International Trade in Services.pdf - DSpace at Khazar University

Understanding Trade in Environmental Services: Key Issues and Prospects 331
disciplines of the General Agreement on Trade in Services of the World Trade Organization
have the potential to affect the ability of governments to regulate the water
industry in the pursuit of social objectives (Lang 2004). Furthermore, (foreign) private
participation in water and sanitation services raises concerns relating to price
increases and the fear that poor people will not be able to afford water because of the
lack of incentives from private firms to manage natural resources in a sustainable way
(Cossy 2005). These views seem to be supported by a number of high-profile failures
in privatization operations. For example, in Argentina, private participation through
concession proved an unsuccessful experience, leaving many stakeholders dissatisfied.
The Organisation for Economic Co-operation and Development and the World
Bank note that this represents a case in which the granting of a concession to manage
water services was not supported by an independent regulatory framework (OECD
and World Bank 2006). Many analysts underline that liberalization disciplines need
to be preconditioned or complemented by regulatory reforms that increase access to
essential facilities and quality services.
Policy makers in developing countries may have significant scope to facilitate
trade in environmental services. They have to be guided by a strategic vision of the
sector and its role in overall economic, social, and ecological development.
Although the benefits of liberalization can be important in terms of increased efficiency
and service access and affordability, experience has shown that reforms
must be appropriately designed and supported by a strong regulatory framework.
More competition and better regulation are vital for the development of the environmental
sector in developing countries. Trade reform then needs to be integrated
into an open and transparent process of regulatory reform in which decisions
on the nature and pace of reform are supported by careful analysis and an
understanding of best practices.
Establishing a good regulatory environment
The regulatory reform discussion differentiates between environmental infrastructure
services and noninfrastructure environmental services because of the
different types of market and regulatory failures that need to be addressed in these
two segments of the industry.
Ensuring that effective competition delivers efficiency and
low prices to consumers
In environmental infrastructure and noninfrastructure services, effective competition
is essential to increasing efficiency. However, several environmental infrastructure
services exhibit natural monopoly characteristics that can pose special
and significant challenges for trade policy making. Given that there are strong