Other research stresses the importance of studying not only sectoral commitments in regional agreements but also the offsetting ‘horizontal’ restrictions.
The lack of progress on making international commitments is a problem for policy makers who want that process to offer support for their domestic programs. It looks like they’ll be waiting ‘till the cows come home’. But it’s also a problem for the WTO because services are not offering much grunt there either.
How to get out of this vicious circle? The answer is to think in different ways about what services offers the WTO and vice-versa. It’s not about disassociating services from the WTO, but it is about cutting the link with the single undertaking in the WTO.
But first, what is the problem? Why are there so few commitments?
The politics of services reform differs from that of goods. Additional foreign market access is not required as part of a big political bargain to offset the local resistance to reform in services. Services are largely about FDI. When barriers are removed, local activity (when that mode does matter) can actually increase, not decrease as in tariff reform.
Furthermore, the demand for services reform is in many cases led by service sector businesses themselves, who have identified unnecessary regulation or rules that are high-cost relative to their benefits. These businesses are seeking better policy to remove impediments to their competitiveness.
Other reasons for the lack of commitments apply to FTAs. It’s hard to define origin in a way that supports discrimination. Market failures are not linked to the origins of services. Regulatory practice, if there is a problem of information for example, should apply uniformly to domestic and foreign providers. Offering special conditions for particular foreign suppliers could risk being stuck with a high cost provider.
Barriers to services transactions can be ‘at the border,’ such as whether offshore providers can enter and the terms on which they can set up. But often more important are regulations that affect operations, and these apply equally to domestic firms; that is, they restrict the entry of all firms into a market and raise the costs of their operation.
Reform means identifying the problem that a regulation is supposed to solve and replacing that regulation with a more efficient measure. Well-designed domestic institutions can lead this process.
In that case, let them do so and remove services from the single undertaking in the WTO. This would shift the focus of international cooperation to transparency and to capacity building to support that institutional reform.
Can the WTO still help services reform? It can agree on and promote the key principles for services reform, document current and actual policy and bind it, accept reports and schedules of reform in services in the WTO process and submit to the trade policy review mechanisms (or even the dispute settlement process) members’ concerns about the manner of implementation of reforms in a particular country. The WTO can also promote international disciplines in yet unchartered services waters — eg. subsidies and domestic regulation — in ways that go beyond transparency to include discussion of what is ‘necessary’ and ‘least trade restrictive.’
Can services reform help the WTO? Critics of breaking the link are concerned that there is less ‘on the table,’ which complicates bargaining for agriculture and manufacturing. But services negotiations are not ‘calling the cows’ as it is. Better to encourage economies to get on with their own reforms, make policy transparent and cut costs of services inputs for other traded sectors where the adjustments are going to be significant following the conclusion of the Round. Use services reform, in other words, to cut the political cost of goods reform.
Jane Drake-Brockman is Principal Consultant, JDB Solutions, Hong Kong and a Director of the Australian Services Roundtable
Christopher Findlay is Professor of Economics and Head of School at the University of Adelaide and a member of Australia’s Pacific Economic Cooperation Committee.
Authors: Jane Drake – Brockman, Trade and Environment Solutions, Hong Kong, and Christopher Findlay, University of Adelaide
The GATS’ contribution to services reform is ‘negligible.’. This is the assessment by Joe Francois and Bernard Hoekman in a recent paper [LINK below](‘Services Trade and Policy’, Journal of Economic Literature, September 2010, XLVIII (3)) where they argue most services reform has been unilateral.
Regional agreements appear to have wider coverage than the GATS but their contribution with respect to actual policy change and implementation is difficult to assess. Other research stresses the importance of studying not only sectoral commitments in regional agreements but also the offsetting ‘horizontal’ restrictions.
The lack of progress on making international commitments is a problem for policy makers who want that process to offer support for their domestic programs. It looks like they’ll be waiting ‘till the cows come home’. But it’s also a problem for the WTO because services are not offering much grunt there either.
How to get out of this vicious circle? The answer is to think in different ways about what services offers the WTO and vice – versa. It’s not about disassociating services from the WTO, but it is about cutting the link with the single undertaking in the WTO.
But first, what is the problem?, Wwhy are there so few commitments?
The politics of services reform is differs from that in goods. Additional foreign market access is not required as part of a big political bargain to offset the local resistance to reform in services. Services are largely about FDI. When barriers are removed, local activity (when that mode does matter) can actually increase, not decrease as in tariff reform.
Furthermore, the demand for services reform, iais in many cases, are led by service sector businesses themselves, who have identified unnecessary regulation or rules which that are high – cost relative to their benefits. These businesses are seeking better policy to remove impediments on their competitiveness.
Other reasons for the lack of commitments apply to FTAs. It’s hard to define origin in a way that supports discrimination. Market failures are not linked to the origins of services. Regulatory practice, if there is a problem of information for example, should apply uniformly to domestic and foreign providers. Offering special conditions for particular foreign suppliers could risk being stuck with a high cost provider.
Barriers to services transactions can be ‘at the border,’, such as whether offshore providers can enter and the terms on which they can set up. But often more important are regulations which that affect operations, and these apply equally to domestic firms;, that is, they restrict the entry of all firms into a market and raise the costs of their operation.
Reform means identifying the problem which that a regulation is supposed to solve and replacing that regulation with a more efficient measure. Well – designed domestic institutions can lead this process.
In that case, let them do so and remove services from the single undertaking in the WTO. This would shift the focus of international cooperation to transparency and to capacity building to support that institutional reform.
Can the WTO still help services reform? It can agree and promote the key principles for services reform, document current and actual policy and bind it, accept reports schedules of reform in services in the WTO process and submit to the trade policy review mechanisms (or even the dispute settlement process) members’ concerns about the manner of implementation of the reform in a particular country. The WTO can also agree and promote international disciplines in yet unchartered services waters — eg. subsidies and domestic regulation —, in ways that go beyond transparency to include discussion of what is ‘necessary’ and ‘least trade restrictive.’.
Can services reform help the WTO? Critics of breaking the link are concerned that there is less ‘on the table,’ which complicates bargaining for agriculture and manufacturing. But services negotiations are not ‘calling the cows’ as it is. Better to encourage economies to get on with their own reforms, make policy transparent and cut costs of services inputs for other traded sectors where the adjustments are going to be significant following the conclusion to the Round. Use services reform, in other words, to cut the political cost of goods reform.
Jane Drake – Brockman is Principal Consultantmanaging director, of JDBTrade and Environment Solutions, Hong Kong , a Visiting Fellow at the Centre for Arab and Islamic Studies at the Australian National University and aexecutive D director of the Australian Services Roundtable
.
Christopher Findlay is Professor of Economics and Head of School at the University of Adelaide and a member of Australia’s Pacific Economic Cooperation Committee.