Privatisation of services
Opening up trade in services: crucial for economic growth
Making GATS work for developing countries
Authors:
; OECD
Publisher:
OECD Development Centre, 2005
This paper argues that an efficient services sector is crucial for the overall economy. And because of this, agreement on opening up services markets is crucial to the success of the current global trade talks.
The paper argues that the gains from more open services trade are substantially greater than those from liberalising trade in goods, because:
- services such as telecommunications and transport are essential for producing and delivering virtually all goods, so more open and efficient services markets can have a major impact on overall economic performance
- sending service suppliers abroad can help a developing country reduce pressure on labour markets while increasing capital flows and helping build human capital
- for receiving countries, bringing people in temporarily to provide services can help improve competitiveness and provide short-term relief for labour market shortages
- open services markets increase exposure to foreign technologies
- a virtuous circle can be created where enhanced trade leads to more technology flows and technology leads to increased trade because it offers new ways of doing business.
The briefing cautions, however, that gains from reform will be reduced or may not materialise at all if reforms do not tackle all of the policies that restrict competition. In particular, governments need to set new competition rules to prevent privatisation and foreign take-overs of domestic firms from leading to monopolies. Measures also need to be taken to prevent brain drain as service-providers migrate.
