Working Paper: CEPR ID: DP2481
Authors: Aaditya Mattoo; Marcelo Olarreaga
Abstract: The negotiations on trade in services at the WTO have so far produced little liberalization beyond levels unilaterally undertaken by countries. One reason is the neglect of the traditional negotiating principle of reciprocity. In particular, there has been a failure to exploit the scope built into the services agreement (GATS) for exchange of market access 'concessions' across the different modes of supply - cross-border delivery, and the movement of capital and individuals. Using the Heckscher-Ohlin-Vanek framework, this paper proposes a negotiating formula that generalizes the fundamental WTO principle of reciprocity to include alternative modes of delivery. Adoption of this formula as a basis for negotiations could help deliver greater liberalization commitments on all modes - producing substantial gains in global welfare and more balanced outcomes.
Keywords: GATS; services; trade
JEL Codes: F02; F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased reciprocity (Z13) | greater liberalization commitments in services trade (F13) |
| reciprocity can neutralize adverse terms of trade effects (F14) | equalizing income changes related to factor flows (F16) |
| lack of political will to improve access for foreign individuals (F29) | hindered negotiations (F51) |
| effective application of reciprocity (C71) | facilitate movement of individuals (J61) |
| facilitating movement of individuals (J61) | enhancing trade in services (F19) |
| changes in income associated with foreign factor flows and trade volumes (F29) | achieve reciprocity (C71) |