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The Rise of Services Trade Restrictions

The Rise of Services Trade Restrictions

4 February 2020 | OECD Trade

 

A long time ago, in a global economy far, far away…

 

Episode I

THE FORCE OF SERVICES AWAKENS

For generations, trade barriers were measured by tariffs, quotas and voluntary export restraints. The policy equivalents of a clumsy and random blaster. That was before new technologies reduced transaction costs. Tradable services gave rise to more integrated business models for a more modern age. Today, services generate more than two-thirds of world gross domestic product, employ the most workers, and create most new jobs globally.

 

Episode II

THE MIDICHLOREANS OF INTERNATIONAL TRADE

The force of services is what gives the global economy its power. Services surround, penetrate and bind global value chains together. Telecommunications and audio-visual services constitute a digital network connecting the world trading system. Transportation and logistics services form the backbone of global supply chains. Financial and professional services are essential enablers of commerce. Engineering and construction services are the foundation of physical infrastructure. Health and education services are at the heart of better lives.

 

Episode III

SIZE MATTERS NOT

Judge exporters by their size, do you? The force of services is a powerful ally for small and medium sized enterprises. Jobs are created by it. It make firms grow. Services surround businesses of all sizes, binding them together and boosting SMEs. Regulatory co-operation can minimise compliance costs, and better use of technology can ease the burden of administrative procedures.

 

Episode IV

SERVICES TRADE RESTRICTIONS STRIKE BACK

A seductive dark side lurks, a pathway to measures that are considered to be restrictions on trade. The OECD’s fifth annual update of its Services Trade Restrictiveness Index (STRI) has detected a disturbance in the services force. It’s as if millions of future jobs risk being silenced. As measured by the OECD STRI, the pace towards more open services trade has been reversed. Newly published data for 2019 demonstrates a 30% increase in new services trade restrictions, while the introduction of liberalising measures has declined by 60%.

 

Episode V

WE’VE GOT A BAD FEELING ABOUT THIS

There are two reasons to worry. First, new restrictions impact sectors that enable trade in digital technologies. Barriers include impediments to online payments and the imposition of local presence requirements on cross-border operations. Second, many countries have introduced measures affecting foreign investment and the temporary movement of professionals. The cumulative effect can trap competitiveness and productivity in a tractor beam and propel the cost of doing business into hyperspace.

 

Episode VI

DO. OR DO NOT. THERE IS NO TRY

Fortunately, a band of policy-makers have been resisting the dark side. In 2019, Brazil implemented comprehensive reforms to air transport services. The European Economic Area (EEA) further liberalised cargo-handling, commercial banking and insurance services. Thailand, France and Greece recorded the highest net decreases in the 2019 STRI indicators. Australia is leading the way with a government-wide services export action plan. Read about all the top performers, reformers and trends in the OECD Services Trade Restrictiveness Index: Policy Trends up to 2020.

 

Episode VII

A NEW HOPE 

Trade Ministers and sectoral regulators must unlearn what they have learned. Impediments to services trade remain pervasive. Regulatory policies are made with limited regard for economy-wide impacts. Countries should adopt whole-of-government services strategies and bind reforms in trade agreements. The alliance of services trade proponents should be revived from its carbonite deep freeze. We encourage trade Ministers to reach out with their feelings, liberalize services trade, and restore balance to the international trading system. In so doing, they can ensure that the force of services trade will be with us. Always.

 

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