United States

New OECD Tool Can Help US Services Exporters Break Down Barriers, Support Jobs at Home

 

Washington, May 7, 2014 -- The United States can further improve productivity in its economy by prioritizing reforms that enhance openness, diversity and competition in services markets, particularly where higher trade restrictions are observed.

 

The OECD’s new Services Trade Restrictiveness Index (STRI), released during the Organization’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.

 

The United States’ scores in the Index –where complete openness to trade and investment gives a score of zero, while being completely closed to foreign services providers yields a score of one--are below the average in 13 out of the 18 sectors studies, reflecting  in large part a favorable overall business environment.

 

Services contribute to 30% of the United States’ gross exports, and over half of its value added exports, indicating that exports of goods rely intensively on services inputs. Cost-effective state-of-the-art services are therefore of utmost importance for the competitiveness of the US industrial sector. Services account for almost 80% of GDP and an even higher share of employment in the United States, which implies that earnings and aggregate demand depends crucially on productivity in the services sectors.

 

 “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 thelaws and regulations impacting services trade in all countries and sectors covered; and a series of composite indicesthat quantify restrictions across five standard categories, with values between zero and one.

 

Key findings for the United States

Least Restrictive Sectors:

- The United States’ has the most liberal policies and lowest STRI scores in the sound recording, motion picture and distribution services among the 40 countries included in the Index. There are no restrictions to the establishment of sound

recording, film production and film distribution companies, or to the diffusion of foreign cultural works; intellectual property rights are appropriately protected.

- Distribution services (wholesale and retail trade) have the lowest average STRI score. The sector is lightly regulated in general in the United States, but a more restrictive regime applies to alcohol distribution and liquor stores.

Most Restrictive Sectors:

- The sectors with the highest STRI scores are air transport, maritime transport and courier services. These are also the three sectors where the United States scores significantly above average.

- In air transport services, foreign participation may not exceed 49% of non-voting equity and 25% of voting equity. The CEO and at least two thirds of the Board of Directors of an airline established in the country must be US citizens. It should be noted that the STRI index for air transport covers only trade through commercial presence; international traffic by foreign companies not established in the United States is governed by bilateral agreements.

- Maritime services have the second highest score, in large part due to restrictions on foreign entry. Companies owning vessels must be incorporated under the laws of the United States; the CEO, the chairman of the Board of Directors and a majority of directors must be US citizens. The cabotage market is not open to foreign firms. The Jones Act states that merchandise transported by water between US points must be carried by vessels built in the  United States, carrying the US flag, owned and manned by US citizens. Another regulation that contributes to the index is the requirement that at least half of government cargo must be carried by US-flagged vessels.

- Courier services include letters, parcel and express delivery services. The state-owned United States Postal Services (USPS) has a monopoly on the delivery of first-class and standard mail and access to mailboxes, which closes the letter segment up to 12.5 ounces to private competitors. USPS is also exempted from the application of  antitrust laws and from the payment of state sales and property taxes. Parcel delivery and express delivery services are competitive

 

“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

 

‌‌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.

 

Queries on the STRI from media in the United States and Canada should be directed to Miguel Gorman at the OECD Washington Center  (+1 202 445 8058).

 

 

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