- Relevance for Regional Co-operation and Integration -

1. THE GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) - Relevance for Regional Co-operation and Integration - 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 • 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 (1985/89 - 1995/98)* * 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: • Strong link between product and producer (service and service supplier) • Need for local presence of companies and/or persons (modes 3 and 4) • 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 • Transparency • Stability and predictability • Level of ambition: • Sector scope • Modal coverage • Range of permissible measures • Common frameworks for licensing, certification, etc.

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

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: • Financial Services • Communication • Transport Traditionally “liberal” services: • Distribution • Tourism Strong institutional and/or regulatory differences between jurisdictions: • Business Services • Health-related Services • Education • 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(?)