The Hindu Business Line : ‘Integration of global services mkt incomplete’

New Delhi, Jan 5 The integration of global services market is incomplete despite its potential benefits, the World Bank has said. In a just published Handbook of International Trade in Services, the Bank study said India today confronted contrasting challenges abroad: uncertainty of access for cross border exports of services and barriers to exports through the movement of people.

Caution

It cautioned that openness to trade could not be taken for granted because, as services outsourcing grows, adjustment costs in importing countries could unleash protectionist pressures. Now, political climate in many advanced countries has become more resistant to foreign service providers. But India has much to gain, probably more than any other country in the world, by bringing services on to centre-stage at World Trade Organisation’s Doha trade talks.

India’s share

In the past 15 years, India’s services exports rose 15 times, from around $5 billion in 1990 to nearly $74 billion in 2006. Over the past decade, India’s exports of business services have grown at 25 per cent per annum, which is faster than those of any other country in the world, except Ireland. More than a third of India’s aggregate exports are services, unmatched by any developing country and only a handful of advanced countries, the Bank said.

The main author of the Handbook, Mr Aaditya Mattoo, Lead Economist, Development Economics Group, said successful reform of financial, telecom and transport services in developing countries could enhance their growth performance by up to one percentage point.

The study stated that if rich countries were to allow temporary immigration of foreign service-providers equal to just 3 per cent of their labour force, global gains would exceed $150 billion — more than thrice the total development assistance flows. Stating that the services negotiations offer India a golden opportunity to secure access to foreign markets and to spur domestic reforms, Mr Mattoo said India could transform the Doha services talks by proposing “a package that is balanced, commercially relevant and supports development”.

For India, the Bank suggests lifting many barriers to global integration of its services markets that deprive households and firms of more, better and a greater variety of services.

The study stated that if rich countries were to allow temporary immigration of foreign service-providers equal to just 3 per cent of their labour force, the global gains would exceed $150 billion — more than three times of total development assistance flows.

It cites a recent World Bank report showing that Indian horticultural producers receive on average only one-sixth of the price consumers pay because of inefficient storage, transport and distribution. India’s restrictions on foreign presence in professional services impede the growing international division of labour in the production of these services which would be greatly to India’s advantage. Restrictions on foreign ownership persist in communications and financial services in India, it said.

The Bank urges the rich world and the large developing countries to accept three elements: a promise not to slap new restrictions on trade in services, a commitment to eliminate barriers to foreign direct investment and an agreement to allow greater freedom of global movement for individual service-providers in order to fulfil specific services contracts.

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