As part of the GATS agreement, regulations for the international trade in services were divided into 4 different modes of supplies. These represent the different forms in which services can be traded across countries. The modes of supply regulate all international trade and therefore directly affect cross-border trade for SMEs. According to the World Trade Report of 2016 and Persin (2011), SMEs are primarily affected by regulations in Mode 1 and Mode 4 of supply. This is principally due to size constraints. While mode 1 regulates cross-border trade, mode 4 regulates the movement of natural persons across borders.
Mode 1 presents great possibilities for SMEs. With the expansion and fortification of the global e-commerce framework, SMEs have and are getting more and more possibilities to access international markets within the service industry. E-commerce regulation and access options especially for developing and least developing countries is limited or non-existent. A big problem of the GATS however and especially for mode 1 of supply, is that there are not many binding regulations. On top of that, many sectors are excluded within the agreements of accession of many countries. The question is then: How can countries be further encouraged to regulate on this topic?
The second main challenge within the SME framework, is the mutual recognition of licenses and qualifications. This falls under the realm of mode 4 of supply. Although this is a problem that all companies face, SMEs are more affected by it. This especially because of the low credibility foreign SMEs have with the institutions or orders (like the order of architects) which are in charge of the recognition after the government has delegated these tasks. Some regional trade agreements (RTAs) already provide first steps to mutual recognition of qualifications but on an international basis, the Annex on the movement of natural persons of the GATS agreement, is the only binding agreement. (WTO, 1995; Carzaniga, 2016)
As part of the committee on the trade in services, you shall discuss the problems that SMEs face regarding mode 4 of supply and cooperate together with the committee on e-commerce to solve and propose regulations for mode 1 of supply within the GATS agreement. The main questions that you should be discussing are: How can regulations be implemented or countries be encouraged to create more mutual recognition agreements? Is this possible on an international scale? How can SMEs be involved more in the regulation making process to be incentivized to participate in international trade?
Download full PDF file: The WTO and Small and Medium Enterprises
Meet the Chairs