International Trade in Services.pdf - DSpace at Khazar University

Assessing the Potential of Services Trade in Developing Countries 7
home. The chapters therefore devote commensurate attention to the illustration
of these benefits and the related policy measures that promote them.
Many imported services provide vital inputs to manufacturing companies that
substantially influence the international competitiveness of these companies. It is
especially noteworthy that simulation models have predicted considerably higher
gains from the liberalization of service sectors than from the liberalization of
goods sectors. This is the case even in countries with high tariff barriers such as
Tunisia, as Konan and Maskus (2006) have concluded. Moreover, if endogenous
productivity effects are taken into account, the long-run benefits from service
liberalization may be significantly greater than the static benefits.
One development that has fueled the growth of service exports is the growing
trend among companies in high-income countries to outsource back-office and
other service functions to take advantage of the advanced skills and lower labor
costs of specialized service providers. Many developing countries have substantial
untapped potential to satisfy this demand for business functions in, for example,
the accounting, engineering, IT, and legal service sectors. However, as emphasized
in some chapters, taking advantage of these trade opportunities often requires
policy reforms that create an enabling environment for private sector service
providers.
Overview: The Trade in Services
The scope of activities that are defined as services in the framework of the General
Agreement on Trade in Services (GATS) of the World Trade Organization is illustrated
in table 1.1. The backbone services include, primarily, communications,
financial intermediation, and transport, while the nonbackbone services that are
the focus of this book comprise most of the remaining categories. In contrast to
merchandise trade, services are often intangible, invisible, and perishable and usually
require simultaneous production and consumption. The need in many cases
Table 1.1. The Scope of Services Covered in the GATS
1. Business services 7. Financial services
2. Communication services 8. Health-related and social services
3. Construction services 9. Tourism and travel-related services
4. Distribution services 10. Recreational, cultural, and sporting services
5. Educational services 11. Transport services
6. Environmental services 12. Other services not elsewhere included
Source: Authors’ compilation based on Services Database.