Negotiating the liberalisation of services is complicated. Adequate national regulation and international regulatory cooperation will often be necessary. A concerted effort is needed to help countries strengthen and improve service sector regulation and implementing institutions, as well as to cooperate with each other where there are significant regulatory externalities.
Much of what remains to be done to remove developing nation barriers to trade in services will be conditional on such regulatory improvements. An important element of any Doha package on services should therefore be agreement to create mechanisms to promote pro-competitive domestic regulatory reform and thus support liberalisation in the future.
Although comprehensive liberalisation of service markets in all 153 members in the Doha round is neither possible nor at this point in time desirable, the largest services economies (a “G25”) can and should go further.
But the larger players may also need to pursue domestic regulatory reforms before opening up some services sectors to foreign competition, and will need to strengthen regulatory cooperation to facilitate trade in some services.A pre-commitment approach will allow such conditions to be put in place and ensure that there is an agreed timetable to open markets to greater competition. Explicitly recognising that services liberalisation cannot – and should not be – divorced from services regulation will do much to help harness the potential that trade agreements have to expand services trade and investment.
More on services trade and the Doha Round by Bernard Hoekman and Aaditya Matto here