- The GATS framework, which spells out the Agreement’s substantive disciplines

- The schedules of commitments of WTO Members that describe the nature, extent and timing of market opening undertakings, including any limitations or exceptions thereto

- 12 Annexes, which include additional or clarifying rules on specific sectors, including financial services.

The GATS specifically excludes any “ _services supplied in the exercise of governmental authority_ ”<sup>8</sup> and defines trade in services – including financial services – as consisting of four modes of supply:

- _cross-border supply_ (mode 1), e.g. foreign providers supply a domestic market remotely

- _consumption abroad_ (mode 2), e.g. domestic consumers purchase financial services abroad (e.g. while traveling abroad)

- _commercial presence_ (mode 3), e.g. the physical establishment of a foreign provider via a subsidiary, branch or representative office for purposes of selling services in a host country market

- _temporary presence of natural persons_ (mode 4), e.g. the temporary entry of foreign individuals for purposes of selling financial services to host country consumers or as key personnel working for a foreign-established firm in the host country market (so-called intra-company transferees).

Even though commercial presence (mode 3) is considered to be the principal means of financial services delivery, especially for retail customers where physical contact is generally required<sup>9</sup> , the cross-border provision of services is becoming increasingly important in view of increased worldwide travel and e-commerce developments. In fact, the advent of e-finance has introduced additional complications to the above framework, since it is not always clear whether the online provision of financial services by foreign providers belongs to modes 1 or 2<sup>10</sup> . By contrast, mode 4 is relatively less important in financial services as it is severely constrained by receiving countries’ migration policies and chiefly relates to highly-skilled experts or intra-company transferees in managerial positions. It should also be noted that the above nationality-based definition of services trade is significantly broader than the one used for balance of payments purposes, which is based on the principle of residency; this difference arises primarily from the fact that trade in services under GATS includes the movement of both capital and labor.

> which have been in existence since the 1960’s, are earlier examples of binding legal instruments for promoting progressive liberalization among OECD Member governments. However, they are not a treaty or international agreement in the sense of international law, as is the case for WTO agreements.

> 8 The definition of governmental authority for financial services is described later in this section.

> 9 According to Harms P., Mattoo A. and Schuknecht L. (March 2003) who estimated the relative size of different modes and sub-sectors in financial services based on US data, “ _establishment trade is three-and a half times greater than cross-border trade for imports and more than twice as large for exports_ .”

> 10 Although there are no universally agreed upon criteria, some WTO Members have based the distinction between modes 1 and 2 on whether there are one or two jurisdictions involved in the provision of a financial service and whether the service was provided as a result of direct online, cross-border solicitation.

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