International Trade in Services.pdf - DSpace at Khazar University

Assessing the Potential of Services Trade in Developing Countries 11
Regulation: Designed and implemented in the least trade
restrictive manner possible
Ensuring that markets are competitive is a key objective for regulators in most
service sectors. Consumers have much to gain if regulators seek to achieve this
objective by paying close attention to the effect of rules and regulations on domestic
and international supply. Regulatory audit or impact assessment with an international
dimension is the most effective way to achieve this goal. In addition, the
aim of regulatory reform is not to remove regulations, but, rather, to make regulations
achieve their objectives with as small a footprint as possible and to ensure
that regulations are as trade-friendly as possible.
Service sector modernization and trade liberalization may
entail adjustment costs
Trade liberalization often entails adjustment costs as resources are being reallocated
to places where they may be employed more productively. 2 Modernization
in the service sector—whether as a result of endogenous innovation and national
upgrading or the entry of foreign competitors that bring new service offerings
and new service delivery options—often requires the upgrading of skills. Thus,
labor adjustment costs can be an important consideration. Most services need to
be provided at the place of consumption, and the liberalization process may
involve either a positive or a negative change in the absolute level of employment
in the sector.
In the eight sectors studied in this book, it is only in the distribution service
sector that large-scale unemployment often results from modernization. The productivity
enhancements linked to the shift in urban areas from a retailing system
based on mom-and-pop stores to large formats can impair the livelihoods of
small store holders. There may also be a gap in the provision of retail services
between city centers and suburban and rural populations. Moreover, the smallest
food producers may lose their retail clients and thus their livelihoods. The ownership
of the new supermarkets can raise ethnic and other social stability issues, as
experienced in East Africa and Southeast Asia.
Consequently, policy makers may consider opening up markets in phases to
allow local suppliers to adjust to higher standards. The process can be greatly facilitated
if social safety nets and resources to assist in training and technical upgrading
are in place to enable farmers and small suppliers to fulfill the minimum safety
and quality standards required to integrate in the supply chains of more demanding
retailers.
Employment in professional services such as accounting, legal, engineering,
and IT services may also be positively affected in developing countries as a result