International Trade in Services.pdf - DSpace at Khazar University

5
Market Structure,
Liberalization, and
Trade: The Case of
Distribution Services
Julian Arkell
Introduction: Why Is Trade in Distribution
Services of Interest to Developing Countries
The distribution sector represents one of the largest activities in an economy (see
the description of distribution services in box 5.1). It comprises 10–20 percent of
gross domestic product (GDP), 15–30 percent of employment, and up to 40 percent
of the total number of enterprises in most countries. 1 The distribution
sector’s share in a country’s GDP tends to increase in parallel with GDP per capita
until a level is reached at which economies of scale and scope are exhausted, after
which the proportion declines slowly. Retail sales of food are the largest element in
total retail sales, but, as income per capita rises, this proportion of household
expenditure declines.
The economic importance of the distribution sector arises from its role in
providing an essential channel between producers and consumers. The productivity
of the distribution sector greatly affects the prices of a wide range of goods
and services: 10 to 50 percent of final consumer prices are often accounted for
by the distributors. The functioning of the distribution market should be a priority
for policy makers because it largely determines the price, quality, and
choice of the goods and products that are available to consumers. Government
policies that restrict competition in the distribution sector are one of the main
The editors have based this chapter on a fuller draft by the author.
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