Economic performance An efficient services infrastructure is a
precondition for economic success. Services such as
telecommunications, banking, insurance and transport supply
strategically important inputs for all sectors, goods and services.
Without the spur of competition they are unlikely to excel in this
role – to the detriment of overall economic efficiency and growth.
An increasing number of Governments thus rely on an open and
transparent environment for the provision of services.
to world-class services helps exporters and producers in developing
countries to capitalize on their competitive strength, whatever the
goods and services they are selling. A number of developing countries
have also been able, building on foreign investment and expertise, to
advance in international services markets – from tourism and
construction to software development and health care. Services
liberalization has thus become a key element of many development
Consumer savings There
is strong evidence in many services, not least telecoms, that
liberalization leads to lower prices, better quality and wider choice
for consumers. Such benefits, in turn, work their way through the
economic system and help to improve supply conditions for many other
products. Thus, even if some prices rise during liberalization, for
example the cost of local calls, this tends to be outweighed by price
reductions and quality gains elsewhere. Moreover, governments remain
perfectly able under the GATS, even in a fully liberalized
environment, to apply universal-service obligations and similar
measures on social policy grounds.
Faster innovation Countries with liberalized services markets have
seen greater product and process innovation. The explosive growth of
the Internet in the US is in marked contrast to its slower take-off in
many Continental European countries which have been more hesitant to
embrace telecom reform. Similar contrasts can be drawn in financial
services and information technology.
Greater transparency and predictability A country's commitments in
its WTO services schedule amount to a legally binding guarantee that
foreign firms will be allowed to supply their services under stable
conditions. This gives everyone with a stake in the sector—producers,
investors, workers and users—a clear idea of the rules of the game.
They are able to plan for the future with greater certainty, which
encourages long-term investment.
Technology transfer Services
commitments at the WTO help to encourage foreign direct investment (FDI).
Such FDI typically brings with it new skills and technologies that
spill over into the wider economy in various ways. Domestic employees
learn the new skills (and spread them when they leave the firm).
Domestic firms adopt the new techniques. And firms in other sectors
that use services-sector inputs such as telecoms and finance benefit