Patrick Low, Fellow of Asia Global Institute, looks at how policy can catch up with the reality generated by the evolution of services.
The paper was prepared as part of an initiative by the International Centre for Trade and Sustainable Development and the World Economic Forum (ITCSD/WEF) on trade and investment. This and other related reports may be downloaded by visiting the e15initiative website; please click here.
Services have needed rethinking for a long time in a changing world. The role of services in production, consumption, and trade has evolved dramatically in the last few decades. Information-related and transport technologies have splintered production locationally and facilitated the separation of production and consumption over greater distances. At the same time, they have greatly shrunk space and time, providing a platform for the explosive growth of international trade and investment. By taking advantage of recently available data sets measuring trade in value-added instead of in gross terms, valuable new insights have emerged on the multiplicity of services entering trade and on the networked nature of economies. The world of policy has been trying to catch up with the evolution of services and servicification in the global economy where services are increasingly recognised as a prominent source of value creation, employment and growth. However, questions arise about the adequacy of arrangements for cooperation in this domain, and, in particular, whether the General Agreement on Trade in Services (GATS) and preferential services agreements are fit for purpose. Following analysis of the background and dynamics to international cooperation in services, the present paper examines issues and outlines related recommendations under six specific categories: services and digitisation; small and medium-sized enterprises and services trade; the role of "soft law" in international agreements; regulatory cooperation; coherence issues arising in relation to the separate rules governing goods and services; and, modifications to the GATS related to temporary presence and also scheduling disciplines. Twelve policy options are put forward for government action to develop an international services regime that addresses today's economic and regulatory challenges, while fostering international cooperation and competition. Their unifying characteristic is that they are all recommendations that could change the framework for future trade policies and negotiations.
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