Multilateral liberalisation of services trade and investment in a globalising world: scope and limitations

Abstract

Conclusion : There are substantial gains, all round, from liberalisation of services trade and investment. International transactions in services tend to be concentrated among developed economies and as, the Australian experience of reform demonstrate, the service sector can provide new sources of productivity growth in higher income economies. There is much to gain from further rounds of deregulation and liberalisation. The modelling results also point to the size of the impediments and the gains to developing countries, from the more efficient internal allocation of resources. At the same time, a number of market access opportunities would arise for developing countries, some of whom already appear on the list of the big exporters and importers. The size of the gains, the scope for both developed and developing countries to gain, the potential for better market access to underpin domestic reform and change, and the intersectoral impacts, all provide the basis for progress in negotiations. There is evidence of significant unilateral policy change in some sectors. The multilateral process helps avoid backsliding on that policy, helps develop multilateral norms on some difficult impediments including regulatory practices (without undermining national sovereignty) and, through the joint action by a number of countries, helps deal with the domestic resistances to policy change. Some of its immediate challenges are various aspects of the negotiating process such as it starting points, as well as the treatment of regulatory policy (including competition policy) and the treatment of safeguards. A critical component of any undertaking on services is likely to be commitments in relation to the fourth mode of supply – the movement people. Commitments in the GATS to this mode are few, and multilateral norms on the important regulatory issues that affect the movement of natural persons are valuable. Additional commitments and the adoption of norms complement each other, since otherwise some commitments could be undone by domestic regulatory practices. Key components are recognition of qualifications, the treatment of temporary migrants and the taxation of income flows. People movement questions, however, are now more complicated to discuss because of the greater weight on national security in policy agendas. New modelling work suggests the gains to including this mode in the liberalisation process will be high. While this mode is often associated with developing country interests, developed countries too will be expected to make requests relating to this mode. Its significance and the mutual interest of many countries in the outcome make progress on mode IV a key component of the final bargain in this Round of negotiations.