Services
Services Liberalization in the New Generation of Preferential Trade Agreements (PTAs)
This paper attempts to fill a gap in the trade literature by providing a comprehensive overview of services liberalization commitments in the new generation of preferential trade agreements (PTAs) as compared to prevailing GATS commitments and Doha Round offers. By developing a new database the paper reviews the commitments undertaken by 29 WTO Members (counting the EC as one) under mode 1 (cross-border supply) and mode 3 (commercial presence) in 28 PTAs negotiated since 2000. The paper presents a general analysis from both a cross-country and cross-sector perspectives and also examines in more detail the GATS+ commitments undertaken in a number of key sectors (audiovisual distribution education financial professional and telecommunication services). The paper also discusses the potential economic costs arising from these preferential agreements as well as the potential implications for the multilateral trading system and for the Doha round of negotiations in particular. The paper concludes by discussing possible approaches to overcome the potential downsides of PTAs including proposals for a more pro-active role for the WTO in the surveillance of these agreements.
Services Trade Liberalization at the Regional Level
This paper discusses the opportunities and challenges for Southern and Eastern African ACP countries of services negotiations in the context of European Partnership Agreements. The paper provides an overview of existing flows in services from and to Southern and Eastern Africa an overview that suffers from the paucity of relevant data. Given the significant differences among services sectors the paper provides a separate discussion for several of them including financial services tourism and business services. The latest developments in each sector are described and the issues that are at stake in trade negotiations. In this context the competitive position of Southern and Eastern African countries is compared with the position of the European Union and other global players. The paper attempts to identify possible export opportunities for Southern and Eastern African ACP countries and discusses the advantages and disadvantages of giving preferential access to EU suppliers in those services sectors where African countries are likely to import. Particular attention is paid to the role of mode 4 in the discussed services sectors.
Liberalizing Financial Services Trade in Africa
This paper analyses the possible gains from regional and multilateral liberalization of financial services trade for African countries taking into account the implications of such liberalization for financial regulation and capital account liberalization. It also describes existing efforts to integrate financial markets within four African regions (WAEMU CEMAC SADC and COMESA) and discusses the existing GATS commitments of the relevant countries with respect to financial services. Although the regions differ significantly there is scope for further regional integration in all of them. Significant scope also exists for further multilateral liberalization of financial services in particular with respect to Mode 3.
The Impact of Mode 4 Liberalization on Bilateral Trade Flows
This paper gives insights into the possible trade creating effects of service trade liberalization via Mode 4. In particular we expect that temporary movements of persons like permanent movements have the potential to reduce transaction costs for merchandise trade between home and host country. Exploiting data on H-1B beneficiaries from different origins in the United States and using a gravity model of trade we find significantly positive effects of temporary movements of persons on bilateral merchandise trade. In addition to this the paper provides insights into the determinants of temporary movements of persons.
Public Services and the GATS
The status of public services is one of the most hotly debated issues surrounding the GATS. There are two approaches to distinguish such services from any other services: an institutional approach that focuses on the legal and institutional conditions governing supply (e.g. ownership status market organisation) and a functional approach based on the policy objectives that may be involved (e.g. distributional and quality-related considerations concepts of universal access). Given the wide range of institutional arrangements that exist in different jurisdictions with significant variations over time the former approach does not appear appropriate. The services provided by government-owned facilities whose costs are covered directly by the State may well be indistinguishable for all practical purposes from the services provided by private commercial operators whose users (students patients passengers etc.) are reimbursed. This paper discusses the relevance of the GATS for different organisational settings - from government monopolies to regulated and/or subsidized private provision - that may be used by WTO Members to meet typical public service objectives. It turns out that virtually all forms of organisation can be accommodated within the framework of the Agreement. To fully exploit its opportunities and avoid unpleasant surprises however governments would need to thoroughly analyse the relevant provisions in the light of their own policy objectives.
Turning Hills into Mountains?
Over the past months it has become increasingly clear that the services negotiations under the Doha Development Agenda will not produce significant improvements on current commitments unless major new impetus is provided. In an introductory section this paper discusses various impediments from the perspective of participating governments that may explain the lack of negotiating momentum to date. It then provides an overview of existing commitments under the GATS (by sector mode of supply and level of development) and of the initial offers that had been tabled by early 2005. Despite the substantial benefits that may be associated with the liberalization of services trade the GATS has obviously not yet lived up to ambitious expectations. For example on average across all WTO Members only one-third of all services sectors have been included in current schedules of commitments; and many entries have been combined with significant limitations on market access and national treatment or with the complete exclusion of particular types of transactions (modes of supply) from coverage. While the ongoing services negotiations provide an opportunity to complement the rule-making efforts of the Uruguay Round with genuine market opening many governments apparently have found it difficult despite generally more restrictive access regimes and thus potentially higher gains from liberalization than in merchandise trade to undertake or envisage economically significant bindings across a broad range of services. Five years after the inception of the services round current negotiating arrangements based mainly on (bilateral) exchanges of requests and offers may need to be complemented by common points of reference to provide greater focus and guidance.
Dominican Republic - Measures Affecting the Importation and Internal Sale of Cigarettes
On 8 October 2003 Honduras requested consultations with the Dominican Republic concerning certain measures affecting the importation and internal sale of cigarettes. This request is a new and expanded version of a complaint filed by Honduras on 28 August 2003 (WT/DS300/1).
Developing Countries in the WTO Services Negotiations
The aim of this paper is to analyse developing countries’ participation so far in the current round of services negotiations under the Doha Development Agenda. The paper analyses developing countries’ negotiating positions as evidenced by their multilateral negotiating proposals; their initial offers; and to the extent allowed by the incomplete and sketchy information available their participation in bilateral market access negotiations. A number of basic themes are raised: the essential role of services for economic development; the high costs imposed by trade protection; the benefits of liberalization; the need to make use of the WTO forum to enhance credibility and sustain domestic regulatory reform programmes; the challenges of regulatory reform and the importance of appropriate sequencing; and the benefits arising from seeking further market access overseas in those areas where developing countries have a comparative advantage.
United States - Measures Affecting the Cross-Border Supply of Gambling and Betting Services
On 21 March 2003 Antigua and Barbuda requested consultations with the US regarding measures applied by central regional and local authorities in the US which affect the cross-border supply of gambling and betting services. Antigua and Barbuda considered that the cumulative impact of the US measures is to prevent the supply of gambling and betting services from another WTO Member to the United States on a cross-border basis. According to Antigua and Barbuda the measures at issue may be inconsistent with the US obligations under the GATS and in particular Articles II VI VIII XI XVI and XVII thereof and the US Schedule of Specific Commitments annexed to the GATS.
The Impact of Mode 4 on Trade in Goods and Services
This paper estimates the impact of liberalization of temporary movements of individual service suppliers on trade in goods and services. In particular the paper looks at the impact of the so-called forth mode to provide a service on trade in services under the other three modes: cross-border service supply (Mode 1) consumption abroad (Mode 2) and commercial presence abroad (Mode 3). Estimates are obtained using a gravity model of trade augmented for a measure of temporary movements of service suppliers. Estimates of the size of a country’s Mode 4 trade in services are based on specific information regarding the number of temporary foreign workers occupied in the service sector and their estimated average earnings thus overcoming the limitations of traditional measures of Mode 4 based on remittances or compensation for employees. We find a positive and significant effect of temporary movements of service providers on merchandise trade and services trade under Mode 1 and 3. No significant relationship is found between services trade under Mode 2 and Mode 4.
The GATS Turns Ten: A Preliminary Stocktaking
The paper discusses the experience to date with the implementation and application of the General Agreement on Trade in Services (GATS) some ten years after its entry into force. One striking observation is the smooth functioning of the Agreement which has created far less tensions and frictions including at Ministerial Meetings than its difficult negotiating history might have suggested. This is due in large part to a high degree of flexibility at several levels: Members have more scope than under the GATT to depart from common horizontal obligations in particular the MFN principle; they are able to adjust the breadth and depth of their trade commitments (market access and national treatment) to particular sector conditions; and they face less constraints if any in the use of trade-related policies such as subsidies export restrictions or domestic regulatory interventions. An additional source of flexibility is the uncertainty still surrounding a few core concepts of the Agreement and their sometimes daring application in individual schedules. While the ongoing negotiations also provide an opportunity for technical corrections of scheduling problems the basic (built-in) flexibility elements of the Agreement - including the bottom-up approach of undertaking sector commitments and the possibility of inscribing limitations under individual modes - will of course persist. (Their actual relevance may nevertheless differ significantly between 'old' Members and countries negotiating their accession to the WTO.) Given the broad reach of of the Agreement in terms of membership sector application and modal coverage flexibility may be considered a conditio sine qua non. There is little reason to believe that a more rigid structure would have been acceptable to Uruguay Round participants and even if so that it would have proven stable and resilient over time. However flexibility may come at a cost: lack of meaningful obligations across a reasonably broad range of service sectors. Vested interests may find it far easier than under the GATT to defend their privileges and defy more rational and harmonized trading conditions. While the paper discusses formula-based approaches that have been proposed to improve the quantity and/or quality of sector commitments within the existing framework of GATS there should be no illusion about the scope for technical solutions to what constitutes a political and institutional challenge.
Mexico - Measures Affecting Telecommunications Services
On 17 August 2000 the US requested consultations with Mexico in respect of Mexico’s commitments and obligations under the GATS with respect to basic and value-added telecommunications services. According to the United States since the entry into force of the GATS Mexico has adopted or maintained anti-competitive and discriminatory regulatory measures tolerated certain privately-established market access barriers and failed to take needed regulatory action in Mexico’s basic and value-added telecommunications sectors.
ICT, Access to Services and Wage Inequality
This paper discusses how information and communication technology (ICT) affects the quality and reach of consumer services. These services need to be provided locally but consist of several components some of which can be digitised and transmitted over long distances. A general equilibrium model is developed and numerical simulations in a stylised two-factor two-region centre-periphery setting are presented. Trade in intermediate services improves the quality of consumer services enormously in the periphery but may reduce the quality at the centre. Trade in intermediate services also has a dramatic impact on skilled workers’ wages in the periphery both relative to unskilled workers in their own region and relative to skilled workers at the centre and leads to a more equal distribution of income both between the centre and the periphery and within the periphery.
Canada - Certain Measures Affecting the Automotive Industry
On 3 July 1998 Japan requested consultations with Canada in respect of measures being taken by Canada in the automotive industry. Japan contended that under Canadian legislation implementing an automotive products agreement (Auto Pact) between the US and Canada only a limited number of motor vehicle manufacturers are eligible to import vehicles into Canada duty free and to distribute the motor vehicles in Canada at the wholesale and retail distribution levels. Japan further contended that this duty-free treatment is contingent on two requirements: Canadian value-added (CVA) content requirement that applies to both goods and services; and manufacturing and sales requirement. Japan alleges that these measures are inconsistent with Articles I:1 III:4 and XXIV of GATT 1994 Article 2 of the TRIMs Agreement Article 3 of the SCM Agreement and Articles II VI and XVII of GATS.
Whether and When to Liberalize Capital Account and Financial Services
Discussions about international capital movements raise extremely important and controversial questions. Why should countries open up their capital accounts especially considering that unrestricted international capital movement is a relatively new phenomenon? For example many OECD countries have not eliminated their foreign exchange restrictions only until the 1980's. If the answer is unequivocally affirmative does it matter how fast should countries do so? Should they wait until "all essential pieces" of the policy package are in place before they eliminate all restrictions? How are international capital movements related to domestic financial sectors? Is there a difference between opening to competition an industry such as car manufacturing as compared to the banking sector? Should the opening of the banking sector be governed by different rules? Rules about foreign exchange restrictions are already in place in the IMF Articles. Until recently the IMF Articles only called for the elimination of foreign exchange restrictions on the current account. The ongoing discussion and the controversy about globalization that calls for the capital account liberalization introduces therefore a relatively new element into the whole discussion. These questions have also implications for the World Trade Organization. It is well known that the Uruguay Round Agreements have already provided a coverage for a number of aspects that are directly related to foreign investment. Rules established elsewhere such as in the context of changes to the IMF Articles will obviously have an important bearing for the implementation of rules agreed in the Uruguay Round. This raises a variety of other questions in the mind of some observers. Who should decide about the rules on capital account liberalization? What rules? IMF? What is the role of the WTO? How does one link the two? All of the questions raised above are clearly extremely important and most of them are discussed in the following paper by John Williamson. Mr. Williamson's presentation is based on his lecture and discussion which was delivered on 17 June 1999 at the WTO. The actual text that follows is a transcript of that lecture.
Financial Services Trade, Capital Flows, and Financial Stability
This study argues that trade policies regarding financial services are an important—but often neglected—determinant of capital flows and financial sector stability. Financial services trade liberalisation which promotes the use of a broad spectrum of financial instruments and allows the presence of foreign financial institutions whilst not unduly restricting their business practices results in less distorted and less volatile capital flows and promotes financial sector stability. The study finds significant evidence in favour of this claim through an empirical analysis of GATS commitments in 27 emerging markets. For example countries which experienced financial crisis during 1991-97 show a combined indicator of financial services trade restrictiveness three times as high (= less favourable for financial stability) as countries without a crisis. The study' s findings have two important policy implications. Firstly liberalising international trade in financial services can be a market-based means to improve the "quality" of capital flows and to strengthen financial systems. This would complement other policies including financial regulation. Secondly even in countries where the financial system is weak and where immediate full-fledged financial sector liberalisation is not advisable certain types of financial services trade could be liberalised as such trade strengthens the financial system without provoking destabilising capital flows.
Financial Services and the WTO
This paper analyses the results of the financial services negotiations under the General Agreement on Trade in Services (GATS) at the World Trade Organization (WTO). It shows that the negotiations have contributed to more stable and transparent policy regimes in many developing and transition countries. The wide range of market access and non-discrimination commitments should advance the process of progressive liberalization. The commitments do not compromise the ability of countries to pursue sound macroeconomic and regulatory policies. However other aspects of the outcome do raise some concerns. First there has been less emphasis on the introduction of competition through allowing new entry than on allowing (or maintaining) foreign equity participation and protecting the position of incumbents. Secondly even where immediate introduction of competition was not deemed feasible not much advantage has been taken of the GATS to lend credibility to liberalization programmes by precommitting to future market access.
National Treatment in the GATS
This paper is concerned with three problems in the interpretation of the national treatment obligation in the General Agreement on Trade in Services (GATS). First the precise domain of Article XVII on national treatment has not been clearly delineated particularly in relation to Article XVI dealing with market access. Secondly there is a difference between the text of Article XVII and the structure of the schedules of commitments which makes it difficult to interpret the scope of the national treatment obligation even for identical services supplied through different modes. The final and most complex problem arises in establishing the definition of "like" services and "like" service suppliers. Uncertainty about the precise meaning of the national treatment obligation may undermine the key GATS objective of creating a secure predictable trading environment. Moreover the extent of liberalization implied by the commitments under GATS depends on the precise choice of interpretation.
World Trade Statistical Review
The "World Trade Statistical Review" series provides a detailed analysis of the latest developments in world trade. It will be produced on an annual basis and replaces the series "International Trade Statistics" the WTO's former annual statistical publication.
Services Profiles
"Services Profiles" provides key statistics on infrastructure services i.e. transportation telecommunications finance and insurance for over 150 economies. This series of publications has been integrated into the "Trade Profiles" series since 2016.
Trade Profiles
"Trade Profiles" provides two-pages snapshots of the most relevant indicators on merchandise trade services and intellectual property for over 200 economies including all WTO members.