Opportunities and Risks of Liberalising Trade in Services in Bangladesh
Country Study on Bangladesh
Issue Paper 3
Eleven years after trade in services was included in the multilateral trading system, the WTO’s
General Agreement on Trade in Services (GATS) remains an unfinished project. It continues to stir up
frustration among its original proponents — given the arguably low level of liberalisation attained so
far — as well as deep concern among others with regard to the policy orientation of its provisions.
In the context of international negotiations, the GATS was the result of a complex process of
political quid pro quos that catapulted services into a major component of the Uruguay Round
negotiations. By and large, major services providers in the US and Europe acted as demandeurs for
a services framework for liberalisation that would lead to global trade expansion in the sector. Their
counterparts in developing countries were left uncertain as to how their development concerns would
be resolved by the vagueness of the GATS. The absence of concrete data, private sector insecurity
and a crippling perception of an unfavourably tilted playing field prevailed in development circles
throughout the negotiations. Broad public policy issues remained off the negotiating table. Difficult
tensions — arising, for instance, from the fundamentally different approaches of diverse public law
traditions to the role of the State in the provision of certain services — permeated the discussions.
Notwithstanding, the eight years of discussions leading to the design of the GATS represented a
breakthrough in international trade treaty-making as trade in what was hitherto referred to as
‘invisible’ products was successfully integrated into the multilateral system of trade rules.
The implementation of the Agreement has to a large extent been characterised by the same
dynamics which pervaded the Uruguay Round talks. As the GATS moved into its liberalisation phase
in the past few years as mandated under its built-in agenda, policymakers in developing countries,
academics, trade analysts and observers from advocacy groups and civil society have expressed
increasingly serious reservations about the implications of requiring developing countries to make
greater market access concessions. This concern is aggravated by the GATS’ lack of appropriate
safety nets to guard against untoward negative consequences of binding liberalisation, as well as its
absence of adequate rules to ensure that the conditions of competition for supplying services are not
distorted by subsidies and other similar support mechanisms. Moreover, many if not most developing
countries have not undertaken an assessment of the impact of liberalisation in services trade,
and more fundamentally, are still evolving the regulatory frameworks and institutions to govern
the services sectors in their domestic territories. The unresolved discussions on the foregoing
issues have hampered further advancement of negotiations and have been significant factors in the
widely-shared perception that the GATS negotiations under the current Doha Round leave much
room for improvement in terms of liberalisation commitments. More importantly, practically all
parties underline the point that a comprehensive policy analysis of the implications of trade in
services for sustainable development, and of the policy spaces available for implementing public
policies, is still missing.
To address this concern, ICTSD has commissioned a series of studies on the opportunities and risks
of liberalising services trade in selected developing countries, including Bangladesh, Mozambique,
Nicaragua, Pakistan, South Africa, Egypt, Guatemala, and Tanzania.
In Bangladesh, the services sector is increasingly important for economic development given that
services make up 57.5 percent of its GDP and generates over 25 percent of employment. In sharp
contrast, trade in (commercial) services represents the equivalent of only 5-7 percent of total
trade in goods. Given the significant contribution of the services sector to its GDP and the relatively
limited trade in services, it appears that there is substantial, untapped potential which may accrue
from optimising Bangladesh’s trade in services through well-managed, progressive liberalisation and
a more predictable competitive environment. At the same time, the nature of its services trade makes it vulnerable to external shocks, and may prompt advocacy of protectionist policies within
certain domestic service industries, including in particular audio-visual, financial, and rail transport
services.
The study finds that Bangladesh is confronted with a particularly delicate task in developing a WTO
negotiating strategy. Although Bangladesh is allowed as an LDC to demur from undertaking liberalisation
commitments under the Doha Round of negotiations, it is pursuing a strategy of ‘critical engagement’
in the GATS negotiations. This recognizes that services liberalisation and regulatory reform can play
a positive role by improving the competitiveness of the goods sector and other services, as well as
increasing export opportunities and the efficiency of domestic services sectors.
Specifically, telecommunications and education were sectors where a positive spillover can be
generated with further liberalisation. Additionally, Mode 4 (i.e., the Temporary Movement of Natural
Persons) is identified as the mode of supply that offers Bangladesh the greatest export interest,
including a wide-range of employment categories ranging from professionals to skilled, semi-skilled,
and less-skilled services providers.
This case study is one of a series of Issue Papers on topics relevant to the current GATS negotiations
produced under ICTSD’s programme on Trade in Services and Sustainable Development. This
programme aims to empower developing country policy-makers and other stakeholders at bilateral
regional and international levels through information, dialogue, capacity-building and research
targeted at influencing the international service trading system to advance the goal of sustainable
development.
We hope you will find this pleasant and informative reading and an effective contribution to the
debate.