from the 12out of 22 economies for which services-specific trade data is available, U.S. services exports totaled $436 billion in 2013, showing 3.7% growth from the previous year. U.S. services imports also grew, from $287 billion in 2012 to $298 billion in 2013. The TiSA would provide for increased market access in the participating countries, creating further opportunities for growth because the U.S. has a comparative advantage in producing services. With greater market access and lower barriers to trade, U.S. businesses will be able to expand their exports further and improve the U.S. economy.

In nearly all cases, the U.S. has a trade surplus in services, and exports of services support thousands of jobs – about 4000 jobs per $1 billion of exports, according to the Office of the U.S. Trade Representative. These jobs tend to be high-paying and high-skill, which suggests that the market for services-exporting jobs will grow as barriers to the services trade are removed.

The data in this report comes from public U.S. Census Bureau and U.S. Bureau of Economic Analysis websites. Census data was available for 2012 – 2014, while BEA data was not yet available for 2014. Therefore, Census data was used when possible. For countries where data was available from both sources, exact figures differed slightly, but trends remained the same.

Australia

Canada

Chile

E.U.

Hong Kong

Israel

Japan

Mexico

New Zealand

Norway

South Korea

Switzerland

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Services Timeline

1995 

The General Agreement on Trade in Services (GATS)

The World Trade Organization (WTO) implemented the GATS in 1995. This agreement created international trade rules and market access commitments for all internationally traded services sectors except services supplied by governments and air transport services. Currently services which are provided on a commercial or competitive basis are covered under the GATS, but the agreement does not require public services to be privatized. The GATS is basically a “pre-Internet” agreement.

1996: 77% of online users send or receive email at least once every few weeks, up from 65% in 1995.*

 

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1997: Google.com registers as a domain name.

1998: 20% of Americans get news from the Internet at least once a week, up from 4% in 1995.

1999: 41% of adults use the Internet. The weather is the most popular online news attraction.

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2000: 40 million Americans - or 14% of the U.S. population - have purchased a product online.

2005: 25 million Americans have sold something online.

2008: 74% of Internet users  - 55% of the entire U.S. adult population - went online during the Presidential election to take part in or get news and information about campaigns.

2012: Ecommerce sales top $1 trillion worldwide.

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2015 

The Trade in Services Agreement (TiSA)

The Trade in Services Agreement (TiSA) builds from the GATS to create a trade agreement which reflects the current and future business practices in the global market. The TiSA will provide updated rules for traded services sectors that reflect the rapidly changing world of the digital economy, globalization, and the role of services as the enablers of all parts of the economy, including manufacturing and agriculture.

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TiSA FAQs

What countries are involved in the TiSA?

23 economies are currently part of the TiSA negotiations. These economies make up 77% of the global services market.

Why do we need a special agreement for services?

The services trade functions differently than the goods trade because of the lack of tangible goods. In agreements on the trade of goods, the focus is generally on tariffs. However, tariffs are not often applicable to services. The main barriers to the services trade include cross-border data flow limitations and localization requirements, favorable treatment for state-owned or domestic enterprises, and lack of regulatory transparency. The TiSA seeks to limit these barriers to the international services trade.

Won't reducing these barriers mean the US loses jobs to countries with lower wages?

Actually, the US has a comparative advantage in the services sector, meaning that even taking into account lower wages in other countries, businesses are better-off investing in US-based services. Service jobs, which make up 80% of US private employment, tend to be high-skill, high-paying jobs -- exactly the kind of jobs that are likely to stay in the US and help build the American economy. In fact, if the US services industry is able to expand its exports, the number of services jobs is likely to increase, not decrease.

What are the goals of the TiSA?

The TiSA seeks to promote fair, open trade across all industries in the services sector by reducing barriers to services trade. It will also make provision for a changing technology environment that did not exist when the previous broad services trade agreement, the General Agreement on Trade in Services, was negotiated in the early 1990s.

Is TPA (Trade Promotion Authority) related to the TiSA?

The passage of TPA would give the US a better position from which to negotiate trade agreements like the TiSA. It does not, however, mean that any trade agreements can pass without specific Congressional approval. For more information on TPA, visit the Coalition of Services Industries information page on TPA.

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National Treatment

What is national treatment?

National treatment ensures that imported services are treated the same in a country as "like" domestic services. 

Why is national treatment significant?

National treatment rules help to eliminate barriers to trade by giving imported services the same treatment as domestic services.

What problems are associated with national treatment?

Discriminatory treatment of cross-border services constitutes a major barrier to the services trade. Discriminatory treatment could include higher taxes on imports or separate regulations for foreign and domestic businesses.

How will the TiSA affect national treatment?

The TiSA aims to ensure fair and equal treatment of both international and domestic services. All parties to the TiSA would be required to provide national treatment across all service sectors, with only narrow exceptions.

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