africa’s trade in services and economic partnership agreements paul brenton africa region, world...
TRANSCRIPT
AFRICA’S TRADE IN SERVICES AND ECONOMIC PARTNERSHIP AGREEMENTS
Paul BrentonAfrica Region, World BankBrussels, October 7, 2010
Overview2
The importance of services Trade in services Trade policy for services matters The challenge of coordinating regulatory
reform and trade liberalisation The opportunities and risks from an EPA
Context: Services in the modern economy3
Figure A1. Infrastructure, Business, Logistics and Personal Services
Infrastructure and Network Services
Telecomms and ICT
Water
Electricity
Finance
Production
Personal Services
Education
Health
Distribution
Households
Material Inputs
Logistics Services
Customs brokerage
Freight forwarding
Transportation services
Port services
Storage and warehousing
Business Services
Design services
Engineering services
R&D
Information
Accountancy
Legal services
Testing Services
Advertising
Packaging
Certification
Labour Inputs
Outputs of goods and services
Context: Services matter4
For growth Productivity growth can be higher than in
manufacturing Technological change important for services Significant learning and knowledge spillovers through
clustering. For employment
Services largest contributor to job creation High employment rates for women
For poverty reduction Poverty reduction more strongly correlated with
growth of services than with growth of manufacturingSee Ghani, E (ed) The Service Revolution in South Asia, World Bank-OUP, 2010
Trade in services plays key role
5
Exports of services can drive diversification Potential 18 million new jobs in developing
countries from offshoring of services (each job generates a further 3 jobs)
Imports of services and FDI can lead to greater competition, lower prices, higher quality and more variety
Trade policy for services6
Competition is essential to increase efficiency Competition leads to lower prices+better quality services. Competition pushes service suppliers to reduce waste,
improve management and reduce operating costs forces suppliers to pass on cost savings to consumers in the
form of lower prices. Competition undermines costly rent-seeking activities
Trade liberalisation can increase competition + attract FDI Small national markets in Africa cannot generate level of
competition needed to drive efficiency and adoption of new technologies.
Small size means attracting investment from overseas is important for key infrastructure services.
Many services require regulation
Market failures in many services sectors can impact on both efficiency and equity. natural monopoly, systemic risks, asymmetric
information, and externalities require regulation. Effective regulation and capacity
Regulation can be complex Weak regulation leads to less competition and
higher costs Must avoid regulatory capture
Effective regulation and capacity
In electricity need to monitor and consider: Output and consumption (access levels, Consumption levels and
growth, unsatisfied demand); Efficiency (Productivity levels and growth, Cost levels and changes,
Capacity and utilization, losses); Quality of supply (Continuity, Quality, customer service) Financial performance (Financial surpluses and losses, rates of
return, indebtedness and interest burden); Capacity, investment, and maintenance (Capacity levels and
margins , investment , maintenance expenditure); Prices (prices and full economic costs, efficiency of subsidies Tariff
design and technical and economic efficiency); Competition (Well-functioning bid auction markets , Well-functioning
and competitive generation and supply markets) Social indicators (Affordability especially for low-income
consumers, Impacts on development)
Coordination of trade and regulatory reform
a dynamic process – no strict sequencing Appropriate regulations may be necessary to
realize benefits of trade liberalization emphasis on competition, sound regulation and wider
access Trade brings new technology which may require change to
regulatory approach Trade opening with inappropriate regulations
can result in adverse outcomes Need for capacity to design and implement
appropriate regulations and monitor impact
Strategy for trade in services
Improve data and initiate dialogue with stakeholders
Focus on priority services sectors Offensive export interests Domestic sectors where increase in FDI/competition essential
for competitiveness
Assess current regulatory policies and openness to trade and FDI
Discuss appropriate forum for trade liberalisation of services Unilateral, Regional, EPA or multilateral
Obtain technical assistance to increase capacity of regulator and improve regulations
10
Services trade policies appear less restrictive in Africa
Source: Gootiz and Mattoo (2009)
18.9
19.9
20.7
29.6
39.3
39.4
41.6
48.2
WRestrictiveness of services trade policy
OECD
ECA
LAC
AFR
MENA
EAP
SAR
GCC
Note: W is average STRI of total 102 countries
But Africa has not bound openness at WTO
0
10
20
30
40
50
60
70
80
90
Eastern Europe
OECD Latin America
Africa World South Asia East Asia Middle East
Actual policy
Doha offers
UR commitments
Source: Gootiz and Mattoo (2009)
Reticence to make commitments on services at WTO
13
Mercantilist bargaining approach not effective for services
GATS/WTO not adequately addressed the issue of regulatory reform and capacity building
Lack of clarity over technical assistance Need forums/platforms of best practices
and lessons for successful trade and regulatory reform
Regional integration and services
Risks from preferential liberalisation – MFN dominates – especially in network industries Regional integration can allow for learning effects But can give first-mover advantage to less efficient firm
But potential gains from mutual recognition Move faster at the regional level than in EPA or multilateral
in sectors with similar standards and regulatory approaches
Opportunities from regional regulatory cooperation Avoid regulatory capture Can allow for faster reform Pooling of technical capacities for regulation
Thick borders in Africa limit integration15
High trade costs create “thick” borders.
These are a key barrier to regional and global integration.
Opportunities from a services EPA
Provide credibility to reform process Improvement in access to EU?????
Especially mode 4 beyond skilled workers Provisions on regulatory issues of
particular importance to Africa Tourism - Shipping?
Financial and technical assistance Enhance regional integration
Risks of a services EPA?
Broad but shallow GATS type agreement
Too much focus on market access without coordinated regulatory reform and
capacity building Preferential liberalisation
A development-oriented services EPA for Africa
A coordinated sector-by-sector regulatory-reform/trade-opening process
Flexible approach to timing of reforms and a phased strategy towards implementation.
An emphasis on locking in non-discriminatory liberalization of services imports
EPA can be a part of process not an end-point!
Africa Trade Policy Noteshttp://go.worldbank.org/M8SXRN80G0
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