Regional Trade Agreements and their Impact on Services Trade
Ten years after the entry into force of the World Trade Organization (WTO) and the suspicion that we continue to know uncomfortably little about the service sector lingers on. This is not to say that service industries around the world do not know their own plight and outlook. As is widely known, services were the object of a host of reforms in the last fifteen years, particularly in the developing world, ranging from privatization to full-fledged regulatory overhauls. The learning-by-doing curve has been bullish but policy-makers and regulators are still at it, trying to comprehend what happened and where to go next.
That lingering feeling perhaps is strongest in relation to the external implications of internal processes. Nowadays, countries are accountable at many a forum for their domestic actions. Trade negotiations abound of the sort that forces countries to think and act fast - or else lose their strategies, their policies and, unfortunately, their markets. Countries, even when already some distance down the learning path, continue to be unsure about how best to translate their domestic priorities at the negotiating table. To complicate things even further, the multilateral regime now has to co-habitate with regional initiatives. The trade in services regime had just been born with the Uruguay Round and already in the first round to follow faces tough choices imposed by the rise of a strong and dynamic regionalism.
To be sure, services liberalization across countries did not start with the Uruguay Round. Western Europe had already been at it for forty years, since the advent of the Treaty of Rome which laid down the free movement of persons, services and capital alongside that of goods as the crucial element in the conformation of an “Internal Market of the European Economic Community”. Even the recourse to regional free trade agreements, as opposed to the much broader, supranational economy-wide European approach to services liberalization, predated the multilateral compact, as attested by CUSFTA (Canadian-U.S. Free Trade Agreement) - entered into force on 1st of January 1989. What is new in 2005, effectively, is that two universes now apply to services trade, the regional and the multilateral, when only fifteen years ago services, with the exception of the European Economic Communities, were fully free from any binding trade obligations at virtually any level.
Since CUSFTA, 26 services agreements have been notified to the WTO out of a total of 161, while the world possibly is in the process of negotiating at least another dozen at this very moment, including some involving more than 30 countries at once as the Free Trade Area of the Americas (FTAA). Since then, therefore, the regional and multilateral universes have expanded, albeit in a somewhat uncoordinated fashion, clearly guided by the precepts laid down in the services free trade agreements of the nineties. Even though the negotiation of “new generation” trade agreements that included trade in services coincided in large measure with the reform push of the nineties in many developing countries, it would be highly fallacious to correlate the two phenomena. The agreements did not promote any of the market openings that took place but merely, in some cases and to a very limited extent, reflected that opening in schedules of commitments. The typical practice so far has been for countries to bind less than their existing regulatory situation even when that situation corresponds to an open market.
As liberalization has been recent in many developing countries, many of them seek time and “policy space” to revisit, reevaluate and, perhaps, re-regulate. The translation of that for negotiating purposes is fairly clear for those that want to see it: caution in negotiating new commitments which includes, if necessary, a staunch reluctance to enter into new agreements.