Economic Globalization and Cambodian Development

Trade in Service and GATS

Dourng Kakada

Content

1. Definition of services trade under GATS

2. Mode of Supply

3. Classification of Core Services

4. Rule of Origin in Services

Definition of services trade under GATS

The definition of services trade under the GATS is four-pronged, depending on the

territorial presence of the supplier and the consumer at the time of the transaction.

from the territory of one Member into the territory of any other Member

(Mode 1 — Cross border trade);  

  in the territory of one Member to the service consumer of any other Member

(Mode 2 — Consumption abroad);

  by a service supplier of one Member, through commercial presence, in the

territory of any other Member 

(Mode 3 — Commercial presence);  and

  by a service supplier of one Member, through the presence of natural persons of

a Member in the territory of any other Member

(Mode 4 — Presence of natural persons)

The 4 Modes of Supply Under GATS (1/2)

MEMBER A MEMBER BMode 1: Cross border supply

Mode 2: Consumption abroad

Mode 3: Commercial presence

Consumer from A

Consumer from A

Juridical person

Commercialpresence

Consumer from A

Establishes a commercial presence in AService supply

Consumer from A

Servicesupplier

The service crosses the border

The consumer is abroad Service supply

Servicesupplier

The 4 Modes of Supply Under GATS (2/2)

Mode 4: Presence of natural persons

Employee sent by firm from B

Consumer from A

Naturalperson

Service supply

Self-employed goes to Member A

MEMBER A MEMBER B

Naturalperson

Juridical person

Consumer from A

Commercialpresence

Service supply

Examples of the four Modes of Supply (from the perspective of an “importing” country A)

• Mode 1: Cross-border A user in country A receives services from abroad through its telecommunications or postal infrastructure.  Such supplies may include consultancy or market research reports, tele-medical advice, distance training, or architectural drawings. 

• Mode 2:  Consumption abroad Nationals of A have moved abroad as tourists, students, or patients to consume the respective services.

Examples of the four Modes of Supply (from the perspective of an “importing” country A)

• Mode 3:  Commercial presence The service is provided within A by a locally-established affiliate, subsidiary, or representative office of a foreign-owned and — controlled company (bank, hotel group, construction company, etc.).  

• Mode 4:  Movement of natural persons A foreign national provides a service within A as an independent supplier (e.g., consultant, health worker) or employee of a service supplier (e.g. consultancy firm, hospital, construction company).

Classification of Core Sector1. Business services (including professional services and computer

services) 2. Communication services 3. Construction and related engineering services 4. Distribution services 5. Educational services 6. Environmental services 7. Financial services (including insurance and banking) 8. Health-related and social services 9. Tourism and travel-related services 10.Recreational, cultural and sporting services 11.Transport services 12.Other services not included elsewhere

The traditional case of goods trade

Country A

Country B

FTA Rest of World

Export

Export

Transformation

The case of services trade

Country A

Country B

FTA Rest of World

Company Establishes commercial presence

Relocates Individual

Exports through Modes 1, 2 & 3 Exports through

Mode 4

Consumer