One of the notable trends in recent years has been the increasing importance of cross-border supply of services, constituting more than 40% of world services trade (including both Modes 1 and 2). This is occurring both through partial substitution of services earlier supplied through commercial presence of foreign companies or natural persons (i.e. GATS Modes 3 and 4), like Professional, Financial, and Audio-Visual Services; and through trade in newer services like Telemedicine and R&D. The other dynamic trend is the growth in offshoring with developing countries as important participants. These trends provide huge scope for developing countries to exploit their comparative advantages in labour-intensive services without displacing substantial labour in developed economies, and at the same time adding to efficiency gains and reduction of costs in the latter.
Current policy with regard to cross-border supply of services, both in developed and developing nations, seem to be more liberal than reflected in current GATS commitments or offers submitted in the Doha Round. Binding that autonomous policy would improve predictability, prevent a backlash of protectionism, and help developing countries exploit their comparative advantages. The liberalization of cross-border supply of services have not only featured prominently in current WTO negotiations but also in recent PTA negotiations among various countries. In general, the trend in these bilateral negotiations appears to be towards the binding of actual status-quo. However, although matching the objectives set out by some developing countries in the Doha Round, the PTA negotiations are not suitable for establishing the grounds of a truly open global environment for the supply of services on a cross-border basis. There appears therefore to be a major role for the WTO in liberalizing these transactions.
The purpose of this paper is threefold; firstly, to review the trends in outsourcing and offshoring of services activities, identifying the main services exchanged and the countries involved; secondly, to assess the situation in the current Doha Round of negotiations, analyzing current commitments and offers, as well as proposals made by Members to advance liberalization in this area; thirdly, to analyze whether and how these issues have been addressed in bilateral PTA negotiations, and compare the outcomes with the multilateral approaches and outcomes thus far; and, finally, to explore the way forward.
Available at: http://works.bepress.com/suparna_karmakar/18/