To appreciate the CARICOM perspective on global trade in services, it is necessary to begin by recalling those factors, which promote the rapid expansion of this trade. These are: technology improvements, demand growth, economic change, and the diversification of production structures, worldwide. In many areas of contemporary economic activity, services are intensively used as key inputs. Trade in services however, unlike trade in goods, intrinsically involves the movement of natural persons and/or a commercial presence, as we know too well here in the Caribbean.
Arguments for liberalisation
Among the arguments advanced in favour of further liberalisation of global trade in services is the notion that global supply and demand schedules for these services facilitates out-sourcing and importation from which countries like those in CARICOM would benefit. There are other direct benefits to importing countries in the form of cheaper and improved quality services and, indirect benefits to local consumers, through increased choice and the competition this forces on local firms.
Competition from outside is expected to bring efficiency gains in the form of lower prices, better quality, as well as the increased choice/variety mentioned before. It is also expected that the intrinsic pressures linking services to a commercial presence will promote foreign direct investment. We must not also overlook the claim of the liberalisation lobby that: 'liberalisation always benefits the liberalisers.'
Concerns: monopoly and restrictions
A number of concerns have, however, been raised about these claims. There is the obvious concern that global competition is leading to the consolidation of economic activity into the hands of a few oligopolistic players. We have in this series, established the disproportionate influence of a few transnational firms (TNCs) over the market share for most products and services. In such a situation it is realistic to expect that these firms would seek to exploit their market advantage. In which case, not much of the expected benefits from the economies of scale and scope will be passed on to consumers. Further, with the consolidation of the industry in a few countries as well, a highly uneven global playing field is being created. Small developing countries like those of CARICOM cannot expect much benefit if these circumstances continue.
There is also concern over the growth of restrictive practices by some firms, particularly those from the USA. Some of these firms, it is claimed, have local labour contracts prohibiting their employees from subsequent employment with competitors or other local businesses in the same field. Others prohibit CARICOM nationals who are recruited in the diaspora from returning to the Region to open rival operations! Clearly, if such practices spread, they will reduce the spillover benefits to the local economy.
Inequalisation of trade
The tendency/pattern towards a growing inequalisation of trade and its concentration among a few countries and a few firms, is already manifesting itself in the services sector, as the recent spurt of mergers and acquisitions (M&As) reveal. Given the present uneven levels of development of the services sector, the rich countries face little risk from trade liberalisation in this area. Indeed, they stand to gain immensely, since growth in the output of services is being fuelled by technological improvement and, one way in which the lead of rich countries can be protected is through open unrestricted trade. This is however, linked 'paradoxically,' to trade restrictions on intellectual property rights (TRIPS), which were examined a few week ago. This contradiction between the call for free trade in services and the call for closed trade stances for trade in intellectual property rights should not go unnoticed.
CARICOM priorities
In a recent article I have identified a number of matters of importance to CARICOM stakeholders. The first is that, the Group of 74 (Group of 24 + African Group + CARICOM) had been playing an active role in the recent GATS negotiations leading up to the last WTO Ministerial at Qatar, in November 2001. The Group of 74 had argued 1) for special treatment of small economies and the needs of small service suppliers in developing countries; 2) against the imbalance in proposals for sectoral negotiations. The then proposals favoured the rich countries and their already well developed service sectors, as it concentrated in areas like finance, insurance, and maritime transport; 3) for continuous assessment of international trade in services as a "new" area, since information is sadly lacking; 4) for better safeguards mechanisms; and 5) for addressing outstanding WTO and global trading issues before a new round of global negotiations was embarked upon.
It should be mentioned that Third World Economics reported this was the first time such a broad coalition of developing countries had developed in the WTO and, better still, had held together for such a long period. It was even claimed that this was "unnerving both the industrial world and the [WTO] Secretariat." Second, there is a great need for comprehensive documentation of trade in services within the Region. This is required in order to enhance common negotiating positions that reflect both commonalities and differences. In other words, to avoid a one-size-fits-all approach for the Region. It is also required to ensure that harmonized practices, law, and administrative arrangements are in place, which are consistent with the GATS.
The third matter is that there is need for broader public and stakeholder involvement in the process. The WTO Agreement and the GATS, along with subsequent negotiations, have been too much of a "closed-door" operation. Thus, in the round of negotiations leading up to the last WTO Ministerial at Qatar, the information provided was extremely limited. One was left to presume that the RNM and CARICOM officials were, understandably, either too busy with the negotiations or considered the issues too "technical" and boring to elicit public involvement. Or that the political directorates had discouraged the flow of information to the public. This, however, was not the best way to proceed. Next week we shall continue this look at global trade in services from a CARICOM perspective.