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Trade Rules in Services: Issues and Problems

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.

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Trade Rules in Services: Issues and Problems

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  1. Trade Rules in Services: Issues and Problems EU-LDC Network Annual ConferenceTrade and Poverty ReductionRotterdam, 30 and 31 May 2001 Carsten Fink, The World Bank

  2. 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.

  3. 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)

  4. 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

  5. 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

  6. 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

  7. 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)?

  8. 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

  9. 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

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