Download Trade Rules in Services: Issues and Problems - EU-LDC

Trade Rules in Services:
Issues and Problems
EU-LDC Network Annual Conference
Trade and Poverty Reduction
Rotterdam, 30 and 31 May 2001
Carsten Fink, The World Bank
Services Trade and Overall
Economic Performance
• Financial services are key to an efficient
transformation of savings into investment
• Transport services contribute to the efficient
distribution of goods domestically and internationally
• Telecom services are at the heart of the dissemination
of information and knowledge in the economy
Well functioning service industries contribute to
overall economic efficiency and growth. Ceteris
paribus, the poor are likely to benefit.
Gains from Services
Liberalization
• Traditional gains due to comparative advantages
• Many services are inputs into production. High costs
of producer services can lead to negative effective
rates of protection
• Services liberalization is often accompanied by the
breakup of public monopolies
• Service providers can reap economies of scale and
scope (especially important for small economies)
Gains from Services
Liberalization (#2)
• To be trade internationally, many services require the
movement of production factors (FDI, temporary
movement of individual service providers)
• Services liberalization and growth:
–
–
–
–
Increased investment
Greater diffusion of knowledge
Risk of brain drain
Empirical evidence points to positive link
Accomplishing Successful
Reform: Domestic Liberalization
• Eliminate barriers to cross border trade
• Remove barriers to establishment trade
– Greater benefits from competition than change of ownership
– Are there good reasons to limit entry by policy?
• Credibility of services reforms
• Strengthen domestic regulations to address market
failures and advance social objectives
• Develop competition policy to address private abusive
practices
Accomplishing Successful
Reform: Foreign Liberalization
• Movement of individual service providers
– Quotas
– Visa requirements
– Qualification and licensing requirements
• Consumption abroad
– Example: health services, need portability of health
insurance
Managing Conflicts Between
Equity and Efficiency
• Services liberalization often lowers prices and
improves the poor’s access to services (e.g., telecoms)
• Service reform may entail elimination of (cross-)
subsidies.
• Private firms may “cherry pick”.
Need for universal service regulation:
– Universal service funds, subsidy schemes, vouchers
– Services roll-out obligations in licenses (beauty contests)?
Other Effects of Services
Liberalization on the Poor
• Need to “locate” the poor.
– Consumption effects
– Employment effects
– Income effects
• Effects on government revenues and spending
How Can the GATS help?
• Unleash liberalization through an exchange of
specific commitments
– So far, limited use has been made of reciprocal
negotiations
• Pre-commit to future reform
• Gain credibility by binding policy
• Disciplines on regulatory measures to ensure
effective market access
Specific regulations that enhance poor people’s
access to services are largely the domain of domestic
policy