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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.

Suggested Citation

  • Hoekman, Bernard, 1995. "Tentative first steps : an assessment of the Uruguay Round agreement on services," Policy Research Working Paper Series 1455, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1455
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    1. Chadha, R. & Brown, D.K. & Deardorff, A.V. & Stern, R.M., 2000. "Computational Analysis of the Impact on India of the Uruguay Round and the Forthcoming WTO Trade Negotiations," Working Papers 459, Research Seminar in International Economics, University of Michigan.
    2. Stephenson, Sherry M., 1999. "Approaches to liberalizing services," Policy Research Working Paper Series 2107, The World Bank.
    3. Hayakawa, Kazunobu & Mukunoki, Hiroshi & Yang, Chih-hai, 2020. "Liberalization for services FDI and export quality: Evidence from China," Journal of the Japanese and International Economies, Elsevier, vol. 55(C).
    4. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
    5. Konan, Denise Eby & Maskus, Keith E., 2006. "Quantifying the impact of services liberalization in a developing country," Journal of Development Economics, Elsevier, vol. 81(1), pages 142-162, October.
    6. Philipp Harms & Aaditya Mattoo & Ludger Schuknecht, 2003. "Explaining liberalization commitments in financial services trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 82-113, March.
    7. 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.
    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. Bernard Hoekman, 1998. "The World Trade Organization, the European Union, and the Arab World: Trade Policy Priorities and Pitfalls," Palgrave Macmillan Books, in: Nemat Shafik (ed.), Prospects for Middle Eastern and North African Economies, chapter 4, pages 96-129, Palgrave Macmillan.
    10. Jiyong Chen & Dabo Chen & Aiping Yao, 2020. "Trade development between China and countries along the Belt and Road: A spatial econometric analysis based on trade competitiveness and complementarity," Pacific Economic Review, Wiley Blackwell, vol. 25(2), pages 205-227, May.
    11. Iris Claus & Les Oxley & Hejing Chen & John Whalley, 2014. "China'S Service Trade," Journal of Economic Surveys, Wiley Blackwell, vol. 28(4), pages 746-774, September.
    12. Nico van Leeuwen & Arjan Lejour, 2006. "Bilateral Services Trade Data and the GTAP database," CPB Memorandum 160, CPB Netherlands Bureau for Economic Policy Analysis.
    13. Sampriti Das & Amiya Sarma, 2021. "Growth Behaviour of India’s Export of Services, 1975–2018," Foreign Trade Review, , vol. 56(3), pages 301-321, August.
    14. 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.

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