1 - Relevance for Regional Co-operation and Integration - THE GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) Rolf Adlung Trade in Services Division WTO

2 Services: Dominant source of production and employment … (Share in GDP, 1999) Source: World Bank, World Development Report 2000/2001, Washington D.C.

3 … relatively modest role in world trade n Services account for some 20 per cent of total world trade (BOP basis) … but strong momentum Services have been the fastest growing segment of world trade between 1985 and 1999, at average annual rates of over 9 per cent (8.2 per cent for merchandise trade)* The share of developing countries in world services exports increased from 14 to 18 per cent (1985/ /98)* * Source: World Bank, 2001

4 Services trade and development: General expectations The gains from liberalizing services may be substantially greater than those from liberalizing trade in goods, because current levels of protection are higher and because [there would be] spillover benefits from the required movement of capital and labour. (World Bank, 2001). Infrastructural services such as telecommunications, finance and transport are crucial determinants of overall economic efficiency and growth.

5 Challenges for rule-making in services: n Strong link between product and producer (service and service supplier) n Need for local presence of companies and/or persons (modes 3 and 4) n Importance of regulatory (non-price) barriers More scope for trade and regulatory frictions = need for more comprehensive disciplines

6 Assessing trade regimes in services: Relevant considerations nTransparency nStability and predictability n Level of ambition: n Sector scope n Modal coverage n Range of permissible measures n Common frameworks for licensing, certification, etc.

7 n Economic Integration (Article V): Preferential elimination of barriers relating to National Treatment (Art. XVII) n Recognition (Article VII): Elimination of regulatory barriers through recognition of licenses, certificates, etc. n Other Labour Markets Integration Agreements (Article Vbis); Exemptions from Article II; General Exceptions (Art. XIV); prudential carve-out in financial services. GATS provisions allowing for departures from MFN:

8 Food for thought The scope for, and the effects of, plurilateral integration and co- operation vary across sectors and modes of supply.

9 Sector perspective: Infrastructure services, capital- intensive, scale economies: n Financial Services n Communication n Transport Traditionally liberal services: n Distribution n Tourism Strong institutional and/or regulatory differences between jurisdictions: n Business Services n Health-related Services n Education n Other (Environmental Services; Recreation, Culture, Sports; Construction)

10 Modal perspective:

11 Policy perspective: Expectations associated with (exclusionary) arrangements +Reciprocal benefits easier to identify: more effective negotiations +Possible greenhouse effect in favour of local industries + Regulatory cooperation may be easier to achieve

12 … and the risks -Resource implications of negotiating and administering various arrangements -Creation of vested interests opposing more comprehensive liberalization -Inefficiencies: sectoral and economy- wide Is there a middle ground? Regional arrangements coupled with pre- commitments to MFN-based liberalization(?)