Services provisions in regional trade agreements: Stumbling blocks or building blocks for multilateral liberalization?

Abstract

Introduction A remarkable feature of the recent wave of regional trade agreements (RTAs) is the inclusion of a trade in services component in many agreements. At the end of 2006, the WTO counted fifty-four such service accords, of which only five predate the conclusion of the Uruguay Round. The rising interest in service trade agreements reflects a number of developments. First, as tariffs have come down, policymakers have turned their attention to other barriers restricting international commerce. Second, the growth of world trade in goods and the emergence of international production networks have highlighted the importance of an efficient services infrastructure – whether in telecommunications, finance, logistics or legal advice. Market openings in services offer the prospect of performance improvements in services, and allow goods producers to draw on multinational service networks in organizing their business. Third, technological progress has vastly expanded the range of services that can be traded cross-border. The well-known outsourcing phenomenon has led to the emergence of new dynamic export industries in services, which hold significant potential for low-wage developing countries. Finally, many governments have transferred the provision of infrastructure services to the private sector, expanding the scope for foreign participation in services. Indeed, services FDI has grown faster than total FDI in recent years, as service providers from high- and middle-income countries seek out new commercial opportunities in foreign countries.