Journal of Industry, Competition and Trade

, Volume 8, Issue 3–4, pp 295–318 | Cite as

The General Agreement on Trade in Services: Doomed to Fail? Does it Matter?



Little progress has been made to date in using the GATS framework to lock-in already implemented unilateral reforms, let alone in inducing new liberalization. The same is true for rule-making efforts. A number of potential explanations for the lack of traction are identified and assessed. These include limited feasibility of using the reciprocity mechanism to mobilize domestic export interests; less need for reciprocity to achieve global welfare improvements in policy; weaknesses in domestic regulatory capacity; and uncertainty/asymmetries regarding the magnitude and distribution of costs and benefits of policy reforms. All these factors play a role in reducing the scope for the GATS to be an effective instrument to help governments overcome domestic and international policy externalities. Changes in negotiating modalities and focus could help strengthen the relevance of the GATS as an instrument of multilateral cooperation.


trade in services trade agreements GATS WTO trade negotiations 

JEL classification

F13 F15 


  1. Adlung, R., “Services negotiations in the Doha round lost in flexibility?,” Journal of International Economic Law, vol. 9, no. 4, pp. 865–893, 2006.CrossRefGoogle Scholar
  2. Adlung, R. and Roy, M., “Turning hills into mountains? Current commitments under the general agreement on trade in services and prospects for change,” Journal of World Trade, vol. 39, pp. 1161–1194, 2005.Google Scholar
  3. Arnold, J.M., Javorcik, B., and Mattoo, A., “The productivity effects of services liberalization: Evidence from the Czech Republic,” World Bank Policy Research Working Paper 4109, 2006.Google Scholar
  4. Arnold, J.M., Javorcik, B., Mattoo, A., and Lipscomb, M., “Services reform and manufacturing performance: Evidence from India,” World Bank, Mimeo, 2007.Google Scholar
  5. Arnold, J.M., Mattoo, A., and Narciso, G., “Services inputs and firm productivity in sub-Saharan Africa: evidence from firm-level data,” Journal of African Economies, vol. 17, pp. 578–599, 2008.CrossRefGoogle Scholar
  6. Bagwell, K. and Staiger, R., “An economic theory of GATT,” American Economic Review, vol. 89, pp. 215–248, 1999.Google Scholar
  7. Bagwell, K. and Staiger, R., The Economics of the World Trading System Cambridge. Massachusetts (MIT Press), 2002.Google Scholar
  8. Baldwin, R., Evenett, S., and Low, P., “Beyond tariffs: multilateralising deeper RTA commitments,” presented at the conference ‘Multilateralising Regionalism’, September 10–12, Geneva, 2007.Google Scholar
  9. Barth, J., Caprio, G., and Levine, R., Rethinking Bank Regulation: Till Angels Govern. Cambridge and New York (Cambridge University Press), 2006a.Google Scholar
  10. Barth, J., Marchetti, J., Nolle, D., and Sawangngoenyuang, W.,. “Foreign banking: do countries’ WTO commitments match actual practices?,” WTO, Mimeo, 2006b.Google Scholar
  11. Baumol, W., “Macroeconomics of unbalanced growth,” American Economic Review, vol. 57, pp. 415–426, 1967.Google Scholar
  12. Blanchard, E., “Reevaluating the role of trade agreements: does investment globalization make the WTO obsolete?” Mimeo, 2007.Google Scholar
  13. Bown, C. and Hoekman, B., “Developing countries and enforcement of trade agreements: why dispute settlement is not enough,” Journal of World Trade, vol. 42, no. 1, pp. 177–203, 2008.Google Scholar
  14. Chaudhuri, S., “Plurilateral negotiations in services,” ICRIER-SRTT Quarterly WTO Newsletter, October–December, 2006.Google Scholar
  15. Egger, P. and Pfaffermayr, M., “The impact of BITs on FDI,” Journal of Comparative Economics, vol. 32, pp. 788–804, 2004.CrossRefGoogle Scholar
  16. Eschenbach, F. and Hoekman, B., “Services policy reform and economic growth in transition economies, 1990–2004,” Review of World Economics, vol. 142, no. 4, pp. 746–764, 2006a.CrossRefGoogle Scholar
  17. Eschenbach, F. and Hoekman, B., “Services policies in transition economies: on the EU and WTO as commitment mechanisms,” World Trade Review, vol. 5, no. 3, pp. 415–443, 2006b.CrossRefGoogle Scholar
  18. Ethier, W.J., “The theory of trade policy and trade agreements: a critique,” European Journal of Political Economy, vol. 23, pp. 605–623, 2007.CrossRefGoogle Scholar
  19. Fink, C. and Jansen, M., “Services provisions in regional trade agreements: stumbling or building blocks for multilateral liberalization?,” Presented at the conference Multilateralising Regionalism, Geneva, 10–12 September, 2007a.Google Scholar
  20. Fink, C. and Molinuevo, M., East Asian free trade agreements in services: roaring tigers or timid pandas? Washington DC (World Bank), 2007b.Google Scholar
  21. Francois, J., Hoekman, B., and Wörz, J., “Does gravity apply to intangibles? Trade and FDI in Services,” Mimeo, 2007.Google Scholar
  22. Gootiz, B. and Mattoo, A., “Restrictions on services trade and FDI in OECD and developing countries,” World Bank, Mimeo, 2008.Google Scholar
  23. Hoekman, B., “Assessing the general agreement on trade in services,” in Martin, W. and Winters, L.A. (eds.), The Uruguay Round and the Developing Countries. Cambridge (Cambridge University Press), 1996.Google Scholar
  24. Hoekman, B. and Mattoo, A., “Regulatory cooperation, aid for trade and the GATS,” Pacific Economic Review, vol. 12, no. 4, pp. 399–418, 2007.CrossRefGoogle Scholar
  25. Hoekman, B. and Messerlin, P., ““Liberalizing trade in services: reciprocal negotiations and regulatory reform,”,” in Sauvé, P. and Stern, R. (eds.), Services 2000: New Directions in Services Trade Liberalization. Washington, DC (Brookings Institution), pp. 487–508, 2000.Google Scholar
  26. Hoekman, B. and Winters, L.A., “Multilateralising preferential trade agreements: a developing country perspective,” presented at the conference ‘Multilateralising Regionalism’, September 10–12, Geneva, 2007.Google Scholar
  27. Hoekman, B., Mattoo, A., and Sapir, A., “The political economy of services trade liberalization: a case for international regulatory cooperation,” Oxford Review of Economic Policy, vol. 23, no. 3, pp. 367–391, 2007.CrossRefGoogle Scholar
  28. Jensen, B.J. and Kletzer, L., “Tradable services: understanding the scope and impact of services outsourcing,” IIE Working Paper 05–9, 2005.Google Scholar
  29. Konan, D.E. and Maskus, K.E., “Quantifying the impact of services liberalization in a developing country,” Journal of Development Economics, vol. 81, pp. 142–162, 2006.CrossRefGoogle Scholar
  30. Maggi, G. and Rodriguez-Clare, A., “A political economy theory of trade agreements,” American Economic Review, vol. 97, pp. 1374–1406, 2008.CrossRefGoogle Scholar
  31. Mattoo, A., Rathindran, R., and Subramanian, A., ““Measuring services trade liberalization and its impact on economic growth: an illustration,”,” Journal of Economic Integration, vol. 21, pp. 64–98, 2006.Google Scholar
  32. Njinkeu, D. and Cameron, H. (eds.). Aid for Trade and Development. Cambridge (Cambridge University Press), 2007.Google Scholar
  33. Oulton, N., “Must the growth rate decline? Baumol’s unbalanced growth revisited,” Oxford Economic Papers, vol. 53, pp. 605–627, 2001.CrossRefGoogle Scholar
  34. Prowse, S., “Aid for trade: increasing support for trade adjustment and integration—A proposal,” in Evenett, S. and Hoekman, B. (eds.), Economic Development and Multilateral Cooperation. New York (Macmillan), 2006.Google Scholar
  35. Roy, M., Marchetti, J., and Lim, H., ““Services liberalization in the new generation of preferential trade agreements: how much further than the GATS?,”,” World Trade Review, vol. 6, no. 2, pp. 1455–1493, 2007.CrossRefGoogle Scholar
  36. Rutherford, T. and Tarr, D., “Poverty effects of Russia’s WTO accession: modeling ‘real households’ and endogenous productivity effects,” Journal of International Economics, vol. 75, pp. 131–150, 2008.CrossRefGoogle Scholar
  37. Sapir, A., “GATS 1994–2000,” Journal of World Trade, vol. 33, no. 1, pp. 51–66, 1999.Google Scholar
  38. Schelling, T., Micromotives and Macrobehavior. New York (Norton), 1978.Google Scholar
  39. Tumlir, J., Protectionism: Trade Policy in Democratic Societies. Washington, DC (American Enterprise Institute), 1985.Google Scholar
  40. UNCTAD, World Investment Report: The Shift towards Services. Geneva (United Nations), 2005.Google Scholar
  41. World Trade Organization. “Recommendations of the taskforce on aid for trade,” WT/AFT/1 (July 27), 2006.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2008

Authors and Affiliations

  1. 1.International Trade Department, The World BankWashingtonUSA
  2. 2.CEPRLondonUK

Personalised recommendations