Trade Policy

Services are the new frontier of globalization and represent the most dynamically growing part of world trade. Nonetheless, stalled negotiations on services within the context of the WTO and persistent controversies over services in trade agreements such as CETA, TTIP, and TiSA reflect substantial discord on the optimal design of international services trade rules. The outcome of these negotiations is critical.

Services constitute the largest economic sector worldwide in terms of both output and employment. The sector is the main engine of job creation worldwide and a key driver of innovation. Moreover, subsectors like education, health, water, electricity, telecommunication, as well as financial and insurance services, are vital to the attainment of social and environmental goals.

Trade provisions on services are fundamentally different from the historical focus on tariffs and quotas in the context of goods trade, and instead often fall squarely into the realm of domestic policy and regulation. As a result, and given the inherent uncertainty on the outcomes of “new generation” trade deals that are currently being negotiated, they invoke strong anxiety as to economic, social and environmental outcomes. Fears that trade agreements may restrict countries in their policy space to promote renewable energy, to safeguard universal coverage of education and healthcare, and to pursue economic development goals, are cases in point. The 15bn US$ claim filed under NAFTA in 2016 in response to the US rejection of the Keystone oil pipeline is an illustration of the stakes involved.

At the same time, codifying sensible international frameworks for services trade and opening select services sectors can offer considerable opportunities. The benefits from competitive and open telecommunications markets for inclusive development and access to information across the globe is testament to that.

Against this background, balanced provisions to seize the opportunities and mitigate the risks of services trade rules for sustainability are crucial. With research on the effects of international trade in services lagging current policy agendas, there is an urgent need to dig deeper into the question of how and to what extent the sector can benefit from trade liberalization and to ensure that these benefits translate into serving a broader sustainability agenda. CEP’s trade policy program contributes to this objective with evidence-based analysis, as well as the formulation and promotion of policy recommendations.

For further information please contact Johannes Schwarzer. Please also check out the articles relating to trade policy in our blog.