WORLD TRADE ORGANISATION Symposium on CROSS-BORDER SUPPLY OF SERVICES

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WORLD TRADE ORGANISATIONSymposium on
CROSS-BORDER SUPPLY OF SERVICES

• Sebastián Sáez
• CONSULTANT

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CONTENT

• ECONOMIC IMPORTANCE OF MODE 1
• RELEVANCE FOR DEVELOPING COUNTRIES
• REGULATORS PERSPECTIVE
• THE WAY FORWARD

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ECONOMIC IMPORTANCE OF MODE 1 International
transactions by mode of supply
MODE OF SUPPLY CATEGORY VALUE (a) (bn 1997) SHARE(a) () 1997
Mode 1 Commercial services (excluding travel) 890 41.0
Mode 2 Travel/Tourism 430 19.8
Mode 3 Gross output of foreign affiliates 820 37.8
Mode 4 Compensation of employees 30 1.4
Sources (a) Karsenty (2000), Deardorff Stern
(2004)
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RELEVANCE FOR DEVELOPING COUNTRIES

• Less expensive way to supply services
• Developing countries invest relatively small
  amount of capital abroad
• Successful experiences have emerged real
  opportunities exist
• Mode 4 is highly sensitive from a political point
  of view
• Efforts to expand trade under mode 1.

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REGULATORS PERSPECTIVE

• THE PROBLEM
• Market Access and National Treatment commitments
  do not provide effective access to market
• Non-discriminatory regulations may act as
  deterrents to trade in services
• Issue is relevant to developing countries the
  sum of all regulatory costs is equivalent to a
  specific tariff on services export
• Asymmetric impact of regulations on trade
  opportunities.

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REGULATORS PERSPECTIVE

• IMPACT OF MODE 1 LIBERALISATION ON REGULATIONS
  AND REGULATORS
• How to maintain domestic regulations effective?
• Raison dêtre is closely linked to its capacity
  to exert effective control
• New forms of regulation must be devised and a
  more flexible approach with regard to trade
  restrictions must be applied
• Mutual co-operation between regulators at the
  international level very difficult venue.

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REGULATORS PERSPECTIVE
Taxation issues identified

• Whose laws and regulations key to enforcement
• Double taxation, evasion and loss of
  tax-collection
• Consumer protection

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THE WAY FORWARD

• Understanding of Cross-border supply of services
• Defined cross-border trade modes 12
• Electronic commerce
• Domestic regulation
• New services
• Subsidies
• Taxation
• Data processing
• Horizontal commitments
• Specific commitments exceptions to general rule.

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ADVANTAGES

• Similar level of liberalisation for WTO members
  avoids selective negotiations and addressing some
  members trade interests
• Provides a common understanding and avoids
  disputes
• Dynamic it does not depend on classification,
  and it captures technology change

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ADVANTAGES

• Developing countries have less leverage in
  negotiations with industrialized countries a
  common approach circumvents power politics
• Domestic regulations provide comfort to
  regulators and public opinion, not a blank
  cheque
• Members may still negotiate exception under
  specific commitments for politically sensitive
  sectors.