Trade in Services and the Doha Development Agenda

Transcription

1 Trade in Services and the Doha Development Agenda World Bank Institute 10 October, 2006 OVERVIEW Will Martin World Bank

2 Three questions: I. What is trade in services? II. What are the barriers and how big are the gains from liberalization? III.What are the priorities for services negotiations in a development round? 2

3 What are Services? 1. Business services 2. Communication services 3. Construction services 4. Distribution services 5. Educational services 6. Environmental services 7. Financial services 8. Health-related and social services 9. Tourism and travelrelated services 10. Recreational, cultural and sporting services 11. Transport services 3

4 A Wide Definition of Trade MODES 1. Cross-border Trade 2. Consumption Abroad 3. Commercial Presence 4. Movement of Natural Persons EXAMPLE Software, insurance or telediagnosis from country B into A A s resident obtains hospital treatment or education in B Bank, telecommunications firm or hospital from B sets up foreign direct investment (FDI) subsidiary in A Engineer or doctor from B provides services in A 4

5 Services are becoming more important Figure N 1: Trade in services has grown faster than trade in goods- (compound growth, 1985=1) Goods Services and developing countries share in world exports have increased, Per cent GOODS SERVICES

6 Regional Distribution of Business Services Exports In Billion US Dollars Africa and the Middle East South Asia LAC East Asia and the Pacific OECD Source: IMF Balance of Payments Statistics; Note: -The Business Services category includes Total Services minus Transportation, Travel and Government Services. Alternatively, Business Services consist of: Communication, Construction, Insurance, Financial, Computer & info, Other business, Personal, cultural and recreational services, as well as Royalties and License fees. 6

7 Average Growth Rate of Exports of Business Services for Selected Countries, During India Israel 28% 43% Dominica Brazil M auritius 19% 20% 20% Nicaragua Estonia Nigeria Romania Australia China United States 11% 11% 11% 15% 14% 14% 13% Canada Barbados 8% 11% Jamaica Peru Euro Area Argentina Ghana 6% 5% 4% 7% 6% Japan 1% Source: IMF Balance of Payments Statistics 7

8 II. Barriers and Gains Figure 1: Services liberalization indices: Telecom s and financial services South Asia (3) E A P ( 5 ) S S A /M N A ( 1 7 ) H igh Incom e (26) F in a n c ia l In developing countries, significant liberalization S e rbut v ic e san uneven pattern E C A ( 3 ) LAC (18) S S A /M N A ( 4 2 ) E C A ( 3 ) South Asia (5) E A P ( 8 ) LAC (21) H igh Incom e (21) T e le c o m s Source: M attoo, R athindran & Subram anian. (2001). 8

9 Successful Reform in Services is Associated with More Rapid Growth Linear prediction G U Y D N K G r o w th rate (adjusted fo r o th er facto rs) TUN THA B R A U R Y M A R TUR K E N N IC C R I LKA C Y P D O M IN D M L TZ C O L P E R JAM ZAF H NMD W I V E N IS L S G P APC RAH GN L EB GO YL K O R P R T G R C P H L M Y S N L D M E X N Z L SW S L V E G B R NU OS A C A N B E L AFRA U T F IN E S P A U S IT A C H E E C U ID N A G O 1 C o m p o site se rv ic e s lib e ra liz a tio n in d e x 8.5 Source: Mattoo, Rathindran and Subramanian (2005) 9

10 Services policy also affects the size and pattern of trade in goods High Cost of Telecommunications Penalizes Trade, Especially in Differentiated Goods homogeneous reference differentiated Note: The chart is based on 1999 data and uses the Rauch classification of goods. 10

11 Welfare Gains from a 3% Increase in Developed Countries' Temporary Labor Quota Unskilled Labor Skilled Labor 100,000 80,000 60,000 40,000 20,000 0 Developed Note: Data in million US$ Rest of the world Source: Walmsley and Winters (2005) 11

12 International Engagement: Trade Negotiations Three benefits: Deeper liberalization through reciprocal exchange of concessions Credibility through binding commitments Regulatory cooperation 12

13 GATS: General rules The key general ( unconditional ) obligations are: Most-Favoured-Nation (MFN) treatment Transparency obligations 13

14 Degree of market opening - Limitations on MA and NT Limitations on market access (MA) Quota-type and similar restrictions (e.g., limitation on the number of foreign hospitals; limitation on foreign capital participation) Limitations on national treatment (NT) Less favourable treatment granted to foreigners (e.g., subsidies reserved for national hospitals) 14

15 Format of GATS Schedules of Specific Commitments Sector or subsector Modes of Supply 1. Cross border 2. Consumption abroad Limitations on Market Access Limitations on National Treatment Additional Comments 3. Commercial presence 4. Presence of natural persons 15

16 The State of WTO Services Negotiations Ambitious requests Disappointing offers Stagnant rules negotiations Limited developing country participation 16

17 Harnessing International Negotiations for Development Domestic reform priorities must inform liberalizing commitments Market access priorities must shape negotiating proposals 17

18 Domestic Reform Priorities must Inform Liberalizing Commitments Identifying the reasons for deferring liberalization Regulatory inadequacies Adjustment costs Versus Political economy (e.g., in legal and retail) 18

19 Domestic Reform Priorities must Inform Liberalizing Commitments Designing the reform program Emphasizing competition and not just a change of ownership Ensuring effective regulation to remedy market failure and achieve social goals 19

20 Effective Regulation I. To remedy informational problems (e.g., in financial and professional services) To remedy market power (e.g., in transport and energy services) To achieve social objectives (e.g., universal access in transport, telecom, financial and health services). 20

21 Regulation to Protect Consumer Interests 25 Port liberalization and Breakup of Private Carrier Agreements: Estimated Reductions in Liner Transport Prices equivalent to savings of $2,063 million equivalent to savings of $850 million 8.27 Liberalization of port services Breakup of private carrier agreements 21

22 Questions that remain How far should trade liberalization be conditioned on strengthened regulation? How much is to be gained from eliminating all barriers to entry/ownership when some is already permitted? Would liberalization improve access to essential services for the poor, and if not, what must be done? 22

23 Precommitment can Enhance Credibility COUNTRY PRECOMMITMENT TO TELECOM LIBN LATIN AMERICA Argentina No restrictions as of November 8, 2000 Venezuela No restrictions as of November 27, Cote d Ivoire Mauritius South Africa India Korea China AFRICA Monopoly until 2005, no restrictions thereafter, Monopoly until 2004, no restrictions thereafter. Monopoly until 31 December 2003: thereafter duopoly and authorities will consider the feasibility of more licenses ASIA Review the subject of opening up of national long-distance service in 1999, and international services in Will raise foreign equity participation in facilities based suppliers. Foreign investment limit from 35% to 49% in Geographic restrictions removed by

24 Market Access Priorities and Negotiating Proposals Cross-border trade Presence of natural persons 24

25 Inadequate GATS Commitments in Mode -1 Mode 1 commitments in various services (as a percentage of total WTO Membership) Audio Visual 6% 3% 90% R&D 14 % 3% 83% Medical & dental 13 % 9% 78% Distribution services 10 % 17 % 73% Financial data processing softw are 24% 3% 73% Advertising 21% 11% 67% Data Base 26% 9% 65% Full Legal Accounting 9% 16 % 26% 19 % 65% 64% Partial Architectural Computer hardw are consultancy 25% 29% 11% 8% 64% 63% None Management consulting 28% 10 % 62% Data processing 28% 12 % 60% Softw are Implementation 30% 12 % 59% Online info & data base retrieval 16 % 26% 57% Tourism 38% 13 % 49% 25

26 Options to Secure Openness of Cross- Border Trade in Services Option 1: Targeted Commitments for Cross-Border Trade in IT and BPO Services Option 2: A Horizontal Commitment To Liberalize Cross-Border Trade in all Except a Narrow Range of Services 26

27 Options for Liberalizing Mode 4 Emphasis in multilateral negotiations on intra-corporate and contract-based movement of the skilled Contract-based movement Likely to be more desirable, because temporary And may be easier to liberate from restrictive immigration and labor market regulations (Streamlined visas and no quotas). Unskilled movement through bilateral cooperation 27

28 Why has Reciprocity not Worked? Inherent difficulty in negotiating services liberalization Inadequate regulatory reassurance Inertial negotiating process 28

29 Inadequate Regulatory Reassurance Regulatory freedom, e.g., mode 1: gambling Regulatory strengthening, e.g., mode 3: financial services Regulatory cooperation, e.g., mode 4 29

30 Inertial Negotiating Process Three inter-related issues What services sectors do Members schedule? Sector 30

31 Three inter-related issues 1. What services sectors do Members schedule? 2. What obligations do they assume? Sector Limitations on Market Access Limitations of National Treatment 31

32 Three inter-related issues 1. What services sectors do Members schedule? 2. What obligations do they assume? 3. How do they negotiate commitments? Sector Limitations on Market Access Limitations of National Treatment 32

33 Example of how Elements of I, II and III may be Combined What services What obligations Negotiating process Existing approach Specified services Variable Request and offer Intermediate Specified services + selected other Nondiscrimination only Collectively agreed model Advanced All services except agreed exceptions Full market access and national treatment Collectively agreed model 33

34 Example of a Model Schedule for Modes 1 and 2 What services? A range of services, ideally at the 2-digit level, excluding financial services that involve capital mobility and transport services What commitments? Non-discrimination 34

35 Example of a Model Schedule for Mode 3 What services? A range of services, where regulatory inadequacy would not undermine gains from opening: business services, distribution, environmental, Plus phased commitments where regulatory inadequacies can be remedied in a predictable time-frame Provision for diagnostics and remedial assistance 35

36 Example of a Model Schedule for Mode 4 What commitments? Access + facilitated entry commitments linked to: Source compliance with conditions (screening, repatriation, curb illegality) Level of unemployment in host What types of movement? Contractual service providers and intracorporate transferees for one year 36

37 Complementary Global Efforts Devising sound policy Strengthening the regulatory environment Enhancing developing country participation in international standard setting Ensuring access to essential services in the poorest areas 37

38 Conclusion No new restrictions, especially on cross border trade Precommitment to reform and regulatory assistance Greater scope for temporary migration with source country obligations 38