South Centre Workshop onTrade in Services: South Centre Workshop on Trade in Services Trade in services: from a private sector perspective Linda Schmid Trade in Services Officer, ITC March 22, 2006 Geneva, Switzerland


Trade in services trends: Trade in services trends Increasing proportion of: Gross domestic product: 35% to 85% Employment: 50% or higher Foreign direct investment: 60% Share of world trade: 25% Services trade surplus in some countries offsets goods deficit Value added to manufacturing & agricultural production The diversity of services includes: accountancy audiovisual, distribution, education, energy, engineering & construction, environmental, express delivery, financial, health, information technology, legal, telecommunications, transportation, travel and tourism, and professional and business services.


Importance of services to economy: Importance of services to economy Financial: expansion of credit, lower cost of borrowing, better risk-sharing, adequate capital deployment Telecommunications: diffusion of market knowledge & intermediate input to production Transportation & distribution: movement of goods and services nationally and across borders Accountancy, legal, computer: lower transaction costs Education & health: building and sustaining the knowledge and well-being of a nation’s people


Telecommunications as the conduit for international services trade…: Telecommunications as the conduit for international services trade… Provides access to foreign markets Means to find, market, and service foreign customers Quality, cost, access to telecom are determinants of competitive position of service firms in least developed and developing countries


Importance of telecommunications reflected in structure of GATS : Importance of telecommunications reflected in structure of GATS The GATS Telecom Annex ensures service providers’ access to and use of public telecom transport networks and services, transparency in use of the services, and a commitment to technical cooperation The Basic Telecom Services Agreement provides for scheduled commitments in, for example, voice telephony, data transmission and privately leased circuits The Telecom Reference Paper has a heavy focus on Telecom networks interconnection with technical, procedural and commercial disciplines and the provision of an independent regulator


Modes of supply from a business perspective: Modes of supply from a business perspective Cross-border Consumption abroad Commercial presence / establishment / investment regime Temporary movement of people


How a Pakistani design firm uses all modes of supply in service delivery: How a Pakistani design firm uses all modes of supply in service delivery Associated offices and offshore business partners outsource design development work to firm via cross border The Pakistani firm serves numerous foreign clients in Pakistan via consumption abroad The firm’s representative office in Dubai exemplifies their use of commercial presence The company’s staff travel to find, market, and serve clients abroad via temporary movement Interplay between modes requires a broader view of commercially meaningful commitments


Services trade impediments may take the shape of government “measures” or regulatory barriers at the national & sub national level in domestic or foreign markets:: Services trade impediments may take the shape of government “measures” or regulatory barriers at the national & sub national level in domestic or foreign markets: Law Regulations Administrative rules


Establishment impediments: Indonesian financial institutions interested in Bangladesh, Sri Lanka, or Middle East markets may face, for example: Excessive capital requirements Compliance with overly burdensome disclosure rules Restrictions on repatriation of profits Ukranian construction conglomerate interested in foreign markets may face: Discriminatory registration or licensing procedures Excessive indemnity requirements Firms may face other investment measures that are applied in a discriminatory manner vis-à-vis domestic or other foreign firms. Establishment impediments


Such measures or rules are important because they influence the bottom line for business:: Such measures or rules are important because they influence the bottom line for business: Where firms locate Who and how many employees they hire Which clients they serve How they access capital Cost of doing business Competitive position


Transparency and objectivity in domestic regulation is critical to service firms: Transparency and objectivity in domestic regulation is critical to service firms Method of creation, publication, administration, adjudication of rules: Enables business to understand the rules governing commercial practices Influences time, quality, and cost of providing services Affects the ability to compete vis-à-vis domestic and foreign firms


Transparency Obstacles: Botswanan firms may encounter administrative rules and procedures that are difficult to obtain and understand in Uganda, Tanzania, or Rwanda, for example. Namibian firms may experience excessive delays or arbitrary treatment in licensing or accreditation procedures in Uganda, Tanzania, Rwanda, or the UAE, for example. Transparency Obstacles


GATS Article VI Domestic Regulation: GATS Article VI Domestic Regulation Contains significant provisions on the administration of domestic regulation where commitments are made Allows for the development of additional disciplines for qualification requirements and procedures, technical standards and licensing requirements


What can service firms or associations do to help negotiators?: What can service firms or associations do to help negotiators? Put together a trade barriers list: Identify export markets of interest Highlight specific obstacles in specific markets Explain how those problems affect the bottom line Prioritize the obstacles and prioritize the markets Explain how the industry is developing, what new service products are expected, and what potential trade obstacles might be on the horizon


Example of Private Sector Service Export Markets of Interest: Example of Private Sector Service Export Markets of Interest


What can regulatory institutions do to assist negotiators?: What can regulatory institutions do to assist negotiators? Explain the scope of the current regulatory framework Identify specific government measures, law, regulation, administrative rules containing restrictions and limitations on foreign investment Explain the direction of regulatory oversight


Slide17: Insurance Commissioners may already be contemplating changes in market oversight: reducing cession requirements lowering restrictions in sub sectors that are poorly served Transportation regulators may already be working on a regional basis consulting with neighboring regulators to reduce obstacles on important routes working to attract investment in infrastructure Environmental regulators may be working to establish vibrant environmental services keenly aware of obstacles at the regional level that impede firms understanding of priorities in sanitation, air quality, and soil, for example All should provide insight on the transparency & objectivity of market oversight Regulatory Insight


Slide18: Intensify tripartite services trade dialogue


What can public sector due to involve private sector in trade policy development?: What can public sector due to involve private sector in trade policy development? Hold public hearings: Valuable "demand pull" device to drive private sector input Individual firms and services associations participate Facilitates parliamentary or inter-ministerial consideration of services trade issues Invigorates trade policy development process


GATS: what influence will negotiations have on your market? Consider:: GATS: what influence will negotiations have on your market? Consider: Current degree of existing market openness as a reflection of national law, regulation, and administrative practice, for example Transparency, objectivity and resource endowment of services regulatory institutions National service firms must consider constraints faced in export markets of interests. Can these be eliminated through trade negotiations to remove obstacles to firms’ growth ? Existing GATS schedules of WTO members will to some degree indicate where obstacles remain Due diligence would also require examination of law, regulation, and administrative practice in foreign markets of export interest in those sectors where national firms can effectively compete


Slide21: Interplay between Agreements Important


Slide22: UMA COMESA/EAC/IGAD ECOWAS/UEMOA MRU ECCAS/CEMAC CEPGL SADC/SACU IOC CEN-SAD Source: United Nations Economic Commission for Africa - Asia (2002) Entire trade regime will affect business


Slide23: After negotiations: implementation services@intracen.org