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Reform services trade policies to boost the global economy, OECD says

 

8/6/2017 - Better services trade policy can stimulate inclusive economic growth by promoting access to the information, skills, technology, funding and markets needed for success in an increasingly digital global economy, according to a new OECD report.

Services trade policies and the global economy shows how reforming policies relating to the trade in services can strengthen global value chains, boost economic performance and bring important benefits for consumers worldwide.  It notes that manufacturing competitiveness relies on access to state-of-the-art services suppliers at the best prices, and underlines the links between favourable and transparent regulatory environments and attractiveness for foreign direct investment. 


Services generate more than two-thirds of global GDP, employ the most workers and create the most new jobs globally.  The OECD-WTO Trade in Value Added (TiVA) database reveals that services represent more than 50% of the value added in gross exports, and over 30% of the value added in exports of manufacturing goods. But services trade remains subject to restrictions in sectors such as telecommunications, financial services, transportation, logistics and professional services, according to the report.


New OECD analysis reveals that the costs of services trade and investment barriers remain high, largely exceeding the average tariff on traded goods.  Consumers and business pay the cost of these restrictions. In sectors such as transport, logistics and construction, prices are estimated to be about 20% higher on average than they would be in the absence of restrictions, and in some countries are nearly 80% higher than otherwise, imposing substantial additional costs on manufacturing enterprises and eventually on final customers. 


Red tape across services markets also creates additional costs for exporters seeking to enter multiple markets - the ad valorem tariff equivalent of regulatory differences is estimated at about 40%.


Small and medium-sized enterprises (SMEs) would benefit from more open and better regulated services markets. SMEs often find that identifying the regulatory requirements of each country, adapting production methods and documenting compliance is beyond their capacity. Reducing the costs of market entry would help improve the inclusiveness of services trade by allowing more SMEs to take up global opportunities.


“Open and well-regulated services markets are the gateway to global value chains,” said OECD Secretary-General Angel Gurría.  “Services trade policy reform can boost SMEs, reduce trade costs, strengthen the digital economy and help make globalisation work for all.”


The report monitors reform of services policies from 2014-2016, identifying a general policy shift towards liberalisation but revealing that some sectors have, on balance, been subjected to greater restrictions. All countries covered have sectors and policy areas where there is scope for reform, and all countries have areas of good performance that could be a model for others.


The report recommends that countries pursue co-ordinated services trade policy and regulatory reforms by:

  • Scaling back restrictions on foreign entry and barriers to the movement of professionals that discriminate against foreign services providers.

  • Adopting strategic reforms across a spectrum of trade, investment and competition policies to facilitate trade in services.

  • Targeting bottlenecks in transportation and logistics services to reduce trade costs.


The OECD records, quantifies and analyses services trade policies.  The OECD Services Trade Restrictiveness Index (STRI) is a unique, evidence-based tool that provides information on regulations affecting trade in services in 22 sectors across 44 countries, which represent more than 80% of global trade in services.


The STRI database compiles up-to-date information on requirements to enter foreign markets in unprecedented detail, providing transparent and readily accessible insights into the measures that hamper services trade.  The STRI is an important reference for policy makers, international services providers and a source of data for academic research on drivers and impediments to services trade.


Further information on Services Trade Policies and the Global Economy is available at: http://www.oecd.org/trade/services-trade/


Journalists should contact John Drummond, head of the trade in services division of the OECD Trade and Agriculture directorate (+33 1 4524 9536) or the OECD Media Office (+33 1 4524 9700).


 

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