WORLD TRADE ORGANISATION Symposium on CROSS-BORDER SUPPLY OF SERVICES Sebastián Sáez CONSULTANT

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

ECONOMIC IMPORTANCE OF MODE 1: International transactions by mode of supply MODE OF SUPPLY CATEGORYVALUE(a) ($bn 1997) SHARE (a ) (%)1997 Mode 1 Commercial services (excluding travel) Mode 2 Travel/Tourism Mode 3 Gross output of foreign affiliates Mode 4 Compensation of employees Sources: (a) Karsenty (2000), Deardorff & Stern (2004);

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

REGULATORS PERSPECTIVE THE PROBLEM: Market Access and National Treatment commitments do not provide effective access to market; Market Access and National Treatment commitments do not provide effective access to market; Non-discriminatory regulations may act as deterrents to trade in services; 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; 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. Asymmetric impact of regulations on trade opportunities.

REGULATORS PERSPECTIVE IMPACT OF MODE 1 LIBERALISATION ON REGULATIONS AND REGULATORS How to maintain domestic regulations effective?; How to maintain domestic regulations effective?; Raison dêtre is closely linked to its capacity to exert effective control; 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; 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. Mutual co-operation between regulators at the international level: very difficult venue.

REGULATORS PERSPECTIVE Whose laws and regulations: key to enforcement; Double taxation, evasion and loss of tax-collection; Consumer protection Double or inappropriate taxation Unintentional non-taxation Lack of supply chain efficiency (i.e., lack of securing global contracts) Inability to enter markets Distortion of competition High compliance costs Non-complianceUncertainty Taxation: issues identified

THE WAY FORWARD Understanding of Cross-border supply of services; Defined cross-border trade: modes 1+2; Electronic commerce; Domestic regulation; New services; Subsidies; Taxation; Data processing Horizontal commitments Specific commitments: exceptions to general rule.

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

ADVANTAGES Developing countries have less leverage in negotiations with industrialized countries: a common approach circumvents power politics; 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; 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. Members may still negotiate exception under specific commitments for politically sensitive sectors.