Transcript The General Agreement on Trade in Services (GATS)

Trade in Services:
Some Lessons from South
Africa
Matthew Stern
www.dnafrica.com
Outline
• Trade in services – facts and theory
• Case studies
– Health services
– Construction services
• The gains from trade
• Trade policy implications
2
Trade in services
• 25% of global trade
• Fastest growing sector (trade & FDI)
• Dominated by OECD (70%)
• Highly regulated
• Critical determinant of competitiveness
3
World service exports
($ millions)
9 0 ,0 0 0
6 0 0 ,0 0 0
E a s t A s ia & P a c ific
L a tin A m e ric a & C a rib b e a n
8 0 ,0 0 0
M id d le E a s t & N o rth A fric a
S o uth A s ia
7 0 ,0 0 0
5 0 0 ,0 0 0
S ub -S a ha ra n A fric a
E uro p e a n M o ne ta ry U nio n
6 0 ,0 0 0
4 0 0 ,0 0 0
5 0 ,0 0 0
3 0 0 ,0 0 0
4 0 ,0 0 0
3 0 ,0 0 0
2 0 0 ,0 0 0
2 0 ,0 0 0
1 0 0 ,0 0 0
1 0 ,0 0 0
1
2
0
0
9
1
9
9
7
1
9
9
5
1
9
9
3
1
9
9
1
1
9
9
9
1
9
8
7
1
9
8
5
8
1
9
8
9
1
1
9
8
3
0
1
0
4
Application of trade theory
• Trade in services, in general, display the same
characteristics as trade in goods
• The theory of comparative advantage does
apply to services trade
• Given high levels of regulation (protection) in
the service sector, economic factors alone
cannot explain the pattern of trade in services
• The removal or reduction of barriers to trade in
services would contribute to major increases in
global welfare
5
Developing countries
• 50% of GDP
• Fourfold increase in trade over last 15 years
• Important contributor to economy-wide efficiency
and development
• Labour intensive
• More dependent on trade in services than
industrialised countries
6
Cape V erde
Sao Tome
Greec e
Ethiopia
Sey c helles
Rw anda
Croatia
Tanz ania
Mauritius
Latv ia
Uganda
Spain
Ic eland
Denmark
Es tonia
United Kingdom
A us tria
Portugal
Sw itz erland
Ireland
Norw ay
Ghana
Sw eden
Madagas c ar
Burundi
Lithuania
Franc e
Poland
Italy
Netherlands
Hungary
Namibia
Cz ec h Republic
Germany
South A f ric a
Finland
Sw az iland
Cote d'Iv oire
Guinea
Malaw i
Les otho
Congo, Rep.
Sudan
0%
Congo, Rep.
Rw anda
Ir eland
Sey c helles
Guinea
Cape V er de
Sao Tome
Denmar k
Ic eland
Nor w ay
Cote d'Iv oir e
Sudan
A us tr ia
Tanz ania
Ethiopia
Maur itius
Sw eden
Madagas c ar
Gr eec e
Bur undi
Malaw i
Uganda
Ger many
United
Italy
Nether lands
Es tonia
Finland
Spain
Cr oatia
Ghana
Fr anc e
Sw itz er land
Hungar y
South A f r ic a
Por tugal
Latv ia
Poland
Namibia
Cz ec h
Sw az iland
Lithuania
Les otho
50%
100%
150%
200%
250%
Service/merch. Exports
WDI:2002
300%
0%
20%
40%
60%
80%
100%
Service/merch. imports
7
Constraints on liberalization
• Domestic opposition
• Lack of expertise and resources
• Unable to improve access for domestic
exporters
• Cannot fully address anti-competitive practices
of foreign firms
• Inadequate stability or international credibility
8
What is GATS?
• Implemented January 1995
• 140 member countries
• All sectors (except government and air traffic
rights)
• Positive list approach
• All modes of supply
9
GATS: Modes of supply
• Mode 1: Cross border supply
– relatively few bound commitments
• Mode 2: Consumption abroad
– relatively open
• Mode 3: Commercial presence
– market access restrictions prevail
• Mode 4: Movement of natural persons
– most restrictive
10
GATS: Coverage
•
Infrastructure services, capital
intensive, scale economies
•
– Communication
– Transport
•
Traditionally “liberal”
services
–
–
Distribution
Tourism
Source: Adlung (2000)
Strong institutional &
regulatory difference between
jurisdictions
–
–
–
–
•
Financial services
Business services
Health services
Education
Other
–
–
–
–
–
Environmental services
Recreation
Culture
Sport
Construction
11
GATS: Obligations
• General
– MFN treatment
– Transparency
• Specific
– Market access
– National treatment
12
Case Studies
SA exports of goods & services
Ex po rts
25%
Me r c h x
A v e r a g e a n nu a l gr ow t h
20%
Se r v ic e x
15%
10%
5%
0%
1 9 7 0 's
1980's
1 9 9 0 's
14
GATS: South Africa
• Scheduled 9 out of 12 major sectors
(education, health and recreational services
excluded)
• Relatively liberal commitments in retail,
computer, construction, tourism and business
services
• Relatively few commitments in transport, life
insurance, communications and education
services
15
SA Health Sector
• Well developed private sector
– 55% of total health care expenditure
– 20% of all patients
– High cost and specialised care
• Embattled public sector
– 80% all patients
– 30% all doctors
– HIV/AIDS
• Migration
16
Exports of health services
• Cross border
– Call and claim centers
17
Exports of health services
• Cross border
– Call and claim centers
• Consumption abroad
– Health tourism
18
Consumption abroad
P rovider
C ountry
K nee
C ataract
R eplacem ent R em oval
H ernia
H ip
C ardiac
R eplacem ent B y-P ass
BUPA
UK
£8,500 to
£10,000
£1,800 to
£3,000
£1,400 to
£1,900
£7,200 to
£10,000
£13,500 to
£17,500
BMI
UK
£7,000 to
£8,925
£1,850 to
£2,755
£1,280 to
£2,785
£6,000 to
£8,800
£10,645 to
£11,500
P anoram a
H ealth
South
A frica
£6,447
£1,262
£2,749
£6,275
£9,273
Specialized
Surgery
South
A frica
£5,380
£730
£3,850
£4,900
£9,000
www.medibroker.co.uk
19
Exports of health services
• Cross border
– Call and claim centers
• Consumption abroad
– Health tourism
• Commercial presence
– NHS contracts
20
NHS health care contracts
• 900 cataracts in Lancaster
– R10 million
– 45 personnel
• 12 000 ENT in Middlesex
• 300 hips and knees in Southport
• 1 000 orthopedics in Gosport
21
Exports of health services
• Cross border
– Call and claim centers
• Consumption abroad
– Health tourism
• Commercial presence
– NHS contracts
• Movement of natural persons
– Nurses
22
Nurses registered in UK
C ountry
1998/99
1999/2000
2000/01
2001/02
Philippines
52
1 052
3 396
7 235
South A frica
599
1 460
1 086
2 114
A ustralia
1 335
1 209
1 046
1 342
India
30
96
289
994
Zim babwe
52
221
382
473
N ew Zealand
527
461
393
443
N igeria
179
208
347
432
W est Indies
221
425
261
248
23
Constraints—international
• Portability of national health insurance
• Recognition/registration of medical
professionals
24
Constraints—domestic
• National Health Bill
– Certificate of need
• Immigration
– Moratorium on foreign health professionals
• Community service
– 45% plan to emigrate
• Technology/telecommunications
25
SA Construction Sector
• Large and extremely competent construction
firms
• Highly skilled engineers
• Dominated by government expenditure
• Long-term decline in domestic activity
26
Construction works
30
20
15
10
5
G e n e ra l g o ve rn m e n t
P u b lic c o rp o ra tio n s
2001
1999
1997
1995
1993
1991
1989
1987
1985
1983
1981
1979
1977
1975
1973
1971
1969
1967
0
1965
R b illio n s ( 1 9 9 5 )
25
P riva te e n te rp ris e s
27
Exports of construction
services
• Civil engineers
– 20% of turnover offshore
– >90% in Africa
• Consulting engineers
– 10% of turnover offshore
– >80% in Africa
28
Exports and investment
• Grinaker-LTA
– 50th largest international contractor*
– 5th largest contractor in Africa*
– Operations: Australia, United Arab Emirates (UAE),
Angola, Nigeria and Mauritius
• Murray and Roberts
– 54th largest international contractor*
– 7th largest contractor in Africa*
– Operations: Australia, UAE, UK, Botswana, Namibia,
Nigeria, Tanzania, Zimbabwe and Indonesia
* Engineering News Record
29
Constraints - international
• Technical standards and regulations
• Nationality & residency requirements
• Ownership restrictions
• Government procurement
– Tied-AID
– Export credit agencies
30
Constraints – domestic
• Poor standards
• Poor regulations
• Expertise
– Immigration
31
Gains From Trade
Gains from exports
• Employment
• Complementary exports
• Foreign exchange
• Knowledge and skills
• Economies of scale
33
Gains from exports
Mode
Health
Construction
Cross-border trade
High
Low
Consumption abroad
High
Low
Commercial presence
Medium
High
Temporary movement of
people
Medium
Medium
Emigration
Low
Low
34
Gains from imports
• Knowledge and skills
• Product
– Price
– Quality
• Capital and infrastructure
35
Gains from imports
Mode
Health
Construction
Cross-border trade
High
Low
Consumption abroad
Low
Low
Commercial presence
Medium
High
Temporary movement of
people
Medium
Medium
Emigration
High
High
36
Trade Policy Implications
Health services - WTO
• 40% of member countries have made some
commitments
– 25% hospital services
– 33% medical and dental services
38
Health services - SA
Sub-sectors
Medical and dental
services
Market access
National treatment
Mode
None
None
1
None
None
2
None
None
3
Unbound except as
indicated in
horizontal section
Unbound except as
indicated in
horizontal section
4
39
Health service strategy
• Remove domestic restrictions on investment
and professionals
• Target foreign barriers to health tourism and
electronic trade
• Access to the national health systems of
importing countries is critical
40
But first …
• Compulsory community service
• New National Health Bill (certificate of need)
• Restrictive immigration laws
• Poor working conditions in the public sector
41
Construction & engineering
services - WTO
• Construction: between 51% and 64% of
countries have made full commitments in
modes 1 to 3
• Architectural and engineering: between 46%
and 66% of countries have made full
commitments in modes 1 to 3
• Within SADC, just South Africa and Lesotho
have scheduled both sectors.
42
Construction services - SA
Sub-sectors
Market access
National treatment
Mode
General construction
work for buildings
Unbound (technical
reasons)
Unbound (technical
reasons)
1
General construction
work for civil buildings
None
None
2
Installation and
assembly
None
None
3
Unbound except as
indicated in horizontal
section
Unbound except as
indicated in horizontal
section
4
Building completion
and finishing work
43
Engineering services - SA
Sub-sectors
Engineering
services
Market access
National treatment
Mode
None
None
1
None
None
2
None
None
3
Unbound except as
indicated in
horizontal section
Unbound except as
indicated in
horizontal section
4
44
Construction service strategy
• Remove domestic restrictions on investment
and professionals
• Re-consider GATS exemption for Export Credit
Agencies (ECAs)
• Engage in negotiations on government
procurement to address tied AID
45
But first …
• Foreign exchange controls
• Restrictive immigration policies
• Inappropriate procurement rules
• Weak standards and regulations
46
Conclusion
Conclusion
• Need to understand the economic gains from
service liberalisation
• Need to understand the social costs of service
liberalisation and protection
• Need to identify actual constraints to trade
– Foreign barriers
– Domestic regulations (or the lack thereof)
48