Time to update global services trade rules - report

Reuters: Global trade rules for finance, telecommunications and other service sectors have failed to keep pace with changes in technology and are “modest and flimsy” compared with trade rules for manufactured goods, said a report released on Friday.

“Services trade policy reform can be both a basis for long-term growth and a way to bolster the world’s fragile recovery from crisis,” said the report done for the Coalition of Service Industries, a U.S. business group hoping to persuade countries to launch new services trade negotiations.

Service industries account for 70 percent of world gross domestic product and employ about 3.2 billion people around the world. Not all those services can be exported, but some services like finance, telecommunications software, information, research and development, architecture and advertising can cross borders.

The paper written by Edward Gresser, director of the ProgressiveEconomy Project at the Global Works Foundation, said the United States, as the world’s largest cross-border services exporter, could gain as many as 3 million jobs from an international pact that lowers barriers to services trade.

“An International Services Agreement would be a next generation, powerful advance in the global trading system, helping to meet the immediate need for growth through exports and investment in a fragile post-crisis world economy,” it said.

The United States and more than a dozen other members of the World Trade Organization have been exploring the idea of negotiating a multi-country services trade pact, partly reflecting frustration the 10-year-old Doha round of world trade talks has failed to deliver any market openings.

Some trade rules for services exist within the WTO and the 17 free trade relationships the United States has negotiated over the past decade.

“But they remain modest and flimsy in comparison to agreements covering trade in goods - and are growing weaker as the rapid development of the Internet and cloud computing creates new forms of trade, the report said. The most common services trade barriers involve restrictions on foreign investment. Those range from full bans on foreign ownership to equity limits of 49 percent to restrictions on the number and location of company branches.

A World Bank study ranked 103 countries on their openness to foreign services companies and concluded the United States, Japan, Britain and New Zealand were among the most welcoming.

Relatively closed countries included France, Italy, Mexico, Russia, South Korea and a number of sub-Saharan African countries, and more extensively closed economies included Egypt, China, Kuwait and Saudi Arabia.

The Philippines and Indonesia fared worse in the World Bank survey and five countries -- Ethiopia, India, Iran, Qatar and Zimbabwe -- were judged the most closed to services trade.