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WTO
NEWS: 2002 PRESS RELEASES Press/300 |
> Services negotiations offer real opportunities for all WTO members and more so for developing countries (Word format, 13 pages, 195 KB)
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These negotiations have been inaccurately portrayed in certain quarters as facilitating the liberalization or privatization of government services including health, water distribution and education. This is untrue. The facts are that such sectors have rarely been discussed in the negotiations and that the principal focus of the talks lies in other services sectors. The fact sheet below offers statistics on the importance of services to the global economy, the state of play in the services negotiations and projections of the economic benefits that would accrue through further liberalization. Statistics on services trade liberalization back to top
There are a number of studies on the impact of services trade liberalization. Although each of these studies uses a different scenario to project the gains from liberalization, all show that the economic gains from services liberalization greatly exceed the gains from merchandise trade liberalization. Moreover, each of the studies shows that developing countries would be major beneficiaries of such liberalization According to the World Bank's report “Global Economic Prospects for Developing Countries” 2001)
According to the University of Michigan (1)
From the World Bank's report “Global Economic Prospects for Developing Countries” (2001) Services liberalization could provide significant gains to Tunisia, with welfare gains equivalent to 7 percent of GDP. These are twice as large as the gains predicted for Tunisia from its preferential agreement with the EU. The largest benefits come from the liberalization of foreign investment in financial services, communications, and transportation. Liberalization lifts economic growth by eliminating inefficiency through increased international competition. Services are available not only at lower prices but also in greater varieties through an increase in the number of firms that would operate in Tunisia. More efficient financial, communications, and transportation sectors are also likely to attract foreign firms to other industries in Tunisia.
From the WTO Trade Policy Review of India (2002) In 2000/01 India’s services sector accounted for around 49% of GDP and employed around 19% of the total workforce (in 1999/00), which suggest that the sector’s labour productivity may be considerably higher than the national average. Other infrastructure services, such as electricity, gas and water, accounted for 2.5% of GDP. As a significant and growing contributor to the economy, an efficient services sector is crucial for economic growth. Recognizing this, the Prime Minister’s Economic Advisory Council (EAC), in a recent report, has noted that the quality of infrastructure services such as power, telecommunications and transport is not what it might be. Inefficient transportation, notably roads, maritime services, and ports, constrain trade and add to the overall costs of doing business. In addition, the power sector has become a major bottleneck to economic activity. The Council also noted that India’s infrastructure required both a massive increase in investment and greater efficiency in order to support economic growth. Reform in infrastructure and other services has been undertaken since the early 1990s with varying degrees of success. In several services, including banking and electricity, liberalization began in the early 1990s. The authorities have noted that although the decision to invite private investment was frequently accompanied by regulatory reforms, teething problems became impediments to attracting private investment. In the case of electricity, for example, although private sector investment has been encouraged since the early 1990s, a major problem identified was the lack of accompanying regulatory changes, notably to restructure the existing State Electricity Boards (SEBs) and to pricing of electricity tariffs. Partly as a result, private investment in the sector has not been as high as expected. By contrast, progress in the telecommunications sector has been more rapid in recent years, with the sector being opened to private investment. As a result, the telecommunications infrastructure has been greatly expanded and tariffs have been reduced significant. Reform in other key infrastructure sectors, including civil aviation, maritime services, and ports has been slower, although steps have been taken to allow private sector investment in ports in recent years to develop capacity and improve efficiency. The overall efficiency of these sectors remains low, however, and inadequate for India’s infrastructure needs. Moreover, as public sector investment in infrastructure becomes increasingly constrained due to budgetary considerations, the need to create a competitive and regulatory environment in which private sector investment can take place becomes increasingly urgent. From the WTO Annual report (2001) In India, growth rate of commercial services in the 1990s was 14.5%, more than double that of world trade (6.4%).
From the WTO Trade Policy Review of Barbados (2002) Barbados has used foreign trade and investment opportunities deftly to maintain living standards well above those of most developing countries. Its trade and investment policies have fostered world-class suppliers in a few areas, particularly tourism and financial services. Based on Barbados’s natural endowments and on niche activities created by government policy, these services have become the mainstay of the economy and the main source of foreign exchange. Of necessity, however, specialization and the small size of the economy have resulted in a narrow production base that makes Barbados vulnerable to external shocks. The services sector has been the main engine of growth in Barbados. Its share of GDP already exceeded 67% of GDP in 1981, and had increased to 71% of GDP in 2000. The largest economic expansion has been in financial and business services. These recorded a value added in current terms of BDS$770 million (US$335 million) in 2000, equivalent to 18% of GDP. According to IMF balance-of-payments statistics, total exports of services reached US$995 million, or over US$3,500 per capita, and 75% of the value added in the services sector that year. The bulk of exports are in travel (US$712 million), reflecting activity in the tourism sector. Exports of financial services reached US$64 million in 2000; this included financial services supplied by “international” companies, which by law are not allowed to sell their services in Barbados (see below). Imports of services reached US$487 million in 2000, up from US$409 million in 1998, and consisted mostly of transport services (US$163 million), insurance services, and travel services.
From the WTO Trade Policy Review of Uganda (2001) The Services Sector shows promise for Uganda with its contribution of almost 40% to GDP. Growth has lagged behind that of the industrial sector but performed better than the agriculture sector. In 1999/2000, services grew by 6.2%, industry by 9.9% and agriculture by 1.6%. Uganda is traditionally one of the leading providers of high quality social services in east Africa. In the 1960s, Uganda offered tertiary educational services that were renowned throughout eastern Africa. Institutions such as Makerere University and Mulago Hospital provided training for the region’s aspiring professionals. Uganda does not have any overall policy objective for the services sector. However, under the aegis of the Ugandan Investment Authority, the Big Push Strategy is to promote specific subsectors, several of which are in the services sector. The overall objective of the Big Push Strategy is to transform Uganda from one of the world’s poorest economies into a world-class provider of services with a widespread impact on general living standards, as well as a producer of high quality agri-products. The strategy focuses on eight subsectors in which Uganda has a potential competitive advantage, most of which are services, namely education services, medical services, information and communications technology, printing and publishing, financial services, and air cargo logistics and an inland port. The emphasis of this strategy is on streamlining government machinery to promote the growth of the private sector, promoting confidence among investors in these subsectors, and other actions. |
Charts: Chart 1:
Commercial services exports of developed, developing and
least developed countries, 1990-2000 Tables: Table
1: Growth
in the value of commercial services trade by region, 1990-2001 |
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Chart 1
Commercial services exports of developed, developing and least developed countries, 1990-2000
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