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Opening Up Trade in Services: Crucial for Economic Growth

Organization for Economic Cooperation and Development | September 1, 2005

Services, from health to banking, have become the single largest sector in many economies worldwide. They not only provide the bulk of employment and income in many countries, but they also serve as vital input, such as telecommunications, for producing other goods and services. So an efficient services sector is crucial for the overall economy. And because of this, agreement on opening up services markets is crucial to the success of the current global trade talks.

 Such market opening will bring gains to all economies, including the developing world, as long as it is done in a carefully considered way. But opening up services markets is a particularly complex challenge. For one thing, any discussion of trade in services has to include the thorny question of whether people providing a service, such as nurses, lawyers or computer maintenance engineers, can go to another country to do so. The previous round of global trade talks only achieved modest market opening agreements for services. But since then technological developments have created their own momentum. Online services such as customer call centres, for example, no longer need to be in the same hemisphere as the customer. As a result, services markets have opened up under bilateral or regional agreements, and under domestic reform programmes. The current Doha Development Agenda (DDA) negotiations at the World Trade Organization (WTO) offer countries at all levels of development a chance to take stock of developments in the services sector so far, and undertake progressive further opening. This Policy Brief summarises some of the key findings of ongoing OECD work on the benefits and challenges of liberalising services trade.

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