Everyone who stops to think knows that trade in services is under-counted. Services do not go through customs points in ports and airports and do not have measurement systems honed over centuries. But like the drunk who was looking for his keys not where he dropped them, but where there was light, we all have a tendency to talk about trade using only data on goods trade, because that is what is available. I’ve done it myself, despite having worked on services trade since the 1980s. That is what caught my eye in this little piece on how to explain why international trade (in goods) appears to have flattened out.
This is a battle that was brewing. Mode 1 trade in services is when the supplier is in Country A, the buyer is in Country B and the transaction occurs over some means of communication, usually electronic. Given the costs of telecom these days, it really does not make sense to open warehouses/server farms in every country. So you have centralized means of delivering services that cross borders electronically (Google, for example) and one-way by post (e.g.
A pioneering e-commerce provider in Sri Lanka has tied up with QTel/Wataniya to offer its services in the Maldives, and in the process also facilitate trade in medical services. E-Channelling has entered into an agreement with Wataniya Telecom Maldives, owned by Qatar Telecom (QTel) as part of its global expansion programme, it said. The deal is to provide software services to automate medical ‘channelling’ services in the Maldives and is E-Channelling’s first international project. “QTel has given an undertaking that after completion of the project in the Maldives they would look into replicating the software solutions in all other 17 countries jointly with ECL,” the statement said. The four-phase project will first make available ‘e-channeling’ services to Maldivians to consult Sri Lankan doctors and get health check-ups and other medical services in 25 partner hospitals in Sri Lanka.
Trade in services came on the policy scene in the 1980s. It played an important role in reforming telecom sectors across the world, especially because of the Regulatory Reference Paper that was an integral part of the Basic Telecom Services agreement. Trade agreements are simply one more element used to lock in regulatory commitment, thus facilitating investment and thereby good performance. The famous story about how one can trade hair-cutting services across borders illustrates the connection with ICTs. How can one trade hair cuts, a service that is consumed at the moment of production?
At the “multi-year expert meeting” on services, development and trade: the regulatory and institutional dimension, organized by UNCTAD in Geneva, there was rich discussion on the increasing importance of regulation in an environment in which services trade is assuming greater importance. As attention shifts to services trade (for example, the most important element of the proposed Comprehensive Economic Partnership Agreement between India and Sri Lanka, is the services chapter), there is of necessity a need to start looking at regulatory restrictions on services trade. Tariffs do not apply to services, so the only barriers are opaque, arbitrary and discriminatory regulatory provisions. This has been well recognized in telecom, with the reference paper on regulation being one of the key contributions to liberalization made by the GATS. The issue being raised at the UNCTAD meeting was whether there was value in exploring the regulatory aspects of trade in other infrastructure services.