Investment Facilitation and Mode 3 Trade in Services : Are Current Discussions Addressing the Key Issues ?

Based on a novel approach to measuring the cost of trade in services for Modes 1 (cross-border supply), 2 (consumption abroad), and 4 (temporary movement of service suppliers), developed by the World Trade Organization Secretariat, this pper reviews available evidence on factors affecting trade costs for services supplied via a commercial presence in a host country market, so-called Mode 3 trade. It does so with a view to answering the question of whether the current “facilitation†agendas on services and investment proceeding at the World Trade Organization focus on the most important factors affecting Mode 3–related trade costs, by far the most important of all modes of supplying services internationally. The paper explores the policy opportunity costs arising from the decision to focus the investment facilitation agenda on matters of regulatory transparency and the streamlining of administrative procedures. It recalls how reducing regulatory heterogeneity, tackling discriminatory impediments to cross-border investment, and developing investor-state conflict management mechanisms to retain and expand investment and prevent dispute escalation -- all issues left unaddressed by ongoing negotiations -- hold important potential for reducing Mode 3 trade costs and facilitating expanded investment.