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Teletraffic engineering/What is Trade in Services?

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Author: Nosipho Dhladhla

Summary

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The general agreement on Trade in Services, GATS is the first of a set of multilateral trade rules designed to promote liberalization of Trade in services [1]. It came in to force in 1995 as a result of the Uruguay Round negotiations. Because of it, large segments of the services economy that were viewed as domains for government ownership and control, given their infrastructural importance and the perceived exsitence of natural monopolies have undergone fundamental technical and regulatory changes in recent decades, opening them to private commercial participation and reducing existing barriers to entry [2]. The telecommunictions industry is a typical example of trade in services in which governments have gradually exposed previous monopoly domains to competition and flexible fair trades.

Definition

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Trade in services refers to the sale and delivery of an intangible product called a service between the producer of the product and the consumer [3].

Trade in Services

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Trade in services is the sale and delivery of a service product between a producer and consumer. International Trade in Services is trade based in different countries, or economies, in legal terms [3]. A set of rules governing trade of services are embodied in the General Agreement of trade in services (GATS). During the Uruguay Round trade negotiations which resulted in the establishment of the World Trade organisation,WTO, country partners recognised the need for a comprehensive set of rules governing trade in services and hence GATS was drafted [1]. It then became enshrined as one of the four pillars of the international treaty comprising the WTO Agreement, 1995 (Shiven, trade expert on GATS and the WTO) [3]. Countries can, therefore freely decide how to negotiate trade agreements between each other, what sectors to liberalize and the mode of supply they want to cover for a given sector.

International trade in services is defined by the Four Modes of Supply of the GATS [3].

  • Cross border trade, which is defined as delivery of a service from the territory of one country into the territory of other country;
  • Consumption abroad - this mode covers supply of a service of one country to the service consumer of any other country;
  • Commercial presence - which covers services provided by a service supplier of one country in the territory of any other country, and
  • 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.

In telecommunications, telecommunications services are any service provided by a telecommunications provider ( the producer) or a specified set of user-information transfer capabilities provided to a group of users (the consumers) by a telecommunications system. The telecommunications service user is responsible for the information content of the message. The telecommunications service provider has the responsibility for the acceptance, transmission, and delivery of the message [4].

GATS obligations are summarised in figure 1 below and represent the frame work of obligations that apply to services and a negotiated set of specific commitments regarding particular services that each member country has agreed to list in a national schedule of commitment. The most general rule is the obligation to grant most-favoured-nation treatment to foreign services and service suppliers of other members in similar sectors [1].

Figure 1 Architecture of the General Agreement on Trade in Services.

Other organisations with interest in trade in services are OECD, APEC. Their websites contain general information update on international negotiations and specific information and research on trade in services.

The past decades have seen a broad structural shift towards services for most country economies. A large percentage of workers employed in services is also on the rise.

Services are, on balance, more knowledge-intensive than other sectors and therefore employ proportionately many more well-educated workers than other industries. For example, a majority of workers in the telecommunications services sector have post-secondary education. Interestingly, some of the best-paid jobs are in the services sector - in telecommunications, financial, legal, advertising, computer software and engineering services [1].

Example

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The telecommunications services sector, tourism sector, the financial services sector , the business sector, construction sector, and the Computer sector are examples of services sectors.

Exercises

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Most WTO country members classify Telecommunication Services according to the system used in GATS. There are sixteen categories including telecommunication services, voice telephone services, packet-switched data transmission services, circuit-switched data transmission and many others.

Try to name as many of the rest of the categories as you can.

Solution

Telecommunication services include: Telex services, Telegraph services, Facsimile services, Private leased circuit services, Electronic mail, Voice mail, On-line information and data base retrieval, 

       Electronic data interchange (EDI),

Enhanced/value-added facsimile services, incl. store and forward, store and retrieve, Code and protocol conversion, On-line information and/or data processing (incl. transaction processing), [extra credit for others]

References

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