liberalization of trade in services

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Regional Liberalization of Trade in Services

Regional Liberalization of Trade in Services

As the impact of trade in services on the current global financial crisis appears to overtake that of trade in goods, we propose to examine liberalization of trade in services through regional trade agreements (RTAs). The regional liberalization of trade in services is expected to generate significant welfare gains both in the services and goods sectors. However, the quantitative effect of RTAs under GATS (General Agreement on Trade in Services) Article V has not been sufficiently investigated. We attempt to fill this gap by applying a gravity regression analysis to four major services sectors—financial services, business services, communication services, and transportation services—while controlling for both country- specific and time-varying importer and exporter fixed effects. We find that (i) the RTAs under GATS Article V create services trade among members and do not divert services trade from nonmembers, but the trade-enhancing effect is sector-specific; (ii) the sector-specific trade- enhancing effect ranges from the highest in business services sector to the lowest in transportation services; (iii) the trade effect on aggregate services trade is weaker when we control for the time-varying multilateral trade resistance factor with the time-varying exporter and importer fixed effect, however, the sectoral effects show a reverse pattern; (iv) there is no anticipatory effect expected from services RTA negotiations, unlike the case of trade in goods; (v) there is a complementary relationship between goods and services imports; and (vi) the trade-enhancing effect of RTAs is stronger between developed members compared to the effect between developed and developing countries.
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LIBERALIZATION OF TRADE IN SERVICES AND
ATTRACTIVENESS OF FOREIGN DIRECT INVESTMENT: A THEORETICAL AND EMPIRICAL REVIEW

LIBERALIZATION OF TRADE IN SERVICES AND ATTRACTIVENESS OF FOREIGN DIRECT INVESTMENT: A THEORETICAL AND EMPIRICAL REVIEW

Licensed under Creative Common Page 417 Sectors such as tourism and business process outsourcing can generate jobs and substantial foreign exchange earnings. More generally, however, it is important to recognize that service activities affect economic development through various indirect channels. The opening of trade and investment in services to foreign competition is a source of new knowledge and new products that can have a major impact on the productivity, and therefore the competitiveness, of many businesses in the economy. Services account for a substantial part of the total production costs of many companies in many sectors. Reducing these costs and increasing the quality of available services is therefore a mechanism for increasing performance across the economy. That said, the economic literature clearly shows that liberalization of services is not a panacea. The quality of existing economic governance, implementing institutions and regulatory regimes will determine the benefits that a country can derive from opening up service markets to foreign competition. This strengthens the arguments for a concerted and constant focus on improving economic governance as a necessary condition for sustained growth.
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Liberalization of trade in services: A CGE analysis for Argentina, Brazil and Uruguay

Liberalization of trade in services: A CGE analysis for Argentina, Brazil and Uruguay

An increase in λ could occur if the liberalization were to create imperfect domestic competition. This could imply that an increase in productivity is associated with a loss vis-à-vis the allocation of resources. Most of the literature assumes that the liberalization of the trade in services would generate a competitive market structure. In contrast, Konan and Van Assche (2006) model the liberalization of telecommunications in Tunisia under the assumption that there will be one sole entrant. So, they define alternative counterfactual scenarios simulating: (i) that the installed firm and the entrant compete á la Cournot or establish a Cartel, (ii) that the firms confront identical costs or alternative costs that differ from the two firms, and (iii) that the entrant could export remittances of gains or maintain them in the country where the investment is being made. Chisari et al. (2003) have already explored this last aspect for the case of regulated public services, showing the choice of alternative regulation mechanisms that influence the performance of the trade balance.
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Reflections on the Preferential Liberalization of Services Trade

Reflections on the Preferential Liberalization of Services Trade

For  a  number  of  reasons  rooted  in  the  political  economy  of  novelty,  regulatory  precaution,  issue  linkages  and  the  greater  overall  difficulty  of  reciprocity‐based  bargaining, the liberalization of services trade under the WTO’s General Agreement  on Trade in Services (GATS) has yet to register meaningful advances. While the Doha  Development  Agenda (DDA) will almost certainly  harvest some of the  far‐reaching  advances  made  in  opening service  markets  to  competition  since  the  curtain  fell  on  the  Uruguay  Round,  the  fact  remains  that,  in  most  countries,  developed  and  developing,  market  opening  in  services  has  primarily  proceeded  along  unilateral  lines.  This  is  especially  true  of  the  broad  range  of  producer  services  (banking,  insurance,  telecoms,  transportation,  energy)  where  opening‐up portends significant  economy‐wide benefits.  
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From selling goods to selling services: firm responses to trade liberalization

From selling goods to selling services: firm responses to trade liberalization

We discuss a number of potential mechanisms that could explain these results by generating a link between services and goods production within the firm. One possibility is that firms’ goods and services outputs may be subject to demand complementarities. However, this possibility seems to be ruled out by the strong negative association between manufacturing and service outputs within firms. It is also inconsistent with the positive impact of lower goods tariffs on services, conditional on several possibly confounding covariates. A second mechanism which is potentially more in line with the evidence is the possibility that UK firms’ relative provision of services rose due to an increase in off- shoring activity. In other words, UK firms might respond to goods trade liberalization by moving their goods production overseas to foreign affiliates or arms length suppliers, while intensifying their focus domestically on headquarter services. In our empirical analysis we find that this channel was relatively unimportant. Third, firms may adjust to trade liberalization by selling industry-specific expertise that they have accumulated over time as goods producers, which they can subsequently sell in the form of services. Finally, we also consider a more traditional Heckscher-Ohlin-type mechanism in which trade liber- alization drives UK manufacturing firms towards specialization in skill-intensive services production.
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The Effect of Financial Liberalization through the General Agreement on Trade and Services on Economic Growth in Developing Countries

The Effect of Financial Liberalization through the General Agreement on Trade and Services on Economic Growth in Developing Countries

This liberalization was expected to be the gateway to stimulating competition in the financial sector, to result in greater efficiency, dynamism and innovation. Other advantages with introduction of other players in the financial sector were seen as potentially stimulating improvements in domestic banking performance, by reducing costs, profits and net interest margins (Claessens et al., 2001; Bayraktar and Wang, 2004). Foreign banks usually bring new and sometimes better skills, management techniques, training procedures, technology and products to the domestic market. As such, these banks can be seen as a major source of skills and technologies for domestic banks (Focarelli and Pozzolo, 2002). In spite of the several potential benefits, many countries continue to be reluctant to open up their markets to foreign banks. Many still believe that foreign banks may stifle financial development instead of enhancing the provision of financial services and capital. In fact, foreign banks are often accused of stimulating capital flight. They are also accused to focus on serving only the most profitable market segments; not serving the retail market; serving only foreign corporations; or dominate the entire domestic market. Because of their interest in recouping costs, foreign banks tend to favor only the high end service consumer, leaving behind large numbers of poor people in the poorest countries who need capital to startup businesses. Their reputation and long experience in the international market give them the priority to choose upon the most profitable clients and dominate the financial domestic market (World Bank, 2002; Tamirisa et al., 2000; Agenor, 2001; Levine, 1996; Peek and Rosengren, 2000).
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Impetus in the United States for the Liberalization of International Trade in Services

Impetus in the United States for the Liberalization of International Trade in Services

The GATT discussions should lead to international fair trade rules under which a subscribing country would ensure that service consumers in their national markets have[r]

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Costs and benefits of trade liberalization

Costs and benefits of trade liberalization

total  output  will  be  produced  by  the  agricultural  sector  and  simple  forms  of  services. The country’s agricultural sector will be using traditional methods and  the  income  of  the  farmers  will  be  very  close  to  subsistence  wage  rate.  Now,  either acting on advice from developed countries and world organizations or due  to excess domestic demand, the country will start opening its borders to foreign  countries for trade. It will start lowering its tariffs and will try to remove any other  trade  barriers.  Exports  and  imports  will  start  rising.  The  country  will  start  exploiting  its  untapped  potential  by  allowing  foreign  firms  to  operate  inside  its  borders.  The  foreigners  will  bring  with  themselves  the  technology  and  skills  to  produce a host of products that could not be produced by the country itself due to  lack  of  these  skills.  The  foreign firms  will  benefit  from the  cheap  labor  and  the  host  country  will benefit from  increased  production  and employment.  Gradually  the  country  will  experience  sectoral  transformation  in  favor  of  its  sector  of  comparative  advantage. The  country  will  specialize in  this  sector,  allowing it  to  expand  and  start  exporting its  produce.  It  will  also  be  able  to improve itself  by  using its high income on research and development. During this process of trade  liberalization  Foreign  Direct  Investment  (FDI)  will  be  attracted  by  the  country’s  sector of comparative advantage. This will cause physical capital formation in the  country and will enable more expenditure on research and development. In other  words,  trade  liberalization  will  accelerate  the  pace  of  industrialization  in  the  country. This will cause new jobs to be created and employment to rise. The per  capita  income  and  consumption  will  rise,  indicating  the  positive  effects  on  the  consumers. So we can list the following benefits from trade liberalization.
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THE MACROECONOMY AND TRADE LIBERALIZATION IN NIGERIA

THE MACROECONOMY AND TRADE LIBERALIZATION IN NIGERIA

According to Orji (2007), ownership advantages are the firm’s specific assets, international experience and the ability to develop either low-cost or differentiated products within the contacts of its value chain. The vocational advantages of a particular market are a combination of market potential and investment risk. Internationalization advantages are the benefits of retaining a core competence within the company and threading it through the value chain rather than obtain to license, outsource, or sell it. In their contribution, Afaha and Aiyelabola (2012) see export as helping to increase foreign exchange earnings, improve balance of payment position, create employment and development of export oriented industries in the manufacturing sector and improve government revenue through taxes, levies and tariffs. To these authors “These benefits will eventually transform into better living condition for the nationals of the exporting economy since foreign exchange derived would contribute to meeting their needs for some essential goods and services (2012).
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DOES TRADE LIBERALIZATION LEADS TO HIGH ECONOMIC GROWTH? (A CASE STUDY OF PAKISTAN)

DOES TRADE LIBERALIZATION LEADS TO HIGH ECONOMIC GROWTH? (A CASE STUDY OF PAKISTAN)

It is generally believed that those countries who embrace the contemporary globalization and more liberalize trade policies to the global exchange of goods and services as well as to the ideas and technologies, enjoy the stable and high growth rates. A group of researchers also supposed that the primary validation for that high growth rate of various East Asian countries was the involvement in international trade during the last 50 years (World Bank 1993). And this assertion is without any doubt that international trade facilitates technological advancement as when a country exports wheat and imports steel, the country benefits in the same way as if it had invented a technology for turning wheat into steel” (Mankiw 2004, 551).
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Free Trade vis-à-vis Trade Protection: A Critical Perspective Using the Multilateral Trade Liberalization Framework

Free Trade vis-à-vis Trade Protection: A Critical Perspective Using the Multilateral Trade Liberalization Framework

Subsequently, Gilpin (2001) strongly stressed the benefits of trade liberalization according to the advocates of free trade. First, “trade liberalization increases competition in domestic markets, and thereby undermines anticompetitive practices, lowers prices, increases consumer choice and increases national efficiency (Gilpin, 2001)”. This benefit from free trade is the primary advocacy of most economists up to this date on engaging in trade. In this scenario, free trade makes everyone in a country better off. Second, free trade “increases both national and global wealth by enabling countries to specialize and export goods and services in which they have a comparative advantage (Gilpin, 2001)”. Third, free trade pushes more the “international spread of technology and know-how around the globe and thus provides developing economies with the opportunity to catch up in income and productivity with more advanced economies (Gilpin, 2001)”. Lastly, “free trade and the international cooperation that it entails increase the prospects of world peace (Gilpin, 2001)”.
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Service Sector as an Engine of Growth: Empirical Analysis of Pakistan

Service Sector as an Engine of Growth: Empirical Analysis of Pakistan

The increase in share of services sector in GDP of Pakistan drawn attention since last decade, there is evidence that there is positive and significant relationship exist among population and transformation process of service sector in case of Pakistan. Further the total debt has significant relationship on service sector which implies that debt burden instruct the growth in domestic economy. More over the paper find significant positive relationship between service sector and trade liberalization, the present analysis demonstrates that trade liberalization policy is beneficial for Pakistan’s service sector growth.. The structural process of consumption significantly and positively with service sector implies that purchasing power distinction with service sector. The paper hypothesize that with debt burden over the time gradually there will be more resources available to develop the service sector, it’s also important to improves the purchasing power parity which has power for accelerating growth particularly to attract foreign direct investment.
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The paradox of “preferences”: regional trade agreements and trade costs in services

The paradox of “preferences”: regional trade agreements and trade costs in services

2 Empirical Data on Trade Costs and Services Trade Liberalization at the Regional Level 2.1 Bilateral Trade Costs in Services: A Database Covering 55 Countries over the Period 1999-2009 [r]

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Impact of Trade Liberalization on External Debt Burden: Econometric Evidence from Pakistan

Impact of Trade Liberalization on External Debt Burden: Econometric Evidence from Pakistan

on external debt burden of our economy, indicate the evidence of the actuality that high dependence on low value added and primary goods export is strongly connected with external debt problem as the world prices of these commodities are steadily declining for the last four decades and they are subjected to the sharp fluctuations. The significant negative relationship between external debt and the import to GDP ratio lies in the fact that the improved capital intensity is usually associated with better productivity and higher returns over the investment up to a certain limit. In the developing countries higher importation of capital goods leads to increase in domestic output of goods and services, which ultimately result in the less dependence on the import sector and thus reduce the external debt burden. According to above results exchange rate negligibly affect the external debt burden but this relationship is significantly negative shows that the higher exchange rate would reduce the external debt through improved revenues earned from exports. Finally the coefficient of terms of trade is positively and significantly at 10% level of significance is associated with external debt burden, proved the fact that the deterioration of the terms-of-trade is the factor undermining a country's ability to access international markets on attractive terms. In practice, countries with a low level of development and of integration in world trade lack credibility in international capital markets, thereby failing to attract private capital flows and becoming reliant on external public debt.
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"International trade disputes in modern regulatory paradigm"

"International trade disputes in modern regulatory paradigm"

After entering into the agreements of the Uruguay Round of multilateral trade negotiations there remained a number of issues that needed further discussion. The first years of the WTO func- tioning showed that contradictions between the member states that need immediate resolution survived and continuously grow. The essence of the contradictions was the following: the countries tried to increase its presence in the markets of trading partners, while slowly liberalizing their particular sectors of economy. And such situation was typical both for developed countries and for devel- oping countries. In 2001 the next round of multilateral trade nego- tiations (Doha Round) was launched to resolve the problems available. But during the negotiations the contradictions between different groups of countries manifested particularly acute. The developed countries were interested in resolving a number of issues on the agenda (investment, competition policy, trade facilitation and transparency in government procurement, security, strength- ening of protection of intellectual property rights, liberalization of services markets), and other group of issues (liberalization in agri- culture, labor migration, etc.) was important for the developing countries. 47 As a result of deep contradictions in the negotiations
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Dismantling the Ancien Régime: Public Service Liberalization in the EU and the Vulnerability of Sector Regimes

Dismantling the Ancien Régime: Public Service Liberalization in the EU and the Vulnerability of Sector Regimes

During the negotiations of the Services and ONP Directives, member states and the Commission were in agreement not to apply competition rules to voice telephony and construction and operation of infrastructure for the time being. However, the very notion of telecommunications as a natural monopoly was losing ground because of technological development and fundamental reforms in the U.S., U.K., and Japan. Furthermore, the U.S. proposed in December 1991 to liberalize long-distance basic telecommunications services in the Uruguay Round. 44 Met with fierce opposition from the EC and other countries, the U.S. backed down the proposal. But by that time, the EC had already agreed to include an article in the General Agreement on Services in Trade (GATS) that promised to continue negotiations for further liberalization in the future. 45 Faced with these developments, it seemed inevitable for member states, albeit reluctantly, to liberalize voice telephony and infrastructure in the near future. 46 The fact that France Télécom (FT) and the French government became enthusiastic about liberalization was another blow to the states of Southern Europe who were opposed to rapid liberalization. The FT had become a public enterprise with an independent accounting system in January 1991 and was developing joint ventures with Deutsche Telekom to provide international services. 47 The change in French preference reflected the development in technology. The various technological developments that had been in the R&D or testing stage were now ready for commercialization, and telecommunication services were shifting from fixed voice telephony to
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Strategies for trade liberalization in the Americas

Strategies for trade liberalization in the Americas

Strategies for trade liberalization in the Americas Chichilnisky, Graciela ECLAC... STRATEGI ES FOR TRADE LI BERALI ZATI ON I N THE AMERI CAS Gr aci el a Chi chi l ni sky..[r]

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Trade liberalization and inter industry productivity spillovers: an analysis of the 1989 1998 Brazilian trade liberalization episode

Trade liberalization and inter industry productivity spillovers: an analysis of the 1989 1998 Brazilian trade liberalization episode

liberalization episode (1984 to the mid- 1990s) as an instrument for Brazil’s import tariff. 9 Prior to their trade liberalization episodes, both the Colombian and Brazilian governments believed that their import substitution industrialization policies (which implied high levels of trade protection) were welfare-enhancing, in addition to the fact that import substitution was viewed as an institution or even an historical legacy that could not be changed due to political concerns. 10 At a certain point, however, governments realize that the gains from import substitution may be smaller than expected, and change their development policies by decreasing trade protection across all industries. 11 This ideological similarity in the trade policies adopted by both countries led to a tariff move in the same direction (downward) as a result of this change to a trade liberalization policy, implying a positive correlation between Brazilian and Colombian tariffs.
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Trade Liberalization and Adjustment in Argentina

Trade Liberalization and Adjustment in Argentina

With the change in relative profitabilities the economy has complied with one necessary condition for the reallocation of resources. If investment in the production of T goods increases with price incentives, the economy would slowly increase employment in T industries, thus starting the process of reallocating labor from NT industries in the “without liberalization” situation to T industries in the liberalized situation. The size of the initial real depreciation may have to be large, it may have to exceed the new “equilibrium” real exchange rate in order to compensate for the additional risk of trying to penetrate international markets, and it may have to last a long period of time to allow the resource reallocation to take place. Only then, may the currency start appreciating towards its equilibrium level.
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Trade Liberalization and Poverty in Bangladesh

Trade Liberalization and Poverty in Bangladesh

Trade Liberalization and Poverty in Bangladesh Raihan, Selim South Asian Network on Economic Modeling SANEM, Department of Economics, University of Dhaka, Bangladesh.[r]

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