Trade in services

The General Agreement on Trade in Services (GATS) regulates the way in which WTO members must open their services markets to each other. The real scope of a country's WTO obligations is determined, sector by sector, in its 'Schedule of Specific Commitments on Services' on the basis of four different 'modes of supply' of services:

• cross-border supply (for instance via the Internet);

• consumption abroad (for instance Chinese tourists being able to ' consume ' tourism services in France);

• commercial presence (for instance an EU bank operating from a commercial location in China);

• presence of natural persons (for instance EU building engineers providing their services 'on the spot' in China).

The scope of a country's GATS obligations depends entirely on the details of its schedule of commitments. It is perfectly possible, for example, for a WTO member to accept supply of certain services via commercial presence whilst not accepting cross-border supply. Chapter 2.2 provides a more detailed overview of some of China's services commitments.

It is important to note that, in practice, the distinction between trade in goods and trade in services is not a rigorous one. For instance, a country's WTO obligations in the area of trade in goods may allow a WTO member to maintain a so-called Tariff Rate Quota for a specific product (ie it may allow the importation of a product up to a certain volume at a lower tariff, whilst imposing a considerably higher tariff on imports above that volume). If a country uses such instruments it also needs to decide which companies can import the 'in- quota' volumes at the lower customs duty rates. This is important because the companies that can make use of this quota can make a profit that is considerably higher than the profits that will be made by those importing out-of-quota volumes at the higher duty rates. An unfair distribution of these import possibilities over Chinese and foreign companies can result in a violation of a WTO member's obligations in the field of distribution services. China is currently involved in such a debate with the US on the distribution of import licences for fertilizer.