1 / 14

Regionalism in Services

Regionalism in Services. “Regional Trade Agreements & the WTO” WTO Secretariat, Geneva, November 14, 2003. CARSTEN FINK. Examples of RTAs in services. Early agreements: EU NAFTA Newer agreements: MERCOSUR ANDEAN Pact ASEAN US bilateral FTAs (Chile, Jordan, Singapore, Vietnam)

mgaddis
Download Presentation

Regionalism in Services

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Regionalism in Services “Regional Trade Agreements & the WTO” WTO Secretariat, Geneva, November 14, 2003 CARSTEN FINK

  2. Examples of RTAs in services • Early agreements: • EU • NAFTA • Newer agreements: • MERCOSUR • ANDEAN Pact • ASEAN • US bilateral FTAs (Chile, Jordan, Singapore, Vietnam) • More agreements are being negotiated • Post-Cancun proliferation of RTAs?

  3. Why negotiate? • Foster deeper liberalization at home and abroad through reciprocity-based market access negotiations • Enhance credibility of • current trade regime • commitment to future reforms • Regulatory cooperation

  4. Will there be trade preferences? Protection PG PF GATS PM FTAA MERCOSUL T3 T1 T2 Time

  5. Are preferences in services feasible? • Measures affecting services trade are typically not tariff-like instruments, but: • Limitations on entry of firms • Foreign equity limitations • Quotas on outputs and foreign service workers • Requirements regarding the legal form of establishment • Regulatory measures • Can there be exclusionary rules of origin?

  6. Example of preferences in services • Bilateral air service agreements: preferential allocation of output quotas • Preferential relaxation of foreign equity limitations (e.g., NAFTA) • Preferential access to certain regions within a country (e.g., Hong Kong-China FTA) • Preferential recognition of foreign qualifications (e.g., EU mutual recognition)

  7. Welfare effects of trade preferences • Lesson from goods trade: • Trade creation: consumers gain from lower prices • Trade diversion: loss of fiscal revenue, possibly loss of quota rents • Preferential liberalization in services is more likely to lead to welfare gains: • No (static) cost of trade diversion, as measures do not generate benefits for the importing country • “Go with the Living Ism ”?

  8. But gains are larger from MFN liberalization • Non-preferential liberalization offers access to the most competitive service providers • MFN liberalization avoids complexity for negotiators, administrators and businesses • Other gains from trade (economies of scale, more intense competition, knowledge spillovers) are likely to bigger if liberalization is non-discriminatory

  9. And trade diversion can be costly in a different way • Due to the importance of location-specific sunk costs in services: • second-best providers may benefit from first mover advantages • sequence of liberalization matters, benefits from eventual MFN liberalization may be smaller

  10. Why then negotiate regionally? • Political imperative • More efficient bargaining • Negotiations may be less complex • Less scope for free riding on MFN principle • Certain forms of regulatory cooperation are more feasible and desirable within a smaller group of countries (regulatory harmonization, mutual recognition). • Innovation in rule-making

  11. Rules of origin (denial of benefits) • From an economic perspective a liberal rule of origin is to be preferred, but then regional liberalization approaches MFN liberalization • Possible approaches: • Local incorporation • Local incorporation and substantial business operation • Domestic ownership and control

  12. Example 1: Mexico’s NAFTA commitment in financial services FDI in millions of US$ 25,000 US Includes investments of U.S. based European banks Spain 20,000 Holland Canada 15,000 10,000 5,000 0 1994 1995 1996 1997 1998 1999 2000

  13. Example 2: Rules of origin adopted in Hong Kong-China FTA • Detailed Annex on “Definition of Service Supplier and Related Requirements.” Criteria for Hong Kong service suppliers include: • Incorporation and possession of valid operating license • Substantive business operations for 3 years of more (5 years for certain services) • Must have paid profit tax in Hong Kong • More than 50 percent of employed staff must be local residents

  14. What have RTAs achieved so far? • Few commitments beyond status quo • Where regional commitments go beyond GATS, few actual preferences exist • Some innovation in rule-making • Some success in promoting regulatory cooperation. • Will future agreements achieve more?

More Related