trade in services and prospects for global inclusive...
TRANSCRIPT
Trade in Services and Prospects for Global Inclusive Growth
Bernard Hoekman
World Bank
ADBI/ARTNet conference, Bali, October 11, 2010
Context: trade collapse & recovery:now and then
‐50
‐40
‐30
‐20
‐10
0
10
20
30
‐48
‐44
‐40
‐36
‐32
‐28
‐24
‐20
‐16
‐12 ‐8 ‐4 0 4 8 12 16 20 24 28 32 36 40 44 48
Current
Past Mean
Past Median
Source: Prospects Group, World Bank
In part because of stimulus programs and limited recourse to protectionism
Global Trade Alert, Sept. 2010
G20 use of temporary trade barriers
So far so good? Not good enough!• Trade has recovered fast; but employment has not
• Stimulus being withdrawn (reduce debt; deficits)
• Major pressures to rebalance current accounts
• Worries about currency wars/protectionism
• Doha moribund—but trade reform now needed more than in 2001
• Rebalancing – a structural agenda
• Liberalization will:
– boost South‐South trade: where there is higher growth and higher barriers
• help deficit nations improve competitiveness (via lower trade and input costs)
• help surplus countries by increasing domestic absorption must imply greater investment and expenditure on services
• Much of the polict action revolves around services
Where to from here? Focus on services
• Are in a world of trade in tasks, not products– Global value chains
• Some two‐thirds of global GDP = services– This is where the mass of business interest and concern lies—not trade in agriculture or manufactures
• Services are key determinant of competitiveness• Barriers to trade much higher than for goods• Services already on the Doha/WTO table
– General agreement a “topping up” is needed– Services offers a clear way of doing so
Services trade policies in 102 nations
Source: Gootiiz & Mattoo, 2009
ECUGEO POLDOM TTO NLDNIC BGR LTU FINGTMMDG MNG MUS IRLROM AUSKGZ GBRARG SWECOLPER JPNNZL USAZAFKAZ CZEGHA PRY ESPBRA DEUSEN ARMPAK AUTGRCMLI TUR PRTRWA ZMBKHMNGA ALB HUNUZB ITABELRUSUGA DNKHND CHLMAR CANKORCIVCMRKEN MEXCRIBWABOLLSO UKR FRAURYTZAMOZ
DZA VENLKAYEM NAM BLRJORTHANPLMWI TUNBGD LBNEGYVNMDRC CHN PANMYSIDN
PHL
IRNZWEIND
ETH
BHRSAUOMN
KWT
QAT
0.0
20.0
40.0
60.0
80.0
Res
trict
iven
ess
of s
ervi
ces
trade
pol
icy
4 6 8 10 12Log of GDP per capita, 2007
Note: GDP per capita (constant 2000 US$)Total number of countries 102
Services policies by sub‐sector0
1020
3040
5060
70S
ervi
ces
trade
rest
rictiv
enes
s in
dex
GCC SAR EAP MENA AFR LAC OECD ECA
Note: The number of countries 102
Financial Telecom Retailing Transportation Professional
Services and Growth
• Growth driven by increases in the quantity and productivity of capital (K) and labor (L) inputs
• Services are determinants of the productivity of these inputs– Financial sector (intermediation across time)– Human capital (education, health….)
• “Producer” services underpin specialization: allow “splintering” of value chain and ΔTFP through their intermediation role and coordination and communication across time/space
Productivity of services• Productivity growth in services drove much of post‐1995 expansion in US productivity, especially in distribution and financial sectors
• Aggregate productivity differentials across OECD reflect differences in services, not goods industries –especially TFP in business services
• India’s TFP growth in services was 2.4% p.a. between 1980‐2006, double what was achieved in manufactures or agriculture
• (Rate in China was 2%, below other sectors)• The presence of foreign services providers as the measure of services policy is the most robust “international” services variable affecting TFP
• See Francois and Hoekman survey (JEL, 2010)
GATS and Doha• Only limited binding of status quo reforms—incl. OECD (e.g., cross‐border)
• Less emphasis on new entry than on expanding/protecting FDI (mode 3 most liberal)
• Little use of GATS as pre‐commitment device (China a major exception; also other accession countries)
• GATS sector/mode coverage: < 50% for most developing countries; Full national treatment/market access <25%
Why such limited traction?1. Less “need” for trade agreements?
– Much reform implemented unilaterally – FDI has grown 10 times faster than GDP since 1990; reached $15 trillion in 2008, o/w 60% in services
Problem: we do have significant barriers ….
2. Trade negotiation machinery does not work?– Many developing countries have little to demand, except mode 4 (not on table); Many also have little to offer
Problem: does not apply to larger countries
3. GATS rules/lock‐in not perceived to be of great value?– Low expected probability of backsliding – Not effective source of discipline/relevant to firms– Regulatory uncertainty and resistance by regulators
Uncertainty re: costs & benefits
• In addition to standard political economy forces opposing reform (firms, unions) in services have: – Sectoral and “horizontal” regulators (e.g., mode 4)
– NGOs, civil society
• Regulators worry about autonomy and negative spillovers of a market access driven negotiation
• Civil society worries about realization of social objectives, ownership of firms, employment, etc.
Advancing social goals
• Conflicts between efficiency and equity can arise as essential services are liberalized or regulatory standards gravitate towards international levels
• Successful international integration requires not just liberalization, but– appropriate regulation, and
– effective policies to widen access to services to lower income/disadvantaged households/regions
Lessons from experience
• Much of the gains accrue to manufacturing and agricultural sectors – users of services
• FDI is a major channel for gains from services trade– Overall business climate matters
• Cross‐border exports of services depends on IT infrastructure/cost and human capital (skills)
• Social and other complementary policies needed to support reforms (equity goals)
• Weak regulation and legal framework can reduce gains and generate downside risks – incl. market power/rents
Moving forward—internalize lessons
• Change approach in Doha and trade agreements
• Focus on complementary regulatory reform – Better regulation a precondition for liberalization
• Learn from WTO trade facilitation experience – Process of analysis of status quo and country experience
– Explicit understanding that assistance will be provided
– Clear focal point already existed (Kyoto convention; WCO)
– Process of self‐assessment and diagnostic in almost all countries, supported by specialized organizations/expertise (“Annex D entities”)
– Much action already been taken at country/regional level, supported by Annex D entities, RDBs, donors
What could be done? (1)
• Adopt a plurilateral approach limited to critical mass of large players; allow free riding of rest– Started down this path post 2005 Hong Kong
ministerial: plurilateral requests/offers
• Address regulatory concerns by focusing first on national treatment – discrimination– Will not deal with regulatory barriers, but there is
still a lot of outright protectionism; focus on that
What could be done? (2)
• Regulatory cooperation/assistance – outsideWTO– Establish a forum to exchange information and learn from
experiences with regulation/reform (Feketekuty, VoXEU, 2010)
– Put in place mechanisms for regular scrutiny of performance of services (outcomes), regulatory impact assessments/audits
• Allocate more “aid for trade” to services – Invest in transparency: analysis at national level– Help put in place preconditions in source countries for
expanded exports of services– Support regional cooperation (e.g., transport logistics)
TRENDS AND OPPORTUNITIES
• Many developing countries are service exporters
• Besides traditional activities such as tourism, health, information technology and communication services are success stories in a number of countries
• Capital intensive and managerially complex services are also part of the story
• Increasingly creative business strategies to capture specific niches are driving continued growth in services activities
Assessment of a country’s trade potential, and a roadmap for successful opening and export promotion in select services sectors.
GETTING IT RIGHT IS COMPLEX
• Trade agreements are a driver for modernization of services regulatory regime
• Vehicle for expanding service trade and improving competitiveness
• Developing countries confront several challenges:– Addressing knowledge gaps
– Managing the political economy of welfare improving reforms
– Trade policy making in services gives rise to great organizational challenges
– Difficulty of translating existing regulations into the terminology and concepts used in trade agreements
A guide to the organization, formulation, and implementation of trade‐related reforms in the services sector.
GETTING IT RIGHT IS POSSIBLE
• One of the most complex sectors, yet developing countries are successfully confronting negotiations
• There are good practices that can be adopted in negotiations
• The financial crisis did not affect financial systems in countries with high level of liberalization
• Policy responses by developing countries to recent crisis were not constrained by trade agreement disciplines
• Experience shows that developing countries are able to address their concerns and interests when negotiating with OECD countries
• Possible to reach high level of financial integration and maintain sound financial regulations