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Tentative first steps : an assessment of the Uruguay Round agreement on services

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  • Hoekman, Bernard

Abstract

A major result of the Uruguay Round was the creation of a General Agreement on Trade in Services (GATS). The GATS greatly extends coverage of the multilateral trading system, establishing rules and disciplines on policies affecting access to service markets. In this paper, the author asks: what does the GATS do to bind policies? And has it established a mechanism likely to induce significant liberalization through future rounds of negotiations? The GATS consists of two elements: 1) a set of general concepts, principles, and rules that apply across the board to measures affecting trade in services; and 2) specific commitments on national treatment and market access. These apply only to service activities listed in a member's schedule - reflecting the agreement's"positive-list"approach to determining coverage - and only to the extent that sector-specific or cross-sectoral qualifications or conditions are not maintained. The impact of the GATS depends largely on the specific commitments made by members, and sectoral coverage is far from universal. High-income countries scheduled about half of their service sectors; developing countries as a group (including Eastern European countries in transition) scheduled only 11 percent. And the sectors scheduled often continue to be subject to measures that violate national treatment or limit market access. High-income countries scheduled only 28 percent of the universe of services without exceptions to national treatment or market access obligations. For developing countries, that figure is only 6.5 percent. Much remains to be done. The GAT's weaknesses include: 1) a lack of transparency. No information is generated on sectors, subsectors, and activities in which no commitments are scheduled - most often the sensitive areas where restrictions and discriminatory practices abound; 2) the sector-specificity of liberalization commitments. Negotiations were driven by the concerns of major players of each industry, leading to an emphasis on"absolute"sectoral reciprocity, limiting the scope for incremental liberalization, tradeoffs across issues, and an economywide perspective; and 3) the limited number of generic rules. Rather than lock in liberal situations that exist, the GATS allows for the future imposition of restrictions (creating"negotiating chips"). To foster nondiscriminatory liberalization, sectoral agreeements should be firmly imbedded in a framework of general rules and disciplines. Many of the framework's general principles apply only if specific commitments have been made. Therefore they are not general. Proposals for improving the GATS should probably build on the existing structure as mush as possible. Possibilities include the following: 1) ultimately, apply the same rules to goods and services. Eliminate the artificial distinction between the two; 2) adopt a negative-list approach to scheduling commitments for the sake of transparency; 3) eliminate overlap between national treatment and market access; 4) develop generic,"horizontal"disciplines for the different modes of supply through which service markets may be contested; 5) explore the possibility of converting quota-like market access restrictions to price-based equivalent measures, thus ensuring that the most-favored-nation and national treatment principles are satisfied; 6) make framework disciplines general by eliminating all instances in which rules are conditional on the scheduling of specific commitments; and 7) agree to a formula-based approach for liberalizing and expanding the GAT's sectoral coverage in future negotiations.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1455.

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Date of creation: 31 May 1995
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Handle: RePEc:wbk:wbrwps:1455

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Keywords: Economic Theory&Research; Environmental Economics&Policies; Payment Systems&Infrastructure; Decentralization; Health Economics&Finance; Health Economics&Finance; Economic Theory&Research; Trade and Services; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; ICT Policy and Strategies;

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References

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  1. Maskus, Keith E & Konan, Denise Eby, 1997. "Trade Liberalization in Egypt," Review of Development Economics, Wiley Blackwell, vol. 1(3), pages 275-93, October.
  2. André Sapir, 1985. "North-South issues in trade in services," ULB Institutional Repository 2013/8264, ULB -- Universite Libre de Bruxelles.
  3. repec:fth:michin:379 is not listed on IDEAS
  4. Hoekman, Bernard & Mavroidis, Petros C, 1995. "The WTO's Agreement on Government Procurement: Expanding Disciplines, Declining Membership?," CEPR Discussion Papers 1112, C.E.P.R. Discussion Papers.
  5. Bernard M. Hoekman & Robert M. Stern, 1991. "Evolving Patterns of Trade and Investment in Services," NBER Chapters, in: International Economic Transactions: Issues in Measurement and Empirical Research, pages 237-290 National Bureau of Economic Research, Inc.
  6. Bhagwati, Jagdish N, 1987. "Trade in Services and the Multilateral Trade Negotiations," World Bank Economic Review, World Bank Group, vol. 1(4), pages 549-69, September.
  7. Hoekman, B.M., 1992. "Conceptual and Political Economy Issues in Liberalizing International Transactions in Services," Working Papers 309, Research Seminar in International Economics, University of Michigan.
  8. Deardoff, A.V. & Brown, D.K. & Stern, R.M. & Fox, A.K., 1995. "Computational Analysis of Goods and Services Liberalization in the Uruguay Round," Working Papers 379, Research Seminar in International Economics, University of Michigan.
  9. Hindley, Brian, 1988. "Service Sector Protection: Considerations for Developing Countries," World Bank Economic Review, World Bank Group, vol. 2(2), pages 205-24, May.
  10. Sapir, André, 1991. "The Structure of Services in Europe: A Conceptual Framework," CEPR Discussion Papers 498, C.E.P.R. Discussion Papers.
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Cited by:
  1. Keith Walsh, 2006. "Trade in Services: Does Gravity Hold? A Gravity Model Approach to Estimating Barriers to Services Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp183, IIIS.
  2. Nico van Leeuwen & Arjan Lejour, 2006. "Bilateral Services Trade Data and the GTAP database," CPB Memorandum 160, CPB Netherlands Bureau for Economic Policy Analysis.
  3. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Drusilla K. Brown & Rajesh Chadha & Alan V. Deardorff & Robert M. Stern, 2001. "Computational Analysis of the Impact on India of the Uruguay Round and the Forthcoming WTO Trade Negotiations," Discussion Papers Series, Department of Economics, Tufts University 0107, Department of Economics, Tufts University.
  5. Zafar Mahmood, 1998. "WTO and Pakistan: Opportunities and Policy Challenges," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 37(4), pages 687-701.
  6. Hoekman, Bernard, 1995. "The World Trade Organization, the European Union, and the Arab World : trade policy priorities and pitfalls," Policy Research Working Paper Series 1513, The World Bank.
  7. Stephenson, Sherry M., 1999. "Approaches to liberalizing services," Policy Research Working Paper Series 2107, The World Bank.
  8. John Roberts, 2000. "Issues in the liberalization of trade in services," Journal of International Development, John Wiley & Sons, Ltd., vol. 12(2), pages 257-264.
  9. Konan, Denise Eby & Maskus, Keith E., 2003. "Quantifying the impact of services liberalization in a developing country," Policy Research Working Paper Series 3193, The World Bank.
  10. Harms, Philipp & Mattoo, Aaditya & Schuknecht, Ludger, 2003. "Explaining liberalization commitments in financial services trade," Policy Research Working Paper Series 2999, The World Bank.

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