Study Cites Worldwide Gain of $1.7 Trillion from Services Trade Liberalization

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“Services trade liberalization can generate far greater economic growth than liberalization of agriculture or manufacturing,” according to a study released today by the Coalition of Service Industries (CSI).

“Services trade liberalization can generate far greater economic growth than liberalization of agriculture or manufacturing,” according to a study released today by the Coalition of Service Industries (CSI). By one estimate, service sector liberalization could yield a global welfare gain of US$1.7 trillion, more than double the potential gain from goods liberalization, and 31 times the gain from agricultural liberalization. Services are essential components of trade in agriculture and goods. If services are not liberalized the potential for trade in agriculture and goods will be stunted.

Services account for 50-60% of economic activity in most developing countries and over 70% in some developed countries. Foreign direct investment in services far exceeds that of both goods and primary products. “Yet services account for only 20% of world trade,” said Norman Sorensen, Chairman of CSI and President and CEO of Principal International, Inc. “This demonstrates the need for liberalization of services in the Doha Round, and the great scope for growth of global trade in services.”

The huge volume of FDI in services ($103 billion to developing countries from 2001-2003) means investment in new technologies and services that create new jobs. Liberalization encourages FDI. Telecommunications service providers are more likely to invest in countries that have made WTO commitments. Countries that fully liberalize their financial services sectors could see an income gain close to $300billion by 2015, equivalent to 2% of GDP.

Over the past decade, employment in the service sector increased from 34% to 39% of the global workforce, while the share of employment in agriculture declined, and industry’s share has been flat. Liberalization of services in the Doha Round will accelerate the trend to greater employment in this sector. In India, IT-enable services are estimated to employ up to 3.3 million people by 2015. In Jordan, telecommunications liberalization led to a 42% increase in jobs. For every job created in Egypt’s mobile telecom industry, eight other jobs are estimated to be created.

The Report contains many examples of liberalization that has worked. “In every country that has liberalized its telecommunications sector, the number of users has grown, prices have fallen, and employment in the industry has expanded.” In Brazil internet users jumped from 5 million in 2000 to over 22 million in 2005.

Liberalization of services like express delivery linked with supply chain management can have tremendous implications for countries’ competitiveness. India’s cost of internal transport is nearly double the global average. India could realize significant additional annual growth if it modernized these services with the help of foreign investors. Brazil has similar high transport costs, almost twice the level in OECD countries.

Developing countries have the opportunity both to benefit from liberalization of their service sectors, and to gain access to other WTO members’ markets. In order to achieve these benefits, WTO members must make bold offers to liberalize domestic service sectors, and make bold demands in return. WTO members should make new offers to liberalize services by July 31 of this year, and to have final offers ready by October 31.

The premise of the Doha Round is that liberalization creates better lives for all peoples. This promise can be realized, but only if WTO Members use the time remaining to seize the development opportunities this round offers.

The study, “Making the Most of the Doha Opportunity: Benefits from Services Liberalization,” is available on the CSI website at http://www.uscsi.org/services_study/.

Contact: John Goyer

(202) 289-7460 ext. 22

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