Trade in services, Macroeconomics

TRADE IN SERVICES:

India had objected to  the  inclusion of  trade in services  in  the agreement for  the UR  negotiations. The  Indian negotiations continued to raise objections to libralisation in the subsequent negotiations. Few could have anticipated that trade in services would be the dynamic sector in Indian export performance. 

Trade in services  has been dynamic growing  at 6 per cent a year between 1990 and 2002. Undoubtedly,  the developed  countries have comparative advantages as they have the lion's  share of exports of commercial services. Furthennore their share in commercial services is higher than  their share in goods exports. However, developing countries, both low income and midd'le- income countries, increased  their  share  of  commercial services exports between 1990 and 2002. But this better performance of developing countries as a whole, hides  the uncomfortable fact that  this is mainly because of  the performance of the Asian countries. The share of other developing country regions in exports of commercial services has declined.  

But when commercial services are broken into transport, travel  and  other services such as banking, insurance, professional, data related, consumption etc. developing countries  have made a substantial gain in travel services. All regions except Latin America have increased  their share. Small gains have also been made by developing countries in both transport and other services. But whereas only East Asia increased  its share  in  transport services, all regions, except SSA(Sub Saharan Afiica), increased their share  of other services.  So developing countries are doing well in the dynamic services as exports of travel services increased at an annual rate of  5.6%  and  other services at 7.0%, whereas exports of transport services grew annually at only 1.1%. But developing countries started off with a relatively low share of the dynamic "other services" sector.  

India has increased its share of all types of services, and particularly of other services.  India's  share of exports of services at  1.4%  is double its share of world exports of goods.  Furthermore, its share  of  the "other services" sector is even higher at 2.2%.  This points to the  dangers of negotiating without adequate analysis, though one should  not  be  too  harsh  on the  Indian negotiators as little was known about services  trade and the technological leap in IT was difficult to predict. The success of Indian service exports  in  the  past decade points  to  the difficulties in anticipating the benefits from  liberalisation. Analysis is made more difficult in the case of services (J.Whalley, 2003) by the difficulties of defining services, measuring service trade and indicators of baniers to trade. Services can range from purely intermediate goods, such as some back office operations,  to  those that are  partly  intermediate  and partly final consumer goods, e.g.,  banking  and  telecommunications, to those that  are  basically  final consumer goods e.g.,  tourism.

Lumping them together as services suggests that the analysis may be seriously flawed. Data on the level and composition of international  trade in services is poor because there is no  formal  customs clearance for services trade. Barriers to trade are sometimes  measured  by price differences and  sometimes by  frequency data showing prevalence of regulatory measures etc. But there are problems with all such measures. For instance, regulatory measures may or may not be  barriers to trade. Such conceptual differences make difficult estimation of  the benefits  from liberalisation.

Posted Date: 11/9/2012 4:29:14 AM | Location : United States







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