Services Liberalization Research Articles

Does services liberalization affect manufacturing firms’ export performance? Evidence from India

This paper investigates the relationship between the reform of energy, telecommunications and transport services in India in the mid-1990s and manufacturing firms’ export performance. The empirical analysis relies on exogenous indicators of regulation of Indian services sectors and detailed firm-level data from India in the 1994–2004 period. I find that the reform of upstream services sector has increased the probability of exporting and export sales shares of firms producing in downstream manufacturing industries. The results suggest that the effect of services liberalization on manufacturing firms’ export performance is stronger for initially more productive firms. These empirical findings are robust to alternative econometric specifications that control for other reforms, industry, firm characteristics and that deal with potential reverse causality concerns.

How to Design Trade Agreements in Services: Top Down or Bottom Up?

This paper deals with claims, recently raised in various circles, that structural faults in the General Agreement on Trade in Services (GATS) have prevented WTO Members from advancing services liberalization under the Agreement. The GATS is generally associated in this context with a bottom-up (positive-list) scheduling approach where the sectors on which trade commitments are undertaken are selected individually. This is claimed to be less efficient, in terms of liberalization effects, than alternative approaches under which everything is considered to be fully committed unless specifically excluded (top-down or negative listing). However, a closer look at services negotiations conducted in various settings, including the Doha-Round process, WTO accession cases and different types of regional trade agreements, suggests that such structural issues have limited, if any, impact on the results achieved. What ultimately matters are not negotiating or scheduling techniques, but the political impetus that the governments concerned are ready to generate.

Trade in Service Agreement (TISA), a Trial for stalemate WTO/DDA in Maritime Transport

The Trade in Service Agreement (TISA), a new plurilateral service agreement and a prominent substitute negotiation for stalemate DDA negotiations has been discussed by the participating 22 countries including Korea, USA, EU countries, Japan, and other countries since 2012. In maritime transport services, we could recognize a confrontation between European participants asserting full liberalisation of feeder services and transportation of transport equipment within domestic water of member countries, and Asian participants and American participants protecting cabotage activities. Even though the discussion over cabotage issues is becoming severer, we find a progress on liberalisation of maritime transport, especially commitment draft of the United States at land-side transport services, and new definition on maritime offshore services by Norway.

Interview with Robert M. Stern, Professor Emeritus of Economics and Public Policy, University of Michigan at Ann Arbor; Visiting Professor, Goldman School, University of California-Berkeley

In this interview with Professor Stern, he presents an analysis of the BRICS countries’ abilities to recover from their recent economic downturns. A further look at the BRICS involves services liberalization, free trade agreement efforts, and potential impacts (as analyzed using the Michigan Model of World Production and Trade). The interviewee also discusses the World Trade Organization’s efforts, regional inequalities, and multinational company labor.

A Dialogue of the Deaf? Conflicting Discourses over the EU and Services Liberalisation in the WTO

Research Highlights and AbstractThe role of the European Union (EU) in services liberalisation—and the impact thereof on the provision of services of general interest—has been highly contentious both globally and in the EU. Besides other policy issues, services liberalisation contributes to make the EU a ‘conflicted trade power’ ( Meunier and Nicolaïdis 2006 ). The study of conflicting discourses and, in particular, the EU's responsiveness to criticism towards the conduct of its trade policy can help to understand the legitimacy issues the EU has to face better than approaches focused on negotiating positions shaped. The study finds that the EU's trade policy is characterised by continuity in spite of the a) potentially various ideological profiles of EU Trade Commissioners b) in the face of contention by civil society, c) external events such as the global financial crisis and the EU debt crisis. However, specific institutional settings can prompt political responsiveness from the Commission in a greater extent. In the European arena, unlike in the more loosely structured global arena, the existence of a parliamentary debate and formal as well as informal contacts with organised civil society (NGOs, interest groups and unions) constrain the EU Commission to more discursive responsiveness and provides for better accountability.This article examines interactions between two conflicting discourses over the EU, public services and negotiations during the WTO Doha Round (2001–2012): on the one hand, the discourse of the anti-GATS transnational advocacy network, and on the other, that of the two EU Trade Commissioners. Conducting a frame analysis in a discursive institutionalist perspective, the eventfulness of political interactions is found to be more important than Commissioners' personal views, but differentiated institutional settings are even more crucial: the presence of a parliamentary arena in the EU arena, in particular, constrains Commissioners to engage with the discourse put forward by its critics; whereas in the global arena they tend to stick to their own framing of services liberalisation as a win-win process. The stalling of the Doha Round and the rise of the debt crisis have brought about new ways of framing threats related to the EU's trade policy.

Trade in tourism services: Explaining tourism trade and the impact of the general agreement on trade in services on the gains from trade

The article addresses two questions related with tourism as a service trade. Can tourism be explained as other export activities? Does service liberalisation have a positive or negative impact on tourism receipts in destination countries? Previous research has either focused on the demand side factors (i.e. factors of demand in the origin countries) or on tourism as a long-run factor of economic growth. The research shows that a complementary perspective such as that offered by trade in a supply side perspective can render additional insights towards understanding tourism. This approach can explain why countries have absolute and comparative advantage. Another finding is that tourism as an export can be explained by some of the same destination factors that explain other service exports. Using different panel estimators the importance of supply side factors that are to some extent exclusive to tourism are demonstrated: the general price competitiveness of the destination, tourism infrastructure and the provision of safety. The econometric models also confirm the relevance of other conventional explanatory factors of trade in services such as GDP per capita and internet usage. The last part of the article analyses the welfare gains from trade under the general agreement on trade in services (GATS). The revenue (tourism receipt) effect is decomposed into a volume (arrival) and price effect. Results suggest that liberalisers under the GATS gained especially from a volume effect with average higher growth rates in the number of arrivals. There is also found to be a positive effect on the average income earned per tourist from being a liberaliser.

Freedom to Provide Services in European and Croatian Law

Paper analyses the freedom of provide services, recent judicial practice and trends of developing since “ Bolkenstein directive” until today. Directive was suggested with purpose of eliminating obstacles in services area. It provoked controversies not only in EU member states but also in wider public. Previously to second reading of Directive on Services (July 2006) two year work preceded since the Committee published the draft of the Directive. Changes proposal is a balance between liberalization of services and preservation of “ European social model” . Directive determines general legal frame in which measures of harmonization are used, along with administrative cooperation and development of treatment codex in certain areas. Most important novelty brought by the Directive is changed principle of “ country of origin” in “ freedom to provide service” .

Multilateralism and Regionalism from an American Perspective: Parallels and Contrasts with the Langhammer Vision

AbstractThe paper discusses various milestones in the process of multilateral trade negotiations, pinpoints current challenges facing the world trading order, and proposes possible ways out of the persistent impasse. Hufbauer argues that the success of the multilateral approach is at least partly because the GATT departed from the strictly unconditional definition of the most-favored nation (MFN) rule in the late 1970s already. Regional agreements such as NAFTA complemented, rather than hindered, multilateral trade liberalization in the past. The political economy of further multilateral liberalization has become increasingly complicated since countries such as Brazil, China, and India have emerged as relevant players. Against this backdrop, Hufbauer expects regionalism to become the strongest vehicle for delivering liberalization in the future. This could still leave a bright future for the WTO as a “house of plurilaterals”, i.e., agreements on specific issues such as services liberalization with conditional MFN treatment of varying membership.

Ethiopia’s WTO Accession and Financial Services Liberalization: Striking the Balance between Trade Liberalization and Domestic Policy Space

This article examines some of the main provisions of the General Agreement on Trade in Services (GATS) and the Annex on Financial Services to evaluate its impact on domestic financial regulation and macroeconomic policy. Inparticular, it analyzes whether Ethiopia can – upon accession and within the WTO’s GATS framework – achieve the objective of liberalizing internationaltrade in financial services while maintaining adequate domestic regulatory institutions and the normative framework needed in this regard. The articleinvestigates whether GATS provides a flexible framework for Ethiopia to negotiate liberalization commitments while at the same time preserving asufficient level of domestic regulatory space to achieve financial and economicstability.Key words: WTO accession, GATS, financial liberalization, domestic policy space, trade liberalization, Ethiopia

Productivity in a Distorted Market: The Case of Brazil's Retail Sector

In a model of monopolistic competition with heterogeneous firms, distortions in prices drive a wedge between the marginal revenue products of factor inputs across firms. We use census data for Brazil's retail sector to study implications for aggregate productivity and relate distortions to regional variation in regulation using a differences‐in‐differences approach. Taxes, entry regulation, and access to credit may create distortions to output and capital that varies by firm size. Potential gains from reallocation have not diminished despite the process of services liberalization in the 1990s.

Do the biggest aisles serve a brighter future? Global retail chains and their implications for Romania

During the past two decades many countries have opened their retail sector to foreign direct investment (FDI), yet little is known about the implications of such liberalization for their economies. Using a unique dataset combining outlet-specific information on global retail chains with a panel of Romanian manufacturing firms, this study sheds some light on this question. The results suggest that the expansion of global retail chains leads to a significant increase in the total factor productivity (TFP) in the supplying manufacturing industries: a 10% increase in the number of foreign chains' outlets is associated with a 2.4% to 2.6% boost to the TFP in the supplying industries. The decomposition of the aggregate productivity in the supplying industries suggests that the boost to performance is driven by both within-firm improvements and between-firm reallocation. Both changes are found to be associated with the expansion of foreign chains. These conclusions are robust to a variety of specifications and supported by evidence from a firm-level survey. They suggest that the opening of the retail sector to FDI may stimulate productivity growth and improve allocation efficiency in manufacturing industries and thus provide another piece of evidence in favor of services liberalization.

The Welfare Implications of Services Liberalization in a Developing Country: Evidence from Tunisia

We propose an integrated method based on a two-sector small open economy dynamic and stochastic general equilibrium model to estimate non-tariff barriers and quantify the impact of services liberalization. The major component of trade barriers is explicitly modeled through the introduction of entry-sunk costs. Hence, liberalization is treated assuming a government's policy decision aimed at reducing those costs. Then, we estimate the model using Bayesian techniques for Tunisia and the Euro Area. The paper presents a precise quantitative evaluation of services trade barriers as the difference between entry-sunk costs in Tunisia versus the Euro Area. We find significant welfare benefits in addition to aggregate and sectoral growth gains the Tunisian economy could attain following services liberalization. Surprisingly, the goods sector is the one that benefits the most from services liberalization in the short- and long-term horizons.

The Welfare Implications of Services Liberalization in a Developing Country: Evidence from Tunisia

We propose an integrated method based on a two-sector small open economy dynamic and stochastic general equilibrium model to estimate non-tariff barriers and quantify the impact of services liberalization. The major component of trade barriers is explicitly modeled through the introduction of entry-sunk costs. Hence, liberalization is treated assuming a government's policy decision aimed at reducing those costs. Then, we estimate the model using Bayesian techniques for Tunisia and the Euro Area. The paper presents a precise quantitative evaluation of services trade barriers as the difference between entry-sunk costs in Tunisia versus the Euro Area. We find significant welfare benefits in addition to aggregate and sectoral growth gains the Tunisian economy could attain following services liberalization. Surprisingly, the goods sector is the one that benefits the most from services liberalization in the short- and long-term horizons.

Liberalizing Trade in Services: Lessons from Regional and WTO Negotiations

Abstract Liberalization of trade and investment in services through trade agreements has progressed less than trade in goods. We review the limited progress achieved to date in the WTO and major regional agreements on services and possible explanations why trade agreements have not been more effective at integrating the services markets of participating countries. We argue that the prospects for both services liberalization and welfare-enhancing regulatory reform in the context of trade agreements can be enhanced through mechanisms that enhance transparency, dialogue and cooperation between regulators, trade officials and stakeholders.

Interest Groups and the “Amended” Liberalizations of the Monti Government

This article examines the liberalization of public services promoted by the Monti government with a law to which it attached great importance, arguing that liberalization would bring significant improvements to the economy and to consumers within a few years. In fact, the innovative capacity of the decree has been significantly diminished due to the amendments adopted in Parliament in response to efforts to maintain the status quo made by interest groups threatened by liberalization. This outcome is explained by the lack of cohesion of the parliamentary majority that supported the caretaker government and by its susceptibility to the influence of organized interests.

Determinants of Services Trade Agreements: Regulatory Incidence and Convergence

Given the rise of services preferentialism in the last decade and the importance of domestic regulation for services trade, this paper examines the role of regulatory incidence and convergence as determinants of services trade agreements (STAs). Our results suggest that regulation is an important determinant of STA membership. They also suggest that geography, common institutions and pre-existing trade matter more than economic size and factor endowments for addressing regulatory incidence and convergence in services negotiations. Finally, we find that countries displaying greater regulatory convergence and less restrictive regulation are also more likely candidates for reciprocal services liberalization.

European Union Competition Policy and the European Territorial Cohesion Agenda: An Impossible Reconciliation? State Aid Rules and Public Service Liberalization through the European Spatial Planning Lens

The territorial and spatial planning impacts of European Union (EU) economic and competition policies have remained under-researched in the field of European spatial planning, in contrast to other EU policy fields. This briefing explores how two elements of the EU competition policy, the regulation of “state aid” and the liberalization of “services of general interest (SGI)”, have significant implications for the pursuit of the objective of territorial cohesion through spatial planning and territorial development policies at different scales. The paper first reviews the development of the concept of territorial cohesion in the EU discourse and policy agenda since the mid-1990s, as well as the contribution of public services (Services of General Interest, or SGI in EU jargon) to it. It, then, reviews how the EU state aid rules and liberalization policies affect the state's ability to intervene (i) in support of sub-national territories which are lagging behind or suffering decline, and (ii) in the provision of public services across the national territory, specifically in peripheral regions or areas where the provision is not catered for by the market. The conclusion of the paper outlines the additional challenges to the pursuit of territorial cohesion in the EU posed by the post-2008 economic crisis and suggests avenues for future research.

Market Access Provisions on Trade in Goods in Regional Trade Agreements

This paper assembles detailed information on the market access provisions in trade in goods contained in 192 active regional trade agreements (RTAs) notified to the WTO as of November 2010. Although market access provisions in trade in goods in RTAs have been addressed in a number of studies, much of this work has been limited to subsets of RTAs, particularly plurilateral RTAs involving three or more parties. The goal of the current study is to expand beyond the more commonly studied RTAs and to include all RTAs notified to the WTO for which data are available. This task has been facilitated by the recent Transparency Mechanism for RTAs (TM), adopted in 2006, that provides the basis for the systematic provision of detailed tariff and trade data by WTO Members engaged in RTAs. This information has been supplemented by other public sources of data, where available. A number of trends are evident. While a majority of RTAs result in a reasonably high degree of liberalization overall (with developing countries often liberalizing as much or more than developed countries), liberalization is not uniform across products or RTA parties. In some RTAs the degree of liberalization appears to be a negotiated outcome, depending on the RTA partner. Agricultural goods continue to be subject to lower levels of liberalization, frequent product exclusions and systematic protection in some RTAs, regardless of the RTA partner's comparative advantage. Nonetheless, a lower level of ambition in some RTAs is tempered by a commitment to negotiate further concessions or expand upon the RTA's scope at some future point: more than half the RTAs analyzed contain such a commitment. Much has been written about the potential for the multilateralization of commitments undertaken in RTAs. While there may be scope for positive externalities in terms of regulatory convergence particularly with regard to services liberalization undertaken in RTAs, there is less evidence in this study to suggest that increased market access in merchandise goods leads to a more favorable trading environment for third parties. Continuing constructive engagement by WTO Members in the Transparency Mechanism through the provision of data, timely notifications, and submission of implementation reports will increase the availability of tariff and trade liberalization data, thus facilitating further examination of the topics highlighted in the study as worthy of future research.

Domestic Preparedness for Trade in Services Liberalization: Are East African Countries prepared for Further Trade Liberalization?

Services are the fastest growing sectors in the global economy. Over the past decades East African countries have witnessed even faster growing rates of the share of trade services in their GDPs. The total services export of EAC countries increased from USD 1868 mills in 1995 to USD 5681 mills in 2008 (WDI 2010) which is approximately three times increase compared to 1995. Along with this growth, liberalization of services trade is becoming a critical economic agenda of these economies. EAC countries have also made unilateral liberalizations in a number of services sectors since the mid 1980’s. On top of that EAC countries have also made commitment to liberalize service trade at the multilateral level. Furthermore a significant commitment of their services sectors has been made under the East African Integration Process beginning from first July 2010. This paper argues that although the importance of services as a share of overall GDP, increase with growth on FDI and employment. Its growth can be driven by number of factors, such as final demand factors and basic structural changes in production, linked to development. Weak domestic preparedness before opening up is likely to be associated with unsatisfactory and undesirable outcomes of services trade liberalization. This paper tries to expound issues that are essential on domestic preparedness for service trade liberalization and analyses the associated concerns. The purpose of this paper is not to provide answers but to shed some light on how services Trade liberalization is currently operationalized in the East African countries, in particular, that is, to open up the “black box”, and indicate the operational design elements around which variance is the highest.CITE AS:Bagumhe, E. P. (2012). Preparación doméstica para la liberalización del comercio de servicios. ¿Están los países africanos preparados para una mayor liberalización comercial?. Iberoamerican Journal of Development Studies, 1 (2): 28-51

Liberalization of Legal Services in India: The Role and Consequences of the Free Trade Agreements EU-India

Since the early 1990s India has progressively liberalized its economy to become fully integrated in the globalization process becoming one of the fastest growing economies in the world. This situation stands in sharp contrast with its legal services market, which remains totally closed to foreign lawyers. Nevertheless, economic developments as well as intense lobbying of foreign legal services suppliers have pressed the Indian government to liberalize its legal services market. However, the Indian government has faced fierce resistance from domestic lawyers. As a result, the situation has been paralyzed for over two decades with the government delaying action. Within this context, the conclusion of free trade agreement with the EU and the potential gains for the Indian economy has become a powerful incentive for liberalization. This article aims to analyze the role and consequences of this agreement in the liberalization of legal services in India.