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Expanding services trade offers major opportunities for growth and jobs, OECD says

 

07/05/2014 - The services sectors offer tremendous opportunities to stimulate growth and jobs worldwide, but much more can be done to reduce the existing barriers to international services trade, according to new OECD research.


Services generate more than two-thirds of global GDP and are the top source of employment in most major economies. But the services sector’s share of global trade is far below its share of the wider economy. This under-performance is largely attributed to the various legal and regulatory obstacles slowing international services trade.


The OECD’s new Services Trade Restrictiveness Index (STRI), released during the Organisation’s annual Ministerial Council Meeting, provides a unique and comprehensive snapshot of services trade restrictions across 18 sectors in 40 leading economies, representing over 80% of global services trade.


“As G20 economies seek to achieve 2% growth above trend over the coming five years, services markets could be an important contributor to future growth,” OECD Secretary-General Angel Gurría said. “The new Services Trade Restrictiveness Index will help countries benchmark their performance while enabling negotiators to target critical trade bottlenecks. It will also help governments detect barriers and the scope for reform, and it will allow businesses to better identify requirements in order to enter foreign markets.”


The Index is based around two key elements: a comprehensive on-line regulatory database of the laws and regulations impacting services trade in all countries and sectors covered; and a series of composite indices that quantify restrictions across five standard categories, with values between zero and one. Complete openness to trade and investment gives a score of zero, while being completely closed to foreign services providers yields a score of one.

Key findings:

 

  • Average levels of restrictiveness are significant, with very wide variations around the average, meaning that there are very real opportunities for most countries to move towards best practices.

  • Across all countries, air transport, legal services and accounting services stand out as highly restricted, while rail transport has a lower average level of restriction, but the widest dispersion around the average. Strong network services are crucial for facilitating trade, so reform in these areas potentially brings large benefits.

  • Foreign equity limitations are common in backbone infrastructure sectors, while national licensing requirements and restrictions on the movement of people often restrict professional services trade. Public procurement regulations are particularly important for construction services.

  • Even modest reforms offer significant benefits: reducing services trade barriers increases imports, but can also increase exports by twice or more, depending on the sector. Modest reforms can increase exports by 3-7%, while lowering import prices by as much as 10%.

  • No country is amongst the three most or least restrictive in all sectors – demonstrating that all countries have areas where reform is possible.

“Our aim with this new Index is not to prescribe reforms for countries,” Mr Gurría said. “The Index provides the information governments need to identify areas of regulatory under-performance as well as best practices elsewhere. Whether reforms are undertaken, domestically, multilaterally or not at all, is for governments to decide. But we certainly hope that, based on this new evidence, they will take action to reduce existing barriers and tap on the tremendous opportunities that expanding services trade offers for growth and jobs.”

For further information on the Services Trade Restrictiveness Index, an interactive website allows users to compare services trade restrictiveness across 18 sectors in the countries covered. Once a given countries’ restrictiveness issues are identified, a policy simulator allows users to test the effects of policy changes. A Policy Brief summarises the main findings.

Country notes offer two-page analytical summaries of the services trade restrictiveness in each of the 40 countries covered.


Sector notes provide detailed analysis of the 18 different services sectors in the index.


A regulatory database provides access to the detailed information behind the index, along with sources and comments, for the 18 sectors and 40 countries covered. Coverage includes approximately 1 400 measures for each country, 90 000 web links and 16 000 laws and regulations.


A section on methodology details the structural foundations for the OECD work on the Services Trade Restrictiveness Index.


Journalist queries on the STRI should be directed to Lawrence Speer, or the OECD Media Office (+33 1 4524 9700).

 

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