Change in the Service Trade Regime with CEE Countries
The further opening up of markets will create a potentially high demand also in the services sector, and domestic providers should be able to exploit it due to their closeness to these markets. However, the boost in liberalization tendencies will result in a keener competitive environment for labor cost intensive service activities, with border areas being affected more. Already now the services trade with the neighboring reform states contributes to alleviating Austria's current account problems despite still existing trade barriers: at ATS +12.6 billion (0.52 percent of GDP), the balance of service transactions with these countries is decidedly positive; without the contribution made by tertiary trade with the closest transition countries, Austria's current account deficit would have been by around 30 percent higher. EU enlargement will greatly change the trade policy regime of Austria vis-à-vis these countries in key areas of the service portfolio: especially with regard to cross-border shopping, services rendered through business establishments in the host country and cross-border inroads made by foreign providers on domestic markets, eastern enlargement will signify a substantial trade policy opening. Whereas domestic providers should find new opportunities under the freedom of establishment due to the low competitiveness of CEE states in the respective tertiary sectors, cross-border shopping and cross-border service provision are expected to create greater import competition. In general, CEE countries are focusing on traditional consumption-close services in their attempts to catch up on western countries. With more complex production-close services, the CEEC 5 providers have so far been hardly able to accumulate company-specific competitive advantages. Especially in terms of supply differentiation and quality they are still far from western European standards. Concerning further expansionist drives of domestic providers, this poor competitive ability in higher-quality services in conjunction with growing demands generated by the catch-up process will open up favorable perspectives for market enlargement. In terms of possible import competition, the present scenario implies that in the near future CEEC providers will hardly be in a position to derive competitive advantages from higher product quality or greater diversity in the range of services offered. Their expansion will be concentrated on partial markets in conjunction with pure price competition where they can exploit existing factor cost advantages. According to WIFO estimates the wage levels and/or cost structures of domestic service industries with approximately one third of all service employees are such that they may become vulnerable to low-wage competition. If we also take into account that any cross-border services (shopping tourism, cross-border inroads on Austrian service markets) are economically meaningful only across limited distances, the percentage of potentially affected service workers will be down to around 17 percent of all service workers (11 percent of dependent workers). A dual strategy seems to be appropriate in preparation for EU enlargement. Selective defensive policies ought to avoid any overstraining of the companies' capability to adapt to the currently necessary structural changes, while active structural policies have to be stepped up with the aim of enhancing the competitive strength of domestic service providers and thus enabling them to really use the potential advantages of enlargement.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 71 (1998)
Issue (Month): 11 (November)
|Contact details of provider:|| Postal: |
Phone: (+43 1) 798 26 01-0
Fax: (+43 1) 798 93 86
Web page: http://www.wifo.ac.at/
More information through EDIRC
|Order Information:|| Postal: Austrian Institute of Economic Research Publikationsverkauf und Abonnentenbetreuung Arsenal, Objekt 20 A-1030 Vienna/Austria|
When requesting a correction, please mention this item's handle: RePEc:wfo:monber:y:1998:i:11:p:771-779. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ilse Schulz)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.