Regulatory Regimes for Goods and Services -- Differences That Matter

A country's regulatory regime is a major determinant of the ability to realize the benefits of various macroeconomic efforts and initiatives, including trade agreements. Intrinsic and historical differences between goods and services sectors indicate that a country's regulatory infrastructure and environment may be potentially more significant for services. The regulatory regimes for service sectors in many countries today, however, are underdeveloped or otherwise ineffective, and may actually deter investment and hinder opportunities in trade involving services. These shortcomings may have particular implications for countries in negotiating service sectors in trade agreements, as they may be, or may perceive themselves to be, at a disadvantage as they negotiate subject matters largely defined by and dependent on the efficacy of regulatory structures and systems. As services increase their importance in national economies and international trade, governments and citizens of those countries are less likely to fully realize the benefits of trade liberalizing efforts or economic growth policies. This article explores the differences between goods and service sectors and the practical implications of the differences - thus, why regulatory regimes matter.