competition confronts users of services (agriculture, manufacturing, consumers) with higher costs. In such cases allowing and encouraging greater inward establishment of foreign service providers, as well as greater imports of services through temporary movement of providers/demanders or telecommunications networks, could do much to give Egyptian industry access to lower cost and higher quality service inputs. The objective of the General Agreement on Trade in Services (GATS) is to encourage the opening of service markets to foreign competition.

# 1. The GATS in a Nutshell 1/

The GATS consists of three main elements: (i) a set of _general_ concepts, principles and rules that apply to all measures affecting trade in services; (ii) _specific_ commitments on national treatment and market access; and (iii) a set of attachments, including sectoral annexes. The Agreement applies to four 'modes of supply': (i) cross-border supply of a service (i.e., not requiring the physical movement of supplier or consumer); (ii) provision involving movement of the consumer to the country of the supplier; (iii) services sold in the territory of a Member by (legal) entities that have established a commercial presence there but originate in the territory of another Member; and (iv) provision of services requiring the _temporary_ movement of _natural_ persons. The Agreement does not apply to services supplied in the exercise of governmental functions.

The reach of MFN and national treatment is less all-encompassing in the GATS than under the GATT. MFN applies to all measures except those explicitly exempted by a Member.2/ National treatment applies only to sectors listed in a country's schedule and its reach may be qualified. The GATS also introduces a commitment not found in the GATT: a market access obligation. Six types of _market access restrictions_ are in principle prohibited. These consist of limitations on: (i) the number of service suppliers allowed, (ii) the value of transactions or assets, (iii) the total quantity of service output, (iv) the number of natural persons that may be employed, (v) the type of legal entity through which a service supplier is permitted to supply a service (e.g., branches vs. subsidiaries for banking), and (vi) participation of foreign capital in terms of a maximum percentage limit of foreign share holding or the absolute value of foreign investment. The introduction of a market access commitment reflects one of the distinguishing characteristics of service markets: the fact that their contestability is frequently restricted by non-discriminatory measures. Because national treatment and market access are not general obligations in the GATS context, the schedules of commitments of Members are very important in determnining the reach of the Agreement.

Other obligations address issues such as transparency, recognition of licenses and certification, payments and transfers, domestic regulation and the behavior of public monopolies. Article III (Transparency) requires all Members to establish inquiry points to provide specific information concerning any laws, regulations, and administrative practices respecting services covered by the Agreement. Article VI (Domestic Regulation) requires that Members establish disciplines to ensure that qualification requirements, technical standards and licensing procedures are based on objective and transparent criteria, are no more burdensome than necessary to ensure the quality of the services 1/ This section and the next draw heavily on Hoekman (1995b).

2/ MFN exemptions may only be made upon the entry into force of the agreement. Once a Member, further exemptions can only be sought by requesting the Ministerial Conference of the WTO for a waiver (which must be approved by three quarters of the Members). MFN exemptions are in principle to last no longer than ten years and are subjec **t** o negotiation in future trade liberalizing rounds, the first of which must take place within 5 years of the entry into force of the agreement.

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