Services Trade and Regulation Supporting International Cooperation and Domestic Reform Bernard Hoekman International Trade Department World Bank WTO, April.

Services Trade and Regulation

Supporting International Cooperation and Domestic Reform

Bernard HoekmanInternational Trade Department

World Bank

WTO, April 11, 2011

Indisputable facts…• The cost and quality of services inputs is a major

determinant of how much countries can benefit from globalization

• Firms need efficient and reliable services to compete in the world economy

• Opening markets to trade and investment flows is an important channel for giving domestic firms access to better services, diversifying its export basket of goods and services

• Effectively integrating services markets is complex because it involves regulatory reform and cooperation

Serious policy challenges…..• Developing countries face significant difficulties

in designing reforms, in part because of concerns about the realization of regulatory objectives

• Multiple players with different objectives within governments/countries

• Provision of services involves a network or cluster of activities: e.g. logistics services or tourism.

• Absence of information on extant regulations, their purpose and impact

• Limited knowledge of alternative regulatory options

World Bank support for regulatory reforms

• Information: data on applied policies across many countries

• Analytical work: impacts of applied policies within countries– Incl. regulatory assessments

• Instruments:– Research– Policy dialogue– Knowledge Platforms– Projects

Services Trade Restrictiveness Indicators

• 102 countries: 78 developing countries surveyed, comparable data for 24 OECD countries

• Five broad services sectors: Financial, Telecom, Retail, Transportation, Professional Services.

• Within sectors, different modes of supply where applicable

• Multiple policy dimensions but focus on discriminatorypolicy measures

more than 3,000 country-subsector-mode combinations

Index of restrictiveness of applied policies (STRI)

STRI by Regions and Sectors

Trade and Transport Facilitation Assessment

• Logistics costs are determined by the regulatory environment for logistics operators, not just quantity and quality of infrastructure

• Within countries, logistics in lagging/remote/ island regions may be key trade barrier due to high costs of shipping small volumes

• Logistics councils or other public-private trade facilitation bodies important to identify/implement better logistics services

• Consultation/coordination processes needed for rapid adoption of new requirements to participate in global supply chains

Professional Services in East Africa: Regulatory Cooperation for Regional

Integration• Collection of new information on market conditions, policies and

regulatory regimes in accountancy, engineering, and legal services • Key findings:

– National markets for these services in East Africa remain underdeveloped

– Regional market fragmented by restrictive policies and regulatory heterogeneity

• Policy recommendations:– Four priority areas – domestic regulatory practices, trade

barriers, international labor mobility, and education– Require both national reform and international cooperation– Regulatory reforms needed for effective regional competition

Source: Dihel, Fernandes, and Mattoo (2011)

Accountancy services in East AfricaAnalytical basis for policy advice

Entry Regulation - Accountants and Certified Accountants Kenya Rwanda Tanzania UgandaAcademic Qualifications

University degree required No Yes Yes NoProfessional Qualifications

Requirement to pass professional exam Yes Yes Yes YesRequirement of relevant compulsory practice Yes No Yes YesCompulsory membership in professional association Yes Yes Yes YesLicensing requirements Yes Yes Yes YesContinuing education requirement Yes No No Yes

Source: Dihel, Fernandes and Mattoo (2011)

• A comparison of domestic entry regulations for accountants by World Bank researchers reveals important differences across countries

Working towards a MRA in accountancy between Kenya, Rwanda, and Tanzania

• Ambitious step in regional liberalization and regulatory cooperation in context of EAC Common Market Protocol: annex on mutual recognition agreements

• 2010: Accountancy professional bodies of Kenya (ICPAK), Rwanda (ICPAR), and Tanzania (NBAA) signed an MRA for academic and professional qualifications– Establishes the East African Community Institutes of Accountants (EACIA)– Empowered to issue CPA designation to qualified candidates – Exempts CPAs from re-examination of professional competence– Mutual recognition of practical experience waiver if domestic experience in 3 out of

previous 5 years– Reciprocal eligibility for membership of EAC bodies subject to CPA certificate, 3

years professional experience, and no misconduct– Promote member education development and institutional strength

• Workshops in Nairobi in September 2010 brought together professional associations, regulators, trade negotiators, and business representatives and created a platform for dialogue to move the accountancy MRA forward– Uganda (not an initial signatory) also participated in the workshop

Services Knowledge Platforms (SKP)• Objectives

– Assess/analyze impacts of current policy regimes – Exchange information and learn from a variety of national

experiences with regulation/reform – Identify beneficial reforms and needed investments– Link to aid for trade initiative for support for implementation

• Connect stakeholders to different sources of expertise – local, regional, global– Build on existing platforms—APEC, OECD, etc. –and existing

networks of regulators– Facilitate South-South knowledge exchange

• Anchored in regional communities• Demand-driven and action oriented• Interest is a SKP has been expressed by PAFTA, CEFTA,

ECOWAS, Tripartite (East and Southern Africa)

An input into (future) cooperation• Progress on services in WTO impeded in part by

regulatory concerns and uncertainty • Locking-in current policies in GATS or negotiating

pre-commitments to liberalize in future require that governments see this as beneficial

• Concrete action to address regulatory agenda a precondition for making commitments

• Same is true for data lacunae – need to improve statistics

• All these factors/requirements indirectly supported by types of activities discussed

Further reading/references

B. Hoekman and A. Mattoo, “Services Trade Liberalization and Regulatory Reform: Re-invigorating International Cooperation,” http://www.voxeu.org/index.php?q=node/5969

Thank you