1. The Doha Services Negotiations Bernard Hoekman (World Bank) Beirut, November 12, 2009

2. Where are we?

3. Restrictiveness of services trade policies, 2008 Source: Gootiz and Mattoo, World Bank Policy Research Working Paper (2009).

4. Services in Doha: a large “offer gap” Source: Gootiiz and Mattoo (2009)

5. GATS schedules, Doha offers and actual policy Source: Gootiiz and Mattoo (2009)

6. GATS: less than full coverage – mostly ‘lock-in’ vs. actual liberalization E.g., EU-15 commitments and Doha offer Mode of supplyGATS commitments Doha offer Difference (% points) Mode 150.557.26.7 Mode 266.988.221.3 Mode 363.082.919.9 Mode 43.54.51.0 Total46.058.212.2

7. Why such little progress?

8. Potential explanations 1.Negotiating process: first Ag. & NAMA 2.Less “need” for reciprocal negotiation? –Much reform implemented unilaterally 3.Market access not that bad? –FDI has grown 10 times faster than GDP since 1990; and doubled to reach $12 trillion in 2006 60% of this in services –Mode 1 tends to be open –Trade in services grew by 12% in 2008 … 4.GATS lock-in not perceived to be of great value? –Low expected probability of backsliding

9. Potential explanations (2) 5.GATS disciplines do not deal with regulatory barriers (e.g., Dell in India) 6.Many developing countries have little export interest – a “reciprocity problem” 7.Lack of an emergency safeguard mechanism 8.Regulators concerned about autonomy 9.Offshoring concerns; anti-migration forces 10.Worries about realization of social objectives, ownership of firms, employment, etc.

10. Cross-border services trade more robust than goods trade in crisis Source: Borchert and Mattoo (2009)

11. US Monthly Imports of Goods and Services (y-o-y change)

12. Why is non-transport/non-travel services trade more resilient? Demand for imports is less cyclical: –Producer services (business process outsourcing) increasingly an integral part of production function of firms—cannot cut this back very much –Outsourcing a way to cut costs in a very competitive environment—demand rising, not falling Services trade is less external finance- dependent –Many service outsourcers are internally financed New WTO report: services trade expanded by 12% in 2008

13. Rules are not relevant enough? Mode 1: In practice is mostly relatively free Mode 2: Protectionism does not “work” Mode 3: There are alternatives, such as bilateral investment treaties to address FDI policy uncertainty Mode 4: Major (political) incentive to be protectionist – are starting from an already very restrictive baseline –Bilaterals/PTAs a more effective vehicle? –Potentially more effective/feasible mechanism for regulatory cooperation/competition? All these arguments have some relevance, but should not be overstated: more commitments will reduce uncertainty and can help promote competition

14. What could be done? 1.Focus effort on expanding coverage of specific commitments rather than new liberalization Greater policy certainty as the main objective No real downside 2.Address regulatory concerns by strengthening provisions on regulatory freedom 3.Focus more “aid for trade” on services –Invest in transparency/analysis at national level –Regulatory cooperation – including in regional contexts 4.More transparency: use WTO for regular scrutiny of performance of services (outcomes), not just policies

15. Conclusions Greater ambition needed on expanding coverage of specific commitments on services –This critical to get a deal—pre-condition to generate political support in key countries This does not imply actual liberalization or less freedom to regulate Recognize the need for effective regulation – and that “one size fits all” does not apply –Expand cooperation (aid for trade) in this area