The Political Economy of Services Trade Liberalization: A Case for International Regulatory Cooperation?

Little progress has been made since the creation of the WTO in expanding and deepening the coverage of services liberalization commitments. This paper identifies and discusses five hypotheses that may explain the absence of dynamism: (i) technological changes allow ever more services to be traded cross-border unaffected by policy; (ii) strong incentives to pursue liberalization on an autonomous basis (unilaterally); (iii) perceptions that bilateral or regional cooperation are a good substitute for the WTO; (iv) standard political economy factors such as adjustment costs and resistance by incumbents to erosion of rents; and (v) concerns that the WTO will affect the ability of regulators to enforce national norms. We argue that all of these explanations play a role, and that some of these factors significantly impede the scope for reciprocal exchanges of ?concessions??the engine of WTO negotiations.