I am interested in tariffs on services.

Are tariffs ever levied on services and do most-favoured nation rules apply as they do with goods?


GATS doesn't apply tariffs, but

The GATS comes in two parts; firstly a framework of rules, principles and concepts which underlie obligations regarding measures affecting international trade in services; and, secondly, the specific negotiated commitments listed in countries' schedules for service sectors. The GATS covers four modes of supply: (1) cross-border supply; (2) supply through the movement of consumers to the location of the supplier; (3) supply though the establishment in a country of the commercial presence of legal entities from another country; and (4) the supply through natural persons of one country in the territory of another.

The key articles in the GATS regarding the scheduling of commitments are Article XVI (on market access) and Article XVII (on national treatment). Market access as such is not defined in the GATS. Rather the approach of the GATS is to list six categories of measure which are prohibited unless specified in a countryís schedule (for each of the four modes delivery). The categories cover the following: (a) limitations on the number of service suppliers: (b) limitations on the value of service transactions or assets; (c) limitations on the number of service operations or on the quantity of service output: (d) limitations on the number of natural persons who may be employed; (e) limitations on the type legal entity through which a service is supplied; and (f) limitations on the permissible size of the participation of foreign capital either in terms of a maximum percentage limit on foreign shareholdings or in terms of the total value of an individual entityís or of aggregate foreign investment. National treatment is defined as treatment no less favourable than that accorded to like domestic services and service suppliers. Under Article XVII measures entailing deviations from national treatment are also to be included in a country's schedule.

Basically limitations (a)-(f) allow various forms of quotas for services from other countries.

As for MFN, GATS has its own version/definition of it. Basically:

Article II of the GATS constitutes a general obligation which is, in principle, applicable across the board by all Members to all services sectors. Article II:1 of GATS states:

"With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers of any other country".

And as with similar WTO agreements, there were exceptions allowed

Article II:2 states:

"A Member may maintain a measure inconsistent with paragraph 1 provided that such a measure is listed in, and meets the conditions of, the Annex on Article II Exemptions". The liberalizing content of the GATS depends to a large extent on the nature of these specific commitments.

The annex makes it clear that no new exemptions can be granted, at least by this route: any future requests to give non-MFN treatment can only be met through the WTO waiver procedures. [...]

While Article II applies across the board, Article XVI on market access and Article XVII on national treatment only apply to sectors included by a Member in its schedule of specific commitments.

[... T]he "Scheduling of Initial Commitments in Trade in Services: Explanatory Note" states that "where an MFN exemption has been granted for a measure, a Member is free to deviate from its Article II obligations, but not from its Article XVI and XVII commitments. Therefore, in such cases, a Member may accord treatment more favourable than the minimum standard to some Members, as long as all Members receive at least the that minimum standard of market access and national treatment appearing in its schedule."

It follows that an MFN exemption would give a Member who had made no commitments in a sector considerable freedom to discriminate. However, an MFN exemption which coexists with fully liberal market access and national treatment commitments would have little meaning - unless a Member wished to provide more favourable treatment to certain foreign suppliers than it does to its own.


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