International Journal of Law And Criminology
12
https://theusajournals.com/index.php/ijlc
VOLUME
Vol.05 Issue08 2025
PAGE NO.
12-16
10.37547/ijlc/Volume05Issue08-02
The Concept and Characteristics of Trade in Services in
International Law
Surayyo Usmanova
Associate Professor, PhD, University of World Economy and Diplomacy, Uzbekistan
Received:
09 June 2025;
Accepted:
05 July 2025;
Published:
07 August 2025
Abstract:
This paper explores the evolving concept and legal characteristics of international trade in services,
emphasizing the growing importance of the service sector in the global economy. The study examines the
challenges in defining “services” in legal and economic contexts and reviews the international legal framework,
particularly the General Agreement on Trade in Services (GATS). By analyzing the modes of service delivery and
sector classifications, the paper highlights the complexity and dynamism of service trade regulation. It concludes
that while services are central to economic development, their legal treatment remains fluid due to their
intangible, diverse, and rapidly changing nature.
Keywords:
Trade in services, international law, GATS, WTO, service sector, economic globalization, legal
framework, service classification, liberalization.
Introduction:
The global economy has experienced a
significant shift toward service-based activities, with
trade in services becoming one of its fastest-growing
components. Despite its growth, the sector faces legal
and regulatory challenges that hinder liberalization and
international cooperation. Unlike goods, services are
intangible, often inseparable from their delivery, and
vary in classification and treatment across legal
systems. This paper investigates the conceptual
underpinnings of “services” and examines how
international law, particularly under the GATS
framework, addresses the complexities of cross-border
service provision.
METHODS
This research is based on a qualitative analysis of legal
texts, international treaties (notably GATS), and
scholarly interpretations concerning trade in services.
Primary sources include the text of the General
Agreement on Trade in Services, the Treaty of Rome,
and sectoral classifications such as the UN’s Central
Product Classification (CPC). Secondary materials
consist of legal and economic scholarship analyzing the
integration of services into international trade law. The
paper applies a comparative legal method to contrast
domestic and international approaches to defining and
regulating services.
RESULTS
The analysis reveals that there is no universally
accepted definition of “services” in international trade
law. Key findings include:
• Services differ fundamentally from goods in their
immaterial nature and consumption dynamics.
• GATS introduces a functional ca
tegorization of
service trade through four modes of supply.
• The service sector is classified into 12 core areas
encompassing over 160 sub-sectors.
• Regulatory frameworks acknowledge both the need
for liberalization and the preservation of domestic
policy autonomy.
• The notion of “public services” is excluded from GATS
to protect governmental sovereignty over essential
services.
DISCUSSION
The
findings
demonstrate
that
the
legal
characterization of services remains fragmented and
context-dependent. The evolution of GATS has
provided a structured, albeit flexible, mechanism to
address the global trade in services. However, national
laws and regional agreements often diverge in their
International Journal of Law And Criminology
13
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
definitions and commitments. The discussion also
highlights the dual nature of services
—
economic and
legal
—
positioning trade in services at the intersection
of policy, market liberalization, and sovereign
regulation. As technological and economic changes
accelerate, international legal instruments must adapt
to the emergence of new service models and delivery
methods.
Nowadays, the importance of the services market for
international trade and the world economy as a whole
cannot be ignored. The development of the service
sector accelerates countries' economic growth.
However, there are still many barriers to international
trade in services. Therefore, the main issues in
international trade negotiations are the liberalization
of international trade in services and the economic
security of national markets.
Today, the service market is one of the fastest-growing
sectors of the world economy. Although services
themselves are increasing rapidly, they serve as a
decisive resource in the manufacturing of products,
and therefore, services account for approximately 50
percent of world trade in terms of value added.
Countries have begun to include trade-in-service
provisions in regional trade agreements.
To understand the concept of “service”, it is necessary
to turn it into the theory of economics because services
have an economic nature. Until now, there was no clear
definition of the concept of “service” in international
trade law. On the one hand, in the science of civil law,
“service” means the actions of the subjects of civil
transactions that do not end with a specific result or
end with an intangible result. Attempts to define the
concept of “services” by specific characteristics, for
example by comparing the “intangibility” of services
with the “tangibility” of goods, have lost their relevance
in the development of the economic sphere. In contrast
to goods, which can be moved and stored, services are
immobile and cannot be stored. The difference
between services and goods is that the provision of
services is inseparable from their consumption, while
the production and receipt of goods are two separate
processes. Accordingly, the process of providing a
service includes the result. In most cases, the consumer
is the object of service provision and can participate
directly in the process of service provision; the service
is usually individual in terms of provision and
consumption. The service provider does not usually act
as the owner of the result of the service provided. It
should be noted that, although the above
characteristics apply to many types of services, they do
not always apply to a specific service.
The need for a trade agreement in the service sector
has long been questioned. Large segments of the
service economy, from hotels and restaurants to
personal services, have traditionally been viewed as
domestic activities beyond the scope of trade policy
concepts and tools. Other industries, from rail to
telecommunications, are considered classic areas of
state ownership and control, given their infrastructural
importance and, in some cases, the existence of natural
monopolies. A third group of critical sectors, including
health, education and basic insurance services, is
considered a government responsibility in many
countries.
Nevertheless, some service industries, notably
international finance and maritime transport, have
remained open for centuries as natural complements
to trade in goods. Other major industries have
undergone radical technical and regulatory changes in
recent decades that have opened them up to private
commercial participation and lowered, if not
eliminated, existing barriers to entry. The advent of the
Internet has helped create a range of internationally
sought-after products from electronic banking to
telehealth and distance learning that were unknown
two decades ago, and trade that puts long-distance
suppliers and users at a disadvantage removed barriers
(professional services such as software development,
consulting services, etc. to relevant industries). A
growing number of governments are gradually opening
up formerly monopolistic industries to competition,
telecommunications can be an example of this.
Examples include visible tourism services; the travel
company organizes a tour for the consumer before the
consumer uses the results of the provided service, etc.
Even though the studied concept is essentially
economic, the content of the relations that arise in
connection with the sale of services, including the order
of organization and the legal capacity of the
participants in these relations, is regulated by legal
norms. It follows that the peculiarity of the legal study
of trade in services has a mixed nature and is located at
the intersection of economics and law.
An example of the definition of “service” at the regional
level can be found in Article 60 of the Treaty of Rome
establishing the European Economic Community in
1957, w
here “service” is defined as an activity to satisfy
needs, i.e., goods, capital or, if the rules on the free
movement of persons are not regulated, normally
provided in return for payment. This distinguishes an
important characteristic of services, i.e. the provision of
services in return for payment.
However, experts in international economic law
consider this concept of “service” as too broad. When
goods are exchanged, ownership of the goods is
International Journal of Law And Criminology
14
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
transferred to the buyer. In the process of buying and
selling services, the ownership of material things is not
transferred; the question is whether or not there is an
obligation to perform some action (transport,
insurance, advice). Customs tariffs apply to the
purchase and sale of goods and the national legislation
of the Member State applies to the provision of
services. “The adaptation of domestic legislation to the
needs of international trade in services is a legal
revolution in almost all areas of law”
.
The criterion of “crossing borders” or, in other word
s,
“cross
-
border” was not suitable for defining
international trade in services in a literal sense.
Therefore, in preparation for the creation of the World
Trade Organization, the understanding that services
can be supplied in different ways was reinforced. As a
result, the GATS defined 4 modes of supply: cross-
border supply, consumption abroad, commercial
presence, and physical presence in the country where
services are consumed. The General Agreement on
Trade in Services uses the concept of “supply of
ser
vices”, which confirms the development of the
services market as a trade operation, which is
confirmed by the increase in the positions and volume
of “trade” services.
GATS is intended to contribute to the expansion of
trade “in a context of transparency a
nd progressive
liberalization and as a means of promoting the
economic growth of all trading partners and the
progress of developing countries.” Thus, trade
expansion is seen, as some critical voices have argued,
not as an end in itself, but as a tool for growth and
development. The development link is further
strengthened in the Preamble with clear references to
the objective of increasing the participation of
developing countries on trade in services and to the
specific economic situation and development, trade
and financial needs of least developed countries.
The contribution of GATS to world trade in services
based on two main pillars: (a) ensuring transparency
and predictability of relevant norms and rules, and (b)
facilitating
progressive
liberalization
through
successive rounds of negotiations. Under the deal, the
latter concept amounts to improving market access and
extending national treatment to foreign services and
service providers in various sectors. However, this does
not imply the abolition of regulation. Rather, the
agreement clearly recognizes the right of governments
to regulate and introduce new rules to achieve national
policy objectives, and the particular needs of
developing countries to exercise this right.
In the process of developing the current GATS text, the
production of services is understood as an activity
aimed at satisfying the specific needs of service
consumers. During the negotiations that preceded the
adoption of the GATS, the problem of defining the
concept of “trade in services” arose. Developed
countries supported the idea that the provision of
services on a large scale requires the presence of a
service provider in the territory of another country
through investment. In turn, developing countries
proposed to include the movement of factors of
production in the concept of “trade in services”, if this
movement is fundamental for the supplier. As a result,
a system consisting of 4 regimes of service provision
strengthened in Article 2 of the GATS was developed.
Clause 2 of Article 1 of the GATS contains the concept
of “trade in services”. The General Agreement on Trade
in Services does not define the term “service”. At the
same time, the provision of services in the Agreement
means their production, distribution, sale, and delivery
by both legal entities and individuals.
The forms of international trade in services covered by
the Agreement are as follows:
a) cross-border trade, i.e., a situation where trade is
conducted from the territory of one state to the
territory of another state, where the seller and the
buyer of the service do not cross the border
themselves, only the service crosses the border
(banking services, communication services, etc.);
b) consumption abroad, i.e., a situation where a
consumer from one country buys services in the
territory of another country (tourism, education
–
study in foreign educational institutions);
c) commercial presence (commercial presence or right
of establishment) in the country where the service is
provided, i.e., a branch providing the service through
the service provider crossing the border and being in
the territory of a certain country, the situation of
opening a representative office or a subsidiary. The
service itself and its customer do not cross the border
(auditing, advertising and other services);
d) the presence of natural persons providing services,
i.e., the presence of natural persons providing services,
i.e., the presence of persons from abroad (qualified
employees of the TNC or holders of certain professions:
consultants, engineers, doctors, sportsmen, artists,
teachers, etc.) .
The adoption of the General Agreement on Trade in
Services became the basis for the separate legal
regulation of trade in services. Prior to the adoption of
the GATS, which was specifically designed to regulate
trade in services, the application of the GATT to this
area was very different from trade in goods, and the
subject matter was difficult to define and required
considerable adaptation.
International Journal of Law And Criminology
15
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
During the Uruguay Round, a new understanding of
what constitutes international trade in services was
developed. The study by UNCTAD, the WTO's
International Trade Centre, showed that services are
the subject of international trade if the transaction
between these persons, which is also reflected in the
GATS, the producer and the consumer of these services
are natural or legal persons
–
from different countries.
This follows from the fact that the provision of services
is a result, product or activity aimed at satisfying the
consumer of services, regardless of the location of the
GATS.
The GATS does not define “services”, but defines
“service of another member” as goods supplied from
the territory of another member state or by sea / by a
vessel registered under the laws of that state by a
person of that State providing the service or the use of
the vessel in whole or in part; or services provided by a
service provider of another country through
commercial presence or physical presence .
There are also definitions of the concepts of “service
sector”, “service provider” and “service consumer”. For
GATS, a special description draws on a sectoral
classification of services, which includes 160 types of
services grouped into 12 main sectors: business
services;
distribution;
communication
services;
education; financial services; construction and
engineering; health services; environmental services;
recreational, cultural and sporting services; transport
services; services related to tourism and travel; other
services.
It should be noted that this classification does not cover
the characteristics of services, and reference is
therefore made to the UN's Provisional Central Product
Classification. The CPCs provide a consistent structure
for classifying goods and services based on a set of
internationally agreed concepts, definitions, principles,
and classification rules. It contains all types of
information requiring product details, including
industrial production, domestic and foreign trade in
goods, international trade in services, the balance of
payments, consumption and price statistics, and other
information used in national standards and serves as an
international standard for summarisation and
tabulation.
According to the GATS, restrictive measures include:
- limiting the number of service providers (quoting,
granting exclusive rights);
- limiting the volume of trade in this type of service;
- limiting the number of operations or the number of
services provided;
- limiting the number of individuals who may be
employed in the relevant service sector;
- the requirement of a specific legal form of the
company;
- limiting the share of foreign capital in the form of the
maximum percentage of participation in the company.
At the same time, each sector is divided into specific
sub-sectors, e.g. the 'Business Services' sector
comprises Research and development services;
Professional, technical, and business services (except
research and development, legal and accounting
services); Telecommunications, broadcasting and
information services, etc. The classification of services
is necessary for the negotiations on the liberalization of
trade in services and for the preparation of Member
States' commitments in the negotiations. It should be
noted that trade in services is constantly developing,
which leads to periodic revisions of the classification of
services. The incompleteness of the classifier is its main
advantage.
According to Article 1 of the General Agreement on
Trade in Services (GATS), “services” include services in
all fields other than those provided in the exercise of
public authority. At the same time, public services
should be understood “not in an organizational sense,
but in a material and legal sense’’ . At the same time,
public services should be understood “not in an
organizational sense, but in a material and legal
sense.”
Consequently, government services are excluded from
the scope of the GATS, thereby expanding the GATS to
“tradable” services, commercial services provided on a
competitive basis. When national governments
procure services for public needs, they are governed by
the Government Procurement Agreement and are not
covered by the GATS.
CONCLUSION
Trade in services represents a critical frontier in
international economic law, reflecting both the
opportunities and complexities of globalization. While
the GATS has laid the groundwork for a cohesive
regulatory framework, the rapid evolution and
heterogeneity of services challenge the stability of legal
definitions and commitments. Ongoing negotiations
and legal adaptations are essential to ensure that
international trade law remains responsive to market
realities, particularly in balancing liberalization with
national policy interests.
In conclusion, it should be noted that the uniqueness,
diversity and constant emergence of new types of
services do not allow us to give a clear and permanent
definition of the concept of “services”. The changing
classification of trade in services is also a result of the
current development of these relations.
International Journal of Law And Criminology
16
https://theusajournals.com/index.php/ijlc
International Journal of Law And Criminology (ISSN: 2771-2214)
REFERENCES
World Trade Organization. GATS: Frequently Asked
Questions.
Accessed
October
26,
2023.
https://www.wto.org/english/tratop_e/serv_e/gatsqa
_e.htm
Zheleznov, R. V. The Principle of Liberalization of
International Trade in Services in International Trade
Law. Diss., Cand. of jurid. Sci., Kazan, 2017. 16.
Treaty of Rome : Two treaties were signed on 25 March
1957
–
the Treaty establishing the European Economic
Community (EEC) and the Treaty establishing the
European Atomic Energy Community (EAEC or
Euratom).
Shumilov, V. M. International Economic Law: Textbook
for Masters. Moscow: Yurait, 2017. 418.
General agreement on trade in services.1994. Art I.
General agreement on trade in services. 1994. Art.
XXVIII. П. (f).
United Nations. Central Product Classification. New
York: United Nations, 1991.
Appendix 1 B: (1994 WTO) General Agreement of Trade
in Services.
Karro
D.,
Zhyujar
P.
Mezhdunarodnoe
e'konomicheskoe pravo / Per. s franc. V.P.
Serebryannikova,
V.M.
Shumilova.
–
M.:
Mezhdunarodny'e otnosheniya, 2002.
