Slides Course 7B

8/9/2019 Slides Course 7B

1/23

1

Barriers to trade inBarriers to trade in

services.services.Services tradeServices trade

liberalizationliberalizationCourse 7BCourse 7B


2/23

2


servicesservices a government measure that creates ana government measure that creates anobstacle to the sale of servicesobstacle to the sale of services

produced abroad.produced abroad.

implication -> the government measureimplication -> the government measureinvolved creates a burden on foreigninvolved creates a burden on foreign

producers that is not borne by domesticproducers that is not borne by domestic

producers and that is unnecessary forproducers and that is unnecessary forthe achievement of non-protectionist,the achievement of non-protectionist,

domestic regulatory objectivesdomestic regulatory objectives


3/23

!

The instruments ofThe instruments of

protectionprotection

Typical restrictions onTypical restrictions on

services tradeservices trade

"aditya #attoo - trade-restrictive measures in"aditya #attoo - trade-restrictive measures inservices$services$

% TarifsTarifs -- di&icult to impose on services importsdi&icult to impose on services imports% QuotasQuotas%%pervasivepervasive

cross-border trade - transport sectorcross-border trade - transport sector

consumption abroad % foreign e'changeconsumption abroad % foreign e'change commercial presence % telecommunications, ban(ingcommercial presence % telecommunications, ban(ing movement of service personnel % professional servicesmovement of service personnel % professional services

- Internal policies that discriminateInternal policies that discriminate against foreignagainst foreignproviders$providers$

- measures that directly provide a cost-advantage to domesticmeasures that directly provide a cost-advantage to domesticproviders %providers % subsidiessubsidies

measures that impose a cost or create a competitivemeasures that impose a cost or create a competitivedisadvantage for foreign providers - internal )direct or indirect*disadvantage for foreign providers - internal )direct or indirect*ta' instrumentsta' instruments, less favorable, less favorable access toaccess toessential facilitiesessential facilitiessuchsuchas ports, airports or telecommunications net+or(sas ports, airports or telecommunications net+or(s

- Domestic regulationsDomestic regulations measures +hich are neithermeasures +hich are neitheruotas, nor do they discriminate e'plicitly against foreignersuotas, nor do they discriminate e'plicitly against foreignersbut they can nevertheless impede tradebut they can nevertheless impede trade


4/23





Three reasons why dierences ariseThree reasons why dierences arise

1 di&iculty of imposing tari&s1 di&iculty of imposing tari&s% cross border trade % imposing tari&s is verycross border trade % imposing tari&s is very

di&icult % the increased possibility of electronicdi&icult % the increased possibility of electronicdeliverydelivery

% +here it is possible to impose uotas )e'+here it is possible to impose uotas )e'

transport services* their transformation intotransport services* their transformation into

tari&-li(e instruments is signi.cantly easier %tari&-li(e instruments is signi.cantly easier %

ta'es per transported passenger or transportedta'es per transported passenger or transportedmerchandise unitmerchandise unit

% Commercial presence % possibility to impose .scalCommercial presence % possibility to impose .scal

measures upon entry or as pro.t or income ta'esmeasures upon entry or as pro.t or income ta'es


5/23

/





Three reasons why dierences ariseThree reasons why dierences arise 2 instruments +hich have a tari&-li(e e&ect2 instruments +hich have a tari&-li(e e&ect inin

terms of increasing costs of foreign providers,terms of increasing costs of foreign providers,are not ho+ever tari&-li(e in generatingare not ho+ever tari&-li(e in generating

revenuerevenue% the conseuences of restrictive measures thatthe conseuences of restrictive measures thatincrease foreign costs but do not generate revenue -increase foreign costs but do not generate revenue -part of the loss in consumer surplus is not o&set bypart of the loss in consumer surplus is not o&set byincrease in tari& revenue - loss in +elfare is muchincrease in tari& revenue - loss in +elfare is muchgreatergreater

% 0imilarly - uotas - the +elfare conseuences could0imilarly - uotas - the +elfare conseuences couldbe alleviated if the rents generated accrued tobe alleviated if the rents generated accrued todomestic importers rather than foreign e'portersdomestic importers rather than foreign e'porters

If complete liberalization is not feasible, a shift fromIf complete liberalization is not feasible, a shift fromboth quotas and non-revenue generating measures toboth quotas and non-revenue generating measures toscal measures would lead to an increase in welfare.scal measures would lead to an increase in welfare.


6/23





Three reasons why dierences ariseThree reasons why dierences arise

!! the range of restrictionsthe range of restrictionsthat are imposed onthat are imposed onforeign direct investment and the movement offoreign direct investment and the movement ofpersonnelpersonnel directly a&ect the mar(et structuredirectly a&ect the mar(et structure

% estrictions on ne+ entry and on the participation ofestrictions on ne+ entry and on the participation offoreign capital are the most common, particularly inforeign capital are the most common, particularly incommunications and .nancial servicescommunications and .nancial services

% 3oreign investment clearly brings bene.ts even in3oreign investment clearly brings bene.ts even insituations +here it does not lead to enhancedsituations +here it does not lead to enhanced

competition )ie, there are entry restrictions*competition )ie, there are entry restrictions*% 4o+ever, if 356 comes simply because the returns to4o+ever, if 356 comes simply because the returns toinvestment are arti.cially raised by restrictions oninvestment are arti.cially raised by restrictions oncompetition, the net returns to the host country maycompetition, the net returns to the host country maybe negative )returns to the investor may e'ceed thebe negative )returns to the investor may e'ceed thetrue social productivity of the investment*true social productivity of the investment*


7/23

7


servicesservices iven the nature of transactions involved$iven the nature of transactions involved$% barriers to trade in services are opaue8barriers to trade in services are opaue8

% 6nformation available is6nformation available is disperseddispersed

of ualitative natureof ualitative nature

% Barriers are di&icult to impose at the borderBarriers are di&icult to impose at the border

% Barriers include a very +ide range of non-Barriers include a very +ide range of non-tari& instruments and internal regulations $tari& instruments and internal regulations $ cause % characteristics of servicescause % characteristics of services

conseuence % need to apply them either to theconseuence % need to apply them either to theconsumer or to the provider of servicesconsumer or to the provider of services


8/23

9

Barriers to trade in servicesBarriers to trade in services

- classication- classication market access restrictionsmarket access restrictions% +hich limit or forbid% +hich limit or forbid

mar(et access for ne+ providers )uotas, number ofmar(et access for ne+ providers )uotas, number oflicenses, interconnection rights*licenses, interconnection rights*

derogations from national treatmentderogations from national treatment% +hich impose% +hich impose

a discriminatory treatment to foreign providersa discriminatory treatment to foreign providers)di&erentiated treatment of non-residents, ta'es for)di&erentiated treatment of non-residents, ta'es forforeign tourists, ta'es on cross-border transfersforeign tourists, ta'es on cross-border transfersthrough high international telecom rates*through high international telecom rates*

other measuresother measures+hich are not e'plicitly aimed at+hich are not e'plicitly aimed at

restricting mar(et access or discriminating againstrestricting mar(et access or discriminating againstforeign suppliers but are doing so in practiceforeign suppliers but are doing so in practice)consumer protection measures, cultural barriers,)consumer protection measures, cultural barriers,government procurement*government procurement*


9/23

:

Barriers to trade in servicesBarriers to trade in services

- classication- classication (1(1Quantitative restrictionsQuantitative restrictions(!"(!"uotas,uotas,

prohibitions, voluntary e'port restraints, local content,prohibitions, voluntary e'port restraints, local content,restrictions on the scope of business, e'change and otherrestrictions on the scope of business, e'change and other.nancial control8.nancial control8

(#(#Price-based restrictionsPrice-based restrictions($"($" tari&s, ta'es )visatari&s, ta'es )visa

fees, entry or e'it ta'es, airport landing fees, port ta'es*,fees, entry or e'it ta'es, airport landing fees, port ta'es*,antidumping duties, price underta(ings and priceantidumping duties, price underta(ings and pricesurveillance, price ceiling and minimum prices,surveillance, price ceiling and minimum prices,subsidies8subsidies8

(%(%Administrative restrictionsAdministrative restrictions (&"(&" licensing,licensing,

standards, customs valuation, clearance procedures, rulesstandards, customs valuation, clearance procedures, rulesof origin, professional licensing systems, environmentalof origin, professional licensing systems, environmentalstandards, copyrights, trademar(s, franchises,standards, copyrights, trademar(s, franchises,government procurement8government procurement8

('('Network-access restrictionsNetwork-access restrictions ("("- discriminatory- discriminatoryaccess to distribution and communication systemsaccess to distribution and communication systems


10/23


11/23

11

,easurin barriers to trade,easurin barriers to trade

in servicesin services


12/23

12

Services tradeServices trade

liberalizationliberalization "iberalization of trade in services involves the"iberalization of trade in services involves thereduction of regulatory barriers to market accessreduction of regulatory barriers to market access

and discriminatory national treatment across all fourand discriminatory national treatment across all four

modes of supply.modes of supply.

iberali?ation and deregulation % di&erent concepts$iberali?ation and deregulation % di&erent concepts$% the focus ofthe focus of dereulationdereulationis to reduce the total amount of stateis to reduce the total amount of state

regulation in a sector )opening the mar(et to ne+ providers andregulation in a sector )opening the mar(et to ne+ providers and

encouraging internal competition*,encouraging internal competition*,

% the focus of trade liberali?ation is to ensure that e'isting regulationthe focus of trade liberali?ation is to ensure that e'isting regulation

does not discriminate against foreign participation in the mar(etdoes not discriminate against foreign participation in the mar(et

)eual treatment for e'ternal competition*)eual treatment for e'ternal competition*

@rivati?ation -> internal deregulation -> opening up@rivati?ation -> internal deregulation -> opening up

to foreign competition-> liberali?ationto foreign competition-> liberali?ation


13/23

1!

The case for maretThe case for maret

liberalization/liberalization/0pen marets are epected to/0pen marets are epected to/% encouraeencourae

uality improvement ,uality improvement ,

product and process innovation ,product and process innovation ,

% reducereducethe scope forthe scope for

+asteful resource use+asteful resource use

rent-see(ing ,rent-see(ing ,

% constrainconstrainthe po+er of individual economicthe po+er of individual economicoperators,operators,

% ensureensure users continued product availability atusers continued product availability at

reasonable conditionsreasonable conditions


14/23

1

$olicy initiatives/$olicy initiatives/

)a*)a* pro-competitive policy initiativespro-competitive policy initiatives to abolish, forto abolish, fore'ample,e'ample, traditional e'clusivity rights and accesstraditional e'clusivity rights and accessbarriersbarriers88

)b*)b* e'ternal mar(et openinge'ternal mar(et opening to confront domesticto confront domesticindustries +ith best international practice8industries +ith best international practice8

)c* information reuirements and, in sensitive areas,)c* information reuirements and, in sensitive areas,prudential rules toprudential rules to protect public interestsprotect public interests88

)d* institutional reforms providing for)d* institutional reforms providing for independentindependent

regulatory supervision8regulatory supervision8

)e* measures to incorporate)e* measures to incorporate social costssocial costs, attributable to, attributable toenvironmental impacts and other e'ternalities, inenvironmental impacts and other e'ternalities, inproduction and investment decisionsproduction and investment decisions


15/23

1/

2onsiderations for services/2onsiderations for services/ 3are services sectors have lon been tihtly reulated43are services sectors have lon been tihtly reulated4

suestin that thesuestin that the potential for liberalizationpotential for liberalization4 and the4 and theensuinensuin economic benetseconomic benets4 are particularly4 are particularly hih.hih.

TheThe traditional framewor of administrative reulation andtraditional framewor of administrative reulation andcontrolcontrol in many services areas4 intended to ensurein many services areas4 intended to ensurereliability and stability of supplies4 isreliability and stability of supplies4 is ill-suitedill-suited to anto anenvironment characterized by rapid technoloical andenvironment characterized by rapid technoloical andeconomic chane.economic chane.

+n the absence of maret-driven reforms4 the secular+n the absence of maret-driven reforms4 the secularepansionepansion of many services sectors in the developmentof many services sectors in the developmentprocess would raduallyprocess would radually broaden overnment reulationbroaden overnment reulationand control.and control.

5iven the5iven the infrastructural natureinfrastructural nature of many services sectors4of many services sectors4eiciency enhancin reformseiciency enhancin reforms - includin reulatory and- includin reulatory andinstitutional chanes - are liely to promote theinstitutional chanes - are liely to promote thecompetitiveness of many downstream activities and4 thus4competitiveness of many downstream activities and4 thus4improve overall economic performance.improve overall economic performance.


16/23

1

5&TS5&TS


17/23

17

5&TS 7 maret access5&TS 7 maret access


18/23

19

5&TS5&TS ational treatmentational treatment(T(T

reuires that countries apply no less favorable treatment toreuires that countries apply no less favorable treatment toforeign suppliers than they apply to domesticforeign suppliers than they apply to domestic

TheThe country schedulescountry schedules- positive lists - only those- positive lists - only thosesectors listed are sub8ect to the ,& and T rules andsectors listed are sub8ect to the ,& and T rules anddisciplines.disciplines.

,) eemptions - neative list4 with ,) applyin,) eemptions - neative list4 with ,) applyinunless a specic eemption is recorded.unless a specic eemption is recorded.

2ommitments or limitations which relate to all2ommitments or limitations which relate to all

sectors are recorded as 9sectors are recorded as 9horizontal commitmentshorizontal commitments99


19/23

1:


20/23

2;

5&TT:5&TS5&TT:5&TS


21/23

21

Barriers

Mode of supply

MA NT Other measures

Cross-border trade - Subsidies, taxes,tariffs- Quantitativerestrictions

- overnment procurementpolicies- !iscriminatory access todistribution net"or#s,subsidies- $%& protection- %rice control- !ifferentiated taxes,

subsidies

FDI - Bans or limits on '!$- eo(raphical, volumeand number restrictions- Sectoral restrictions

- %erformance re)uirements- Access to financin(- Tax measures- %rofit repatriation- !ifferentiated incentivesre(ime

- $%& protection- *onsumer protection- %romotional policies to attractinvestment- +nvironment protection

Consumption abroad - isas and otherdocuments,- Administrativere)uirements

- imitations on forei(ncurrency, travel-relatedtaxes, insurance- imitations on o"nership,forei(n currency re(ime,price discrimination

Temporary movement - isas, labor permits- Qualificationre)uirements

-ife and "or# conditions,tax re(ime, insurance,- $ncome repatriation

- &e(ulations on repatriation- *ultural barriers


22/23

22

Sursa: Stern, R., Brown, D. & Deardof, A.(2001), Trade Liberalization, Global Welfare and Worlds Services Sector

@otential economic bene.ts of reducing post-Druguaybarriers


23/23

2!

Slides Course 7B

Documents

Transcript of Slides Course 7B