Trade Policy Note Final-rev08 - Development

suppliers in the domestic market for key social services can often exacerbate
inequalities and undermine policies aimed at ensuring universal access, for example,
by draining off professionals (doctors, nurses, teachers) for the public system and
exacerbating urban/rural disparities.
Services and Competitiveness
Services policies empower and enhance the productivity of poor people by (a)
through the provision of advanced services as inputs into the productive process at all
levels, and (b) by facilitating the export of services. Despite the heterogeneity of the
service sector, governments should aim at devising an overall services development
strategy that provides policy measures applicable to all services sectors. Such a
strategy must address imports under “Mode 3” i.e. the conditions imposed on foreign
investment in service sectors. Priority should be given to ensuring access to those key
producer services that contribute to the competitiveness of other services, or of the
manufacturing sector. The Annexes to this Section illustrate some of the
considerations facing developing countries in negotiations on trade in selected service
sectors where developing countries are faced with requests for liberalization
commitments.
In services liberalization, priority should be given to services that serve as inputs into
the productive process and, enhance productivity. Service strategies should ensure
that imports do not exacerbate inequalities by reducing access to essential services,
crowding out small suppliers or by giving control of key sectors to large TNCs.
Liberalization of services with no productive role, but with a possible negative impact
on social programmes, national sovereignty or cultural integrity should be avoided as
far as possible.
Exports of Services
On the other hand, developing countries are major exporters of certain services,
notably in areas where they posses a labour cost advantage, (comparable to textiles
and clothing). Such exports usually involve the movement of persons as (a)
consumers, e.g. tourism, (Mode 2) and (b) suppliers, movement of workers abroad
(Mode 4). More recently some developing countries are exporting labour intensive
services electronically (Mode1), a process which has been termed
“outsourcing”.Often, however, developing countries’ exports of such services , where
they can expect to have a comparative advantage (e.g. construction) , are frustrate d by
lack of access to capital and constraints on the short-term movement of semi-skilled
labour. Also restrictive business practices, such as those prevalent in the tourism
sector, can greatly reduce the actual benefit of exports to the exporting developing
country. Success in these areas requires a coherent strate gy on the part of the
developing countries, as well as secure access to markets (see Annex E to this
Section) accompanied where relevant by sector specific provisions to deal with anticompetitive
practices.
Negotiations on Trade in Services
The WTO GATS Agreement established a framework for the negotiation of
multilateral commitments relating to trade in services, which were defined as
covering four Modes of Supply (Mode 1- cross border movement, Mode 2-movement
of consumers, Mode 3 - commercial presence i.e. investment, and Mode 4 -
temporary movement of persons to supply services). GATS members accept the
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