Professional Documents
Culture Documents
Key trends
Services trade offers enormous potential for welfare gains; in
the area of temporary labour movement alone, possibly
greater benefits than those flowing from the liberalization of
all barriers to trade in goods
Yet, there has been limited negotiating traction so far,
especially in the WTO (alongside far-reaching unilateral
reforms and deeper PTA commitments)
The political economy of noveltyeven after 25 years, we are
still in discovery mode
and the Uruguay Round is not yet finished in services
thirteen years into the Doha Round
Novelty breads precaution, especially in a world where many
stakeholders seek the protection of regulatory sovereignty
100
TTO
FRA DNK
BE L
ITA
SW E CA N
JP
N
CA N IRL
FRA
DEU
FIN
ES
PG RC
GB
R
DNK
NLD
SW
EAUT
CA N
ITA
FRA
BE
L
ITA JP N
AUS
SW
DNK
EAUT
BE
L
NZL ES PG RC
JP
N
DEU
AUS
FIN
GB
R AUT
NLD IRL
NZL ES PG RC
DEU
FIN
AUS
GB
R NLD IRL
NZL
20
40
60
80
ECU
TTO
PHL
LK A COL
TUN
TUN
SE
N
MAR
PAK
IDN
IND
LKEG
A COL
CHL
KE NIDN
MY
S
CHL
Y THA
GHA
NG A
THA
IND
MNG
MAR
BRA
PAKCHN
CHN
PHL
KOR
VE N
IDN
MEX
PE
TUN
THA
RBRA
MEX
VE N
EG Y
MY S
S AU
PRT
S
KOR
AU
ZAF
JOR
ARG
POL
ZAF ARG
KOR
RUS
TZA MAR
LKJOR
A COL BRA
MEXPOL
L TU HUN PRT
KHM
PAK
PE R VE N
KE
N
PRT
NG A
ARG L TU HUN CZE
KHM
GHA
HUN CZE
SE N
ECU
PE
RZAF
L TU
TTO CZE
UKR
CHL
POL
MNG UKR
10000
20000
30000
GDP per capita, PPP 2006
Fitted value s
Fitted value s
Fitted value s
40000
USA
USA
73.4
64.6
43.1
44.5 45.8
1990
49.6 46.4
53.6
2008
Low income
Middle income
High income
25%
21%
1400
20%
1200
1000
16%
15%
800
10%
600
400
5%
200
1980=100
0%
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Goods
A: ?
Key Determinants
Technological change
Production fragmentation
The growth of FDI
The supply of human capital
Changes in demand patterns
Ideology
10
Technological change
Technological innovation, especially (but not only) in
information and communication technologies, was
instrumental in:
Contributing to dramatic cost reductions in information processing;
and
Increasing the tradability of services transactions.
12
13
16
17
Ideological shifts
The collapse of centrally-planned economies and the rise of
the Washington consensus emphasising market-friendly
trade and investment policies resulted in a marked shift in
attitudes towards the boundary between the market and the
state.
The period since the late 1980s has witnessed a sustained
withdrawal of the state as owner-supplier of many services
and its emergence as a regulator of services, responding to
market failures and assuming the role of competition police in
newly-competitive markets.
18
19
A priori expectations
about service sector reforms
The gains from liberalising services may be
substantially greater than those from liberalising
trade in goods.
Why is this so?
Because current levels of protection are higher in services
and
Spill-over benefits result from the oft-required movement
of capital and labour
20
A priori expectations
Additional gains from trade liberalization are
associated with the fact that services protection
tends to rely on quota-type restrictions, which
tend to be:
Less-transparent (involving administrative
discretion in licensing decisions for instance)
More distortive of competition and
Less economically efficient (mostly nonrevenue bearing) than tariffs in merchandise
trade.
24
33
Intangible
What is the value of a service? This is arguably harder to
assign and measure than for physical goods.
Data limitations at both the national and international levels
are pervasive in the services field.
Weak data means that the predictive value of economic
models of services reforms is itself weaker.
Can you negotiate what you cannot properly measure? Weak
data induces negotiating precaution, especially on the part of
developing countries.
Negotiating implications: lack of precise data inhibits the
quest for workable emergency safeguards provisions in
services trade (need to document import surges and establish
causation/injury).
34
Non storable
Unlike goods, the simultaneity of production and consumption
distinguishes many services transactions.
Yet, we observe the increasing commoditization of many services
that are embedded in goods or stored and delivered electronically.
There remains, nonetheless, a critical need for factor mobility, and
its complex political economy in home and host countries:
Movement of capital remains controversial in many host
countries, especially developing countries; and
Movement of labour (for work purposes) is resisted in most
recipient countries, especially (but not only) in developed
countries.
Definitional and negotiating implications: non-storability alerts us to
the need to adopt a modal approach to defining services trade,
with two modes of supply Modes 3 and 4 focusing specifically on
factor movements.
35
Intermediates
Services are inputs into all that a nation produces, brings to
market, trades or invests in.
This is arguably the most central insight by far, with farreaching implications for policy design and engagement in
trade negotiations.
An inefficient service sector acts like a prohibitive tax on
economy-wide performance.
Services trade policy should thus be designed like that
affecting imports of capital goods.
Gains from trade come from both imports and exports, such
that countries may have an incentive to engage in
negotiations to secure access to (or reduce the price of) key
inputs that may be lacking or that are inefficiently produced
at home.
36
37
Highly regulated
The ubiquity of market failure in the provision of services
justifies the high level of domestic regulation found in
services markets.
There are four main types of market failure in services
trade:
Monopolies and oligopolies (especially prevalent in networkbased industries);
Information asymmetries (finance/prudential standards and
professional licensing regimes);
Externalities (transportation and environmental services, cultural
diversity); and
Universal services/public goods (health, education).
38
39
Diverse
Complex political economy: industry is usually closer to sectoral
regulators than to trade ministries; regulatory agencies can be powerful
political actors.
Limits to reciprocal bargaining as a result of cross-country differences in
specialization patterns.
Services negotiations entail the need to master many different
regulatory languages and bureaucratic cultures (challenge of interagency coordination).
Building user coalitions may also be needed to overcome producer
resistance to market opening:
Financial industry lobbied hard for telecommunications liberalisation in
Uruguay Round; and
Manufacturers/distributors lobby for more liberal logistical/transportation
services.
40
Negotiating issue
Modes of supply
Treatment in GATT
Treatment in GATS
National treatment
Most-favoured nation
treatment
Quantitative restrictions
Diversity
42
43
44
45
na
nc
ia
l
is
m
ur
43%
41%
41%
44%
ca
tio
46%
du
49%
Developed
Developing and Transition
81%
78%
100
58%
54%
80
39%
39%
60
# of Members
95%
H
ea
lth
B
Te
us
le
in
co
es
m
s
m
un
ic
at
io
n
C
on
st
ru
ct
O
io
th
n
er
Tr
an
sp
or
R
t
ec
re
at
io
na
l
A
ir
Tr
an
sp
or
E
t
nv
ir
on
m
en
t
D
O
is
th
tr
ib
er
ut
C
io
om
n
m
un
M
ic
ar
at
iti
io
m
n
e
Tr
an
sp
or
t
Fi
To
140
120
71%
40
20
46
To
ur
is
m
R
ec
re
M
at
ar
io
iti
na
m
l
e
Tr
an
sp
or
A
t
ir
Tr
an
sp
O
th
or
er
t
Tr
an
sp
or
t
ea
lth
B
Te
us
le
in
co
es
m
s
m
O
un
th
er
ic
at
C
io
om
n
m
un
ic
at
io
C
n
on
st
ru
ct
io
n
D
is
tr
ib
ut
io
n
Ed
uc
at
io
En
n
vi
ro
nm
en
t
Fi
na
nc
ia
l
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
47
Unbound
Partial
Full
50%
40%
30%
20%
10%
0%
Cross-border
Consumption Abroad
Commercial Presence
Mode
48
49
Index of restrictiveness
60.0
56.6
50.0
40.6
40.0
30.0
24.0
17.3
20.0
10.0
0.0
70
IND
50
PHL
IDN
MYS
40
CHN
EGY
TUN
THA
SAU
30
JOR
LKA
TZA
FRA
MAR
VENMEX
RUS
20
KEN
10
PAK
KHM
SEN
GHA
NGA
MNG
BRA
ZAF
PER
UKR
COL
PRT
KOR
CZE
ARG
LTU
POL
ITA
GRC
ESP
NZL
TTO
BELDNK
CAN
AUT
DEU
JPN GBR
SWE
FIN
AUS
NLD
IRL USA
CHL
ECU
HUN
10000
20000
30000
GDP per capita, 2007
40000
Restrictiveness by sector
100.00
90.00
80.00
70.00
Fin/Serv
60.00
Telecom
50.00
Retail
40.00
Transport
30.00
Professional
20.00
10.00
0.00
Low
income
Low er
middle
Upper
Middle
High
income
44.78
SAPTA
39.24
ASEAN
36.90
EAC
30.16
MERCOSUR
28.90
TPP
27.81
NAFTA
17.97
OECD
EU
6.84
2.69
60.00
SAPTA
36.32
ASEAN
31.67
TPP
26.39
MERCOSUR
24.66
NAFTA
21.13
EAC
EU
OECD
20.68
13.46
12.30
75.00
SAPTA
50.00
ASEAN
37.50
NAFTA
33.33
TPP
30.56
MERCOSUR
30.00
EAC
25.00
OECD
EU
12.07
3.57
50.00
SAPTA
40.00
ASEAN
37.50
EAC
35.00
TPP
27.78
NAFTA
25.00
MERCOSUR
20.00
OECD
EU
11.21
3.57
57.76
EAC
54.76
GCC
48.50
MERCOSUR
38.76
EU
31.43
ASEAN
30.63
OECD
26.21
TPP
25.84
NAFTA
21.27
45.00
ASEAN
33.33
SAPTA
30.00
EAC
15.00
TPP
11.11
OECD
7.76
EU
7.14
MERCOSUR
NAFTA
5.00
0.00
37.08
NAFTA
35.83
SAPTA
33.75
TPP
27.22
GCC
17.00
OECD
16.15
MERCOSUR
8.13
EU
EAC
6.00
0.00
61.67
SAPTA
52.50
GCC
43.00
OECD
42.24
EU
40.00
NAFTA
38.33
EAC
38.00
MERCOSUR
37.00
TPP
36.67
68.48
SAPTA
66.16
GCC
62.32
EAC
52.84
NAFTA
50.83
TPP
48.52
OECD
48.37
EU
46.09
MERCOSUR
46.00
Thank you!
Pierre Sauv
pierre.sauve@wti.org
Contact :
EU-MUTRAP Project Management Unit
64