Services Trade Liberalisation and Domestic Regulations: The Developing Country Conundrum

Services have become the engine of growth in a large number of economies in the developing world. Additionally, the rapid development of ICT, and emergence of transnational corporations, has not only made cross-border provision of services easier, but has also increased the demand for and trade in services; developing countries today are increasingly emerging as cost efficient providers of key business and professional services, thereby becoming key players in the services supply chain.In the absence of explicit tariff barriers, as compared to goods, over the years, countries have more intensively regulated services on grounds of protecting consumer interest and ensuring quality and excellence of professional services provided. It is also true that as cheap labour is the resource with comparative advantage in most developing countries, and especially India, access to developed country markets by means of cross-border supply and movement of natural persons have the potential of conferring the maximum benefits from services liberalisation. However, challenges for market access in developed countries in these two modes of supply lie in the range of regulatory barriers, including burdensome visa formalities, stringent quotas and qualification requirements, and discriminatory taxes, levies and standards faced by the developing country service providers. Most professions are closely regulated and certified, and often self-regulated, usually though sectoral trade associations.This paper brings out the key elements of the prevalent regulatory measures and barriers to market access for developing country service providers, and assesses how (if at all) the proposed disciplines on domestic regulations would help in securing or easing market access problems of developing country professionals in the developed country markets. An analysis of select professional services in India indicate that for developing countries in general there exist many elements in the proposed disciplines that are not only desirable but would help them to get better market access into key developed country markets. Also it appears that given the prevailing weaknesses of the domestic legal and institutional framework in most developing countries, commensurate changes in the domestic legal and regulatory systems would need to be incorporated prior to the adoption of the DR Disciplines so as to enable countries to fulfill the requirements under such disciplines. Incorporation of suitable S&DT provisions is needed to ensure proper implementation of the said disciplines and satisfy the development agenda of the Doha Round.