As promised, this week's article examines trade in accounting services so as to illustrate issues already discussed concerning the WTO and GATS. Last week's article had also indicated that this would bring to an end our discussion of this topic. This will no longer be the case; the reason being the truly remarkable revelations that have emerged from the collapse and bankruptcy of Enron, the seventh largest US transnational corporation (TNC). As we shall see beginning next week, these revelations have brought to the fore a grave crisis, which threatens to compromise the growth of global trade in financial services generally, and accounting in particular. The explosive growth of trade in accounting services has been based on a wide variety of regulatory standards in the accounting profession, which has created certain difficulties. This variation occurs with the service provider, (for example in terms of qualifications and certification), as well as with the service itself, (for example in terms of standards and rules to be followed). Professional designations vary a great deal. Sometimes these are presented by functional title (e.g., registered auditor); educational title (e.g., ACCA); or academic title (e.g. MSc [Accounting).

While some countries have legal regulation of the profession provided by the state or other appropriate governmental body, other countries rely on self-regulation. In some instances, countries rely on both. These variations make worldwide comparisons extremely difficult.

Under the WTO Agreement, the GATS focuses on the commercial segment of the accounting profession. The two global professional bodies are the International Federation of Accountants (IFAC) established in 1977, and the International Accounting Standards Committee (IASC), established in 1973. These umbrella bodies provide coordination and the framework for the development of the profession at the global level. Over the past two decades, the range of accounting services provided by major accounting firms has widened considerably. These now typically include: accounting, auditing, management consultancy, taxation, investment services, "expert witnesses", insolvency, contribution and merger audits, and information technology (IT) consulting services.

Globally, the majority of accounting firms are quite small, with only 1-5 persons. A significant number are also medium-sized. However, it is the "Big Five" TNCs, which dominate the industry. The "Big Five" reap enormous economies of scale and scope and are able to attract a diverse array of skills and customers. Since the nature of accounting services is such that it requires the simultaneous presence of both the supplier and the consumer, historically it has encouraged a "commercial presence" and the visit of "natural persons" to be strong features of its global trade.

The "Big Five" accounting firms, however, are not like the traditional TNCs we have been referring to in this series, with their classic parent company/overseas subsidiary relations. What we have are transnational "networks" or "alliances" driven by client-demand and their organizational imperatives, which provide for work referral across national frontiers. This structure gives tremendous flexibility and scope to accounting firms. Whether this structure will survive over the long run, however, is not yet clear, as the balance between the historical factors that have led to the present position and the future promise of freer trade in accounting services is not yet clearly established.

While GATS seeks to promote free trade in accounting services, existing barriers to this trade are enormous. These include: a plethora of "discriminatory" laws and regulations in different countries; payments restrictions on the transfer of funds due for providing accounting services; restrictions on the movement of natural persons attached to the services; and, restrictions on commercial presence.

It also includes barriers created through the tax treatment of imported accounting services; restrictions on the transfer of technology and information in the profession; the existence of subsidies; the existence of monopolies, which constrain global trade; and, finally a wide variety of modalities for professional certification, which prevent the easy standardisation of skills. Data for the late 1990s suggest that between one-third and 41 per cent of the accountants in the Caribbean work in commercial practice, either as a sole practitioner or collectively through accounting firms. Accountants working for firms in industry and commerce accounted for 40-60 per cent of the total. The number of accountants in Government service is therefore small, probably less than 8 percent of the total. In the region, the most common accounting qualification is the ACCA, although it has been reported that the CMA (Canadian), CCMA (British), and CPA (USA) are growing in importance. As we noted before, under the GATS most of the "horizontal restrictions" placed by CARICOM countries on their trade in services pertain to work permits, alien land holding, exchange controls, and company registration, which are primarily administrative or legal in their nature. Under the GATS, CARICOM has made "specific commitments" for freer trade in 9 of the 12 categories of services. The three categories under which no commitments were made are: Construction and Related Engineering; Distribution; and Environmental Services . Of the 73 categories/activities in which commitments were definitely made, the largest number of such commitments was made by Jamaica (32), followed by Trinidad and Tobago (21), Antigua and Barbuda (18), and Guyana (17).

The number of commitments made by other member countries was in the range of 4-8. Overall, CARICOM made commitments in 72 sub-categories, with more than one-third of these in business services (27) and more than one-fifth in transport services (15). As far as accounting goes, three CARICOM countries (Antigua and Barbuda, Guyana, and Jamaica) have made specific commitments for the sub-sub category described as Accounting, Auditing, and Book-keeping Services, under the sub-category, Professional Services and the General Category, Business Services. The question that arises is to what extent was the accounting profession involved in the decision-making, before these irreversible commitments were given to the WTO/GATS process. Indeed the same question may be asked for all the other service sectors. The most likely answer is "very little," which highlights in a concrete way the problem indicated in this series of limited "inclusiveness" and highly restricted access to information on the Region's approach to the negotiation of several all-embracing and fundamental undertakings in this age of globalisation.