Opportunities and Risks of Liberalising Trade in Services in South Africa
Country Study on South Africa
Trade in Services and Sustainable Development Series • Issue Paper 2
Ten years after services were included in the multilateral trading system, the WTO’s General Agreement on Trade in Services (GATS) remains an unfinished project. Given the arguably low level of liberalisation attained so far, it continues to arouse scepticism among its original proponents, 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 knotty 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 WTO rules and for a process that would lead to global trade expansion in the sector. Their counterparts in developing countries were confused, and their development concerns — omnipresent in the process — were ultimately left appallingly vague. The absence of data, commercial 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. The eight years of talks to design the GATS represented a hugely rich, creative and analytical effort, characterised by complexity, technicality and a high degree of politisation.
The implementation of the Agreement has perpetuated the pattern. In the past few years — as we move into the liberalisation phase mandated as a built-in agenda in the GATS — policymakers in developing countries, academics, civil society analysts and advocacy organisations have expressed serious reservations about the potential implications of requiring developing countries to make greater market access concessions; the need to sequence liberalisation; the lack of adequate domestic regulatory frameworks; the imperative of universal access for essential services; and institutional reform and good governance. The unresolved discussion on whether liberalisation and further advancement of negotiations can proceed in the absence of the mandated impact assessment of implementation seems to be most troubling for practically all parties. Indeed, 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.
At the national level, the impact of services liberalisation on the local economy is among the most challenging and controversial issues. 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 South Africa, Bangladesh and Tanzania. In South Africa, the services sector is considered increasingly important for economic development both in terms of its contribution to growth and its export potential. Exposing the services sector to the “fresh winds of international competition” has the potential to unleash significant economywide gains. However, deep and justified concerns regarding unemployment, poverty alleviation and universal access to basic services have led South Africa to adopt a cautious approach to the progressive liberalisation of key services under the GATS. The opportunities and risks of liberalising trade in services in South Africa are thus delicately balanced in an environment in which regulatory and competition authorities have only been recently established and the restructuring of state assets is still far from complete.
The submission of initial requests in services to South Africa by 16 WTO Members in all the major services sectors has underscored the importance of developing a coherent and coordinated approach to liberalising services in South Africa. Any well-designed strategy for services liberalisation must maximise the gains and minimise the associated adjustment costs. Notwithstanding general improvements to the institutional foundations for services liberalisation — notably the establishment of (largely independent) regulatory authorities committed to transparent and non-discriminatory rule-making procedures — we argue that South Africa does not presently have such a strategy and efforts to formulate one are constrained by a trade negotiating apparatus operating sub-optimally on a number of levels. In this case study, we suggest an approach to developing a services liberalisation strategy and highlight a number of issues on which the balance of opportunities and risks of liberalising services in South Africa is likely to turn.
This case study is the second in 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 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.