Trade in Services: A South Asian Agenda 1 NITYA NANDA
Outline of the Presentation 2 Trade in Services: Some questions Some myths and realities GATS commitments Meaning of GATS commitments Assessment of GATS Liberalization Trade in services and sustainable development Some thoughts Concerns relating to regulation Barriers to trade in international markets What SA Countries Should Do?
Trade in Services: Some Questions Emergence of transnational corporations & development of Information Technology GATS defined Trade in Services by four modes of supply of services Mode 1: Cross Border Supply 3 Mode 2: Consumption Abroad (What barrier? Is it important?) Mode 3: Commercial Presence (Why call investment in manufacturing but trade in services?) Mode 4: Movement of Natural Persons (If it is good in services why it is not desirable in manufacturing?) As per classical definition of trade (in goods) only Mode 1 qualifies for trade in services
Some Myths in Realities Myth: India has gained from trade in services and hence India has gained from GATS Reality: GATS has played little or no role in increasing India s export of services, as neither it has provided new market opportunities nor prevented the emergence of protectionist measures in key markets. India s export in services is driven mainly by technology and business dynamics Myth: Most South Asian countries get huge foreign remittances from theirs workers abroad and hence they have benefitted from Mode 4 of GATS Reality: Very few of these workers have got work permit abroad through GATS which is only about intra-company transfer 4
GATS Commitments Source: Nitya Nanda (2008), Expanding Frontires of Global Trade Rules, London: Routledge
GATS Commitments (Contd.) 6 Uruguay Round First Round of Negotiations Limited liberalization Mode 1: unbound, for technical unfeasibility Mode 2: full or partial, relatively liberal commitments Mode 3: mostly partial Mode 4: unbound in sectoral schedules (least liberalization), commitments limited to movement of professionals and linked to intra-company transfer Reflect political economy and interest of developed countries
Meaning of GATS Commitments Mode 3 is most liberalised Liberalization of Mode 2 is not so important Movement of natural persons is allowed in almost all sectors but they are linked to intra-corporate transferees and movement of highly skilled professionals, essentially to facilitate Mode 3, but an illusion was created that it was for developing countries Mode 1, where developing countries have advantage is not so smooth GATS is Liberlisation of investment rather than trade
Assessment of GATS Liberalization- Does it Benefit? 8 Stiglitz and Clayton (2004) showed that in the first six years following the Uruguay Round, 48 LDCs were worse off by $600 million On the other hand, Winters and and others have pointed towards significant gains from Mode 4 liberalization In practice Mode 4 was not liberalized Mattoo estimated gains from liberalizing telecommunication sector Overall, assessment is difficult since, for most countries, the actual level of openness is more than the UR commitments
Assessment of GATS Liberalization- Does it Benefit? Share of services in total trade had been growing for developing countries till 1997 (17.4%), from a mere 11.8 % in 1980. Falling since 1998 reaching 14.5 % in 2003 Throughout the period, developed countries witnessed a rise in the share of services in total trade Developing countries have been maintaining a deficit in trade in services since 1981 which has widened in recent years, while the developed countries have been maintaining a surplus which has also been growing steadily
Trade in Services and Sustainable Development 10 Trade in services can lead to sustainable development by increasing incomes and access (?) increasing competition, leading to better pricing of products increasing access to better technology Services are key to sustainable development It includes sectors like health, environment, education, water, transport which are treated as public goods In developing countries there is a need to ensure that services such as basic health services are accessible to all at reasonable prices environment is protected and preserved infrastructure investment are made for economic development
Some Thoughts It is well recognised that FDI in manufacturing is less risky than FDI in services, yet we liberalise more in services? Liberalisation, efficiency, exports or imports confusing!- why? Lack of access is due to inefficiency or lack of purchasing power? What is better getting thousands of Bangladeshi patients to India for treatment or a few doctors from India in Bangladesh or a few Indian hospitals in Bangladesh? Liberalization to be accompanied with regulation capabilities?
Concerns Relating to Regulation 12 What should be the appropriate regulation? Private monopoly replacing public monopoly Anti-competitive practices - predatory pricing Whether benefits of liberalization will percolate down to the poor? Suitability of technology to the requirements of individual countries labour-intensive countries and capital intensive technologies
Barriers in International Markets 13 Barriers to outsourcing/cross-border trade Commercial presence requirement Security/data protection issues Anti-outsourcing sentiments Non-recognition of qualifications Cumbersome licensing procedures Security issues Lack of market knowledge
Barriers in International Markets 14 Barriers faced by Professionals Lack of recognition of qualifications and experiences Restrictive work permit/visa regimes Non-transparent/cumbersome administrative procedures Economic Needs Tests/Labour Market Tests Wage Parity conditions Social security contributions without corresponding benefits Nationality/residency/citizenship/registration requirements Quantitative ceiling Requirements to employ locals
What SA Countries Should Do? 15 Integration of services not just for better access in each others markets but for better collective access in global markets Focus more on cross-border provisioning of services and related sharing of knowledge and capacity building Coordination among professional bodies and eventual mutual recognition of qualifications Treat MNP as separate class or category rather than a mode of trade in services and MNP should not be limited to services sector only Collective development of regulations, regulatory standards and sharing of knowledge, experience and capacity building Build a coalition for negotiations at WTO
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