Trade in services

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Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer. Trade in services takes place between a producer and consumer that are, in legal terms, based in different countries, or economies, this is called International Trade in Services.

International trade in services is defined by the Four Modes of Supply of the General Agreement on Trade in Services (GATS).

  • (Mode 1) Cross border trade, which is defined as delivery of a service from the territory of one country into the territory of other country;
  • (Mode 2) Consumption abroad - this mode covers supply of a service of one country to the service consumer of any other country;
  • (Mode 3) Commercial presence - which covers services provided by a service supplier of one country in the territory of any other country, and
  • (Mode 4) Presence of natural persons - which covers services provided by a service supplier of one country through the presence of natural persons in the territory of any other country.

A "Natural person" is a human being, as distinct from legal persons such as companies or organisations. 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.

The tourism sector, the financial services sector and the telecommunication services sector are examples of services sectors.

During the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), the General Agreement on Trade in Services was drafted, and became enshrined as one of the four pillars of the international treaty comprising the World Trade Organization Agreement in 1995.

Regional trade in services agreements are also negotiated and signed between regional economic groupings such as CARICOM, North American Free Trade Agreement (NAFTA) and ASEAN.

Some examples of trade in service would be: banking, check-ups done by a doctor and IT (information technology).

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