Doing Business with China
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.