LIST OF FIGURES ................................................ ix
LIST OF TABLES ................................................. xi
LIST OF BOXES .................................................. xv
NOTES ON CONTRIBUTORS ........................................ xvii
ACKNOWLEDGEMENTS .............................................. xix
LIST OF ABBREVIATIONS ......................................... xxi
PART I. THE FRAMEWORK OF TRADE IN SERVICES
1. Overview ..................................................... 3
Aaditya Mattoo and Robert M. Stern
2. The GATS .................................................... 48
Rudolf Adlung and Aaditya Mattoo
3. The Basic Economics of Services Trade ....................... 84
Brian Copeland and Aaditya Mattoo
PART II. ANALYZING TRADE IN SERVICES
4. Measuring Trade in Services ................................ 133
Andreas Maurer, Yann Marcus, Joscelyn Magdeleine,
and Barbara d'Andrea
5. Empirical Analysis of Barriers to International Services
Transactions and the Consequences of Liberalization ........ 169
Alan V. Deardorff and Robert M. Stern
6. Regionalism in Services Trade .............................. 221
Aaditya Mattoo and Pierre Sauve
PART III. SECTORAL AND MODAL ANALYSIS
7. Financial Services and International Trade Agreements:
The Development Dimension .................................. 289
Wendy Dobson
8. Trade in Infrastructure Services: A Conceptual Framework ... 338
Philippa Dee and Christopher Findlay
9. Transport Services ......................................... 356
Christopher Findlay
10.Trade in Services Telecommunications ....................... 389
Peter F. Cowhey and Jonathan D. Aronson
11.Trade in Health Services and the GATS ...................... 437
Richard Smith, Chantal Blouin, Nick Drager, and
David P. Fidler
12.E-Commerce Regulation: New Game, New Rules? ................ 459
Carlos A. Primo Braga
13.The Temporary Movement of Workers to Provide Services
(GATS Mode 4) .............................................. 480
L. Alan Winters
Appendix. A Guide to Services Negotiations Geza Feketekuty .... 542
INDEX ......................................................... 593
LIST OF FIGURES
1.1. Trade in goods and services, 1985-2002 .................... 7
1.2. Developing countries' share in world exports of goods
and services, 1986-2002 ................................... 8
1.3. Regional distribution of business services exports ........ 8
1.4. Average growth rate of exports of business services,
1965-2000 ................................................. 9
1.5. Welfare gains from a 3% increase in developed countries'
temporary labor quota .................................... 11
1.6. Effects of telecommunications costs on trade in goods .... 12
1.7. Services liberalization indices: telecoms and financial
services ................................................. 13
1.8. Effects of services liberalization on economic growth .... 14
1.9. Effects of sequencing on mainlines ....................... 19
1.10. WTO Members have been reluctant to make market access
commitments on the movement of natural persons
(Mode 4) ................................................. 25
1.11. Sector focus of current commitments (developed/
developing country members, August 2003) ................. 21
1.12. Sector focus of current commitments (acceding/non-
acceding members) ........................................ 27
2.1. Sector focus of current schedules, November 2005 ......... 55
2.2. Sector policy profile of MFN exemptions, September
2004 ..................................................... 65
2.3. The impact of offers on the share of sectors subject
to commitments under the GATS, November 2005 ............. 74
3.1. Welfare effects of service trade ......................... 90
3.2. Welfare effects of trade taxes .......................... 106
3.3. Effects of an import quota .............................. 108
3.4. Foreign direct investment: competitive market ........... 110
3.5. Impact of restrictions on market structure .............. 113
3.6. FDI with average cost pricing ........................... 115
3.7. FDI with markup pricing ................................. 115
3.8. Trade in professional services with imperfect
screening ............................................... 118
3.9. Trade in professional services with reform of
screening ............................................... 119
3.10. National treatment vs. recognition ...................... 121
3.11. External benefit from local production .................. 122
3.12. Local product squeezed out by trade ..................... 123
3.13. Substitution between modes of supply .................... 125
4.1. World trade in commercial services, total exports,
1980-2004 ............................................... 134
5.1. Perfect competition and perfect substitution between
domestic and foreign services firms ..................... 174
5.2. Imperfect competition and substitution between
domestic and foreign services firms ..................... 175
5.3. Domestic services firm with monopoly power and
restrictions on foreign firms ........................... 175
5.4. Restrictiveness indexes for banking services for
selected Asia-Pacific economies, South Africa, and
Turkey .................................................. 190
5.5. Restrictiveness indexes for banking services for
selected Western Hemisphere economies ................... 191
6.1. Regionalism and trade in services in the Americas ....... 280
7.1. Liberalization indices based on GATS commitments-core
banking services ........................................ 308
7.2. Liberalization indices based on GATS commitments-
direct insurance services ............................... 309
8.1. Separating the natural monopoly and competitive
elements of infrastructure industries ................... 347
9.1. Number of WTO members scheduling transport services ..... 365
13.1. Remittances from overseas workers as percent of GDP
and exports (1990-2000) ................................. 487
13.2. The costs of labor misallocation ........................ 494
13.3. The benefits of a small relaxation of mobility
restrictions ............................................ 495
LIST OF TABLES
1.1. Inadequacies of Statistical Domains with Regard to
Modes of Supply ........................................... 7
1.2. Developing Country Priorities in Alternative
Negotiating Fora ......................................... 23
1.3. Commitments for Telecommunications Reform ................ 29
2.1. Measures that May Affect Services Trade under the Four
Modes of Supply .......................................... 51
2.2. Structure of a Schedule of Commitments ................... 54
2.3. Commitments by Country Group, November 2005 .............. 56
2.4. Examples of Pre-commitments to Liberalization in Basic
Telecommunications (Mode 3) .............................. 62
2.5. Rationale for Regulation in Services and Potentially
Relevant GATS Rules ...................................... 68
2.6. Overview of Mode-specific Objectives as Contained in
the Hong Kong Ministerial Declaration .................... 76
3.1.A.Welfare Economics A: Lawyers that Move Counted in GDP
of Abroad ................................................ 91
З.1.В.Welfare Economics B: Lawyers that Move Counted in
GDP of Home .............................................. 91
4.1. Correspondence Between Modes of Supply and Statistical
Domains ................................................. 140
4.2. Countries Reporting Exports of Selected BPM5 Services
Components .............................................. 158
4.3. Summary of BOP Trade in Services Data Dissemination
by International Organizations .......................... 159
4.4. Availability of Inward and Outward FATS Statistics in
OECD Countries .......................................... 160
5.1. International Services Transactions by Modes of
Supply, 1997 ............................................ 170
5.2. Restriction Categories for Banking Services ............. 180
5.3. Barriers to FDI ......................................... 182
5.4. Components of an Index of FDI Restrictions .............. 188
5.5. FDI Restrictiveness Indexes for Selected APEC
Economies and Selected Sectors, 1996-98 ................. 188
5.6. Constructed Ad Valorem Tariff Equivalent
"Guesstimates" by 1-Digit ISIC Services Sectors for
Selected Countries ...................................... 193
5.7. International Air Passenger Transport: Bilateral
Restriction Indexes and Price Impacts ................... 194
5.8. Tariff Equivalents of Barriers to Telecommunication
Services in Major Nations ............................... 196
5.9. Estimated Tariff Equivalents in Traded Services:
Gravity-model Based Regression Method ................... 198
5.10. Average Gross Operating Margins of Firms Listed on
National Stock Exchanges, 1994-96 by Country/Region ..... 199
5.11. Average Gross Operating Margins of Services Firms
Listed on National Stock Exchanges, 1994-96, by
Country/Region and by Sector ............................ 199
5.А.1.Price Impact of Regulation on Telecommunications
Prices, 1997 (Percent of Notional Price Existing
under Benchmark Regulatory Regime) ...................... 207
5.A.2.Price Impacts of Regulation on Industrial Electricity
Prices, 1996 ............................................ 209
5.A.3.Estimated Cost Impacts of Foreign and Domestic
Barriers to Establishment in Wholesale and Retail
Food Distributors ....................................... 210
5.A.4.Estimated Price Impacts of Foreign and Domestic Trade
Restrictiveness Indexes (TRI) on Net Interest Margins
of Banks ................................................ 211
5.A.5.Estimated Price and Cost Impacts of Restrictions on
Engineering Services .................................... 212
5.A.6.Coefficient Estimates of Technical Efficiency in
Telecommunications Services ............................. 213
5.A.7.Welfare Effects of Elimination of Services .............. 216
6.1. Key Disciplines in RTAs Covering Services ............... 240
6.2. Key Features of RTAs Covering Services .................. 248
6.3. Key Provisions of GATS Article V (and V bis) ............ 250
7.1. An Index of Openness in Financial Services, 1997 ........ 305
7.8.1.1. Main Provisions on Financial Services-
Regional and Extra-Regional Agreements of
the Western Hemisphere ......................... 318
7.8.1.2. Main GATS plus Component in Financial
Services Commitments of Selected Western
Hemisphere Countries ........................... 320
7.В.2.1. Foreign Ownership in China's Local Banks ....... 328
7.B.2.2. Non-performing Loans and Capital Adequacy of
Banks .......................................... 329
7.B.2.3. Important Events Related to the Qualified
Foreign Institutional Investors (QFII) ......... 331
7.B.2.4. Comparison of Some Indicators between
China's Banks and Top Banks in the World ....... 332
7.B.2.5. China: A Summary of Implementing GATS
Commitments in the Financial Sector ............ 333
8.1. Access Charges with Structural Separation ............... 349
8.2. Access Charges with Vertical Integration ................ 350
9.1. Trade in Transport Services: Some Examples .............. 363
9.2. Example of GATS Commitments ............................. 364
10.1. Wireless Technology Systems ............................. 399
10.2. Participant Commitments ................................. 401
11.1. Articles of GATS of Greatest Relevance to Health
Policy .................................................. 440
12.1. The Layers of Communication Systems ..................... 460
12.2. Regulatory Environments and Networks: Areas of
Relevance for E-Commerce ................................ 461
12.3. Deeper Integration Issues Related to E-Commerce ......... 471
13.1. The Temporary Movement of Unskilled and Skilled
Workers: Estimated Stocks in 1997 ....................... 484
13.2. Geographic Origin of Non-immigrants to the United
States: Selected Visa Categories of Most Relevance for
Mode 4, 2001 ............................................ 485
13.3. Profile of HIB Beneficiaries by Top Ten Industries,
United States, Fiscal 2001 .............................. 486
13.4. Overseas Service Workers from the Philippines, by
Occupation and Country (1995-2000) ...................... 488
13.5. Commitments on Mode 4 by Type of Person (Horizontal
Commitments), April 2002 ................................ 489
13.6. Economic Welfare by Region and Class of Worker .......... 501
13.7. Percentage Changes in the Real Wages of Skilled and
Unskilled Workers ....................................... 501
13.8. Welfare Decomposed According to Effects of Increasing
Skilled and Unskilled Quotas ............................ 503
13.9. Welfare Results for Sensitivity Analysis ................ 504
13.A.1.Accounting Concepts for the Temporary Flow of
Labor from Country A to Country В ....................... 539
LIST OF BOXES
1.1. Why do Services Matter for Development? .................. 10
1.2. Services Reform and Impact on Comparative Advantage ...... 12
1.3. The Sequence of Reform Matters ........................... 18
1.4. The Main GATS Rules ...................................... 25
1.5. Ensuring Barrier-Free Trade in Electronically
Delivered Products ....................................... 28
2.1. Classification of Services Proposed by the then GATT
Secretariat .............................................. 49
3.1. Some Stylized Facts about Services ....................... 86
3.2. Dynamic Benefits of Services Trade Liberalization ........ 98
3.3. Impact of Restrictions and Substitutability between
Modes ................................................... 102
3.4. Fiscal Instruments: Is the Difficulty of Substitution
Between Policy Instruments Overstated? .................. 109
3.5. Are There Good Reasons to Limit Entry? .................. 116
4.1. Measuring Services Production ........................... 133
4.2. Different Types of Movement of Persons, Viewpoint of
the Recipient Country ................................... 134
4.3. Patterns of Trade in Services Expansion ................. 135
4.4. Measuring Trade in Services: The U.S. Statistical
Practices-Obie G. Whichard .............................. 150
5.1. Russia's WTO Accession: What Are the Macro-economic,
Sector, Labor Market, and Household Effects?-Thomas
F. Rutherford and David Tarr ............................ 171
6.1. The Standard Economics of Preferences ................... 225
6.2. Harmonization and Mutual Recognition in Services:
Promise and Pitfalls .................................... 243
6.3. Liberal Rules of Origin Can Minimize Investment
Diversion ............................................... 251
6.4. Demonstration Effect Regionalism: The Digital Trade
Agenda and RTAs ......................................... 260
6.5. Liberalizing Services Trade in the ASEAN Region-
Carsten Fink ............................................ 274
6.6. Regionalism and Trade in Services in the Americas-
Sherry Stephenson ....................................... 278
7.1. Liberalization of Trade in Financial Services: New
Trends in the Western Hemisphere-Patricio Contreras ..... 316
7.2. China's Financial Sector: Pre- and Post-WTO Reforms-
Yan Wang ................................................ 326
9.1. Inefficient Internal Transport System Contributes to
the Concentration of China's Export Industries in
Coastal Regions ......................................... 357
9.2. Transport Services Categories in the GATS ............... 361
9.3. Argentina's Experience in Port Reform ................... 368
9.4. Derailed British Railway Reforms ........................ 373
9.5. NAFTA and Mexico-U.S. Liberalization of Cross-border
Road Transport .......................................... 381
9.6. Trade in Transport Services: Competition and
Reliability: Issues and Trade-Offs-Marc H. Juhel ........ 384
10.1. Economic Principles of Telecommunications ............... 392
10.2. Basic and Value-Added Telecommunications ................ 403
10.3. Korea's Final Schedule of Commitments on Telecom at
the WTO ................................................. 405
10.4. The WTO Reference Paper ................................. 407
Annex Commitments of Costa Rica on Telecommunication
Services in the Context of the U.S.-Central America-
Dominican Republic Free Trade Agreement (DR-CAFTA)-
Roberto Echandi ......................................... 428
11.1. Health Policy Principles to Guide Liberalization of
Health-Related Services ................................. 438
11.2. Points for Policy Makers ................................ 439
11.3. Modes of Service Supply under GATS and Health
Opportunities and Risks ................................. 441
11.4. Key Questions for Monitoring the Impact of GATS 2000
on Health Policy ........................................ 443
11.5. Checklist for Policy Makers on Trade in Health-
Related Services ........................................ 445
11.6. Elements of a General Framework for Country Analysis
of GATS ................................................. 445
11.7. The GATS and the Health of Poor People-Shantayanan
Devarajan ............................................... 457
13.1. The Indian Proposal on Mode 4 ........................... 517
13.2. The United Kingdom's GATS Visa Scheme ................... 518
13.3. The Recruitment of Nurses in the U.S. ................... 523
13.4. The European Communities' Offer on Mode 4, 2003 ......... 526
13.5. The Temporary Movement of Service Providers: The U.S.
Experience-Demetrios G. Papademetriou ................... 533
13.6. Mobility of Service Providers in the Caribbean
Region-Sherry Stephenson ................................ 535
A.l. The Experience of Brazil in Trade in Services
Negotiations-Flavio Marega .............................. 590
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