Transcript realizing the gains from services liberalization

Analyzing Services Trade and Policy:
Overcoming Limitations of the Data
Aaditya Mattoo
WTO Data Day, 18 May 2009
Four broad questions
• What is the pattern of trade in services and
how is it determined?
• What are the barriers to trade and how big
are the gains from eliminating them?
• What are the elements of successful
reform of services trade policy, and how do
they differ across sector and country?
• What should be the focus of international
cooperation on services?
I. What is the pattern of trade in
services and how is it determined?
International Transactions in Services
and Existing Statistical Domains
Mode of Supply
Relevant Data Source
Cross border supply
BoP service statistics
(categories other than
travel)
BoP Statistics (mainly the
travel category)
Production, FDI and FAT
statistics
BoP and FAT Statistics
Consumption abroad
Commercial presence
Presence of natural
persons
BoP data: Shared interest in crossborder trade in business services
..but developing are among the most
dynamic exporters
OECD dominates…
Regional distribution of business services
exports, 1990-2005
Average growth rates of business services
exports, 1995-2005
Regional Distribution of Business Services Exports
1990
1995
2000
2005
Average Growth Rate of Business Service Exports for Selected Countries
during 1995-2005
906
600
Ireland
530
31.6
India
25.4
16.6
China
500
15.1
Brazil
Romania
14.7
(in billion of US dollar)
Argentina
400
380
14.4
13.6
Israel
Malta
12.3
Finland
12.2
Spain
300
12.2
11.9
United Kingdom
256
11.5
Jamaica
Nigeria
200
171
10.9
New Zealand
10.9
10.6
Morocco
10.6
Malaysia
100
79
86
Mauritius
9.8
Sweden
35
22
3
4
10
7
11
17
23
9
8
12
23
South Asia
Latin America & Caribbean
9.3
United States
0
East Asia & Pacific
9.7
9.4
Norway
Middle East & Africa
OECDs
(%) 0
5
10
15
20
25
30
35
What explains services dynamism?
National data show human capital matters:
Evidence across Indian states
Services output and Education: averages over 1980-00
Services output per capita
6000
MH
5000
TN
4000
KR
AP
3000
GJ
RJ
OR
1000
HY
KN
WB
MP
2000
PJ
UP
BH
0
0
0.001
0.002
0.003
Tertiary educated per cpaita
Source: Amin and Mattoo (2006).
0.004
0.005
What explains services dynamism?
National data show institutions matter:
Evidence across Indian states
T&D Loss and Services per capita: averages over 1980-00
6000
MH
Services per capita
5000
GJ
PJ
4000
TN
KR
3000
HY
AP
KN
WB
RJ
MP
2000
OR
UP
BH
R2 = 0.45
1000
0
10
15
20
25
T&D Losses (%)
Source: Amin and Mattoo (2006).
30
US high frequency trade data reveals the crisisresilience of trade in “other private services”
US Monthly Imports of Total Goods and Services, Shares in Total Exports
(2008) and Year-on-Year Growth Rates
40.0
Goods
85%
growth rate (%)
20.0
0.0
-20.0
Services
15%
-40.0
Travel
Source: Borchert and Mattoo (2009).
Transport
Other Private Serv
Goods
Why is services trade more resilient?
• Demand for traded services is less cyclical: what
does national data on output and employment
show?
• Services trade and production are less dependent
on external finance: what does firm or industry
level data show?
• Little explicit protection, but changing political
climate and widening boundaries of the state may
introduce a national bias in firms’ procurement
and location choices: what does policy or firmlevel data show?
“It ain't what you don't know that
gets you into trouble. It's what you
know for sure that just ain't so.”
• GDP data in poor countries and the secret of
steady growth
• GDP data in rich countries and services
productivity growth
• India’s services exports to the US and US imports
from India
• Trade in telecom, banking and insurance: What
are we really measuring?
II.
What are the barriers to trade and
how big are the gains from
eliminating them?
Remedying the gaps in data on services trade
policy
Restrictiveness of Services Trade Policy, 2007-08
60
IND
50
PHL
TUN
40
IDN
CHN THA
MYS
EGY
30
JOR
LKA
20
TZA
PAK
MAR
KEN
10
KHM
NGA
GHA
SEN
SAU
BRA
VEN
RUS
ARG
ZAF
MEX
COL
UKR
PER
ECU
CHL
KOR
ITA
HUN
DNK
SWE
BEL
JPN
AUT
AUS
ESP GRC
CAN
FIN DEU
GBR NLD
CZE
LTU
POL TTO
MNG
FRA
PRT
IRL
USA
NZL
0
10
20
30
GDP per capita (thousand)
GDP per capita,PPP (co nstant 2005 international $)
Source : Gootiiz, Mattoo
Source: Gootiiz and Mattoo (2009).
40
Step 1: Times Series Data on
Policy: In recent years, India has
reformed its services sectors and
significantly liberalized FDI
India: FDI in services sector is growing faster than
in non-services . . .
Newly created index of services reform
Growth Rate (CAGR)
40
4
35
3.5
36%
30
3
FDI in Services*
25
2.5
20
2
1.5
15
1
10
0.5
5
0
0
(1992/93 values
are indexed to 1;
Unit: US$)
20%
Banking
Insurance
Telecom
Transport
2001/02
2000/01
1999/00
1998/99
1997/98
1996/97
1995/96
1994/95
1993/94
1992/93
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
FDI in Non-services
Step 2: Econometric analysis using firmlevel data suggests services policy reform
benefited manufacturing industries
Percent
Gains in Annual TFP Growth After Services Reform
4
New study based on:
•panel data for 4,000 Indian firms for the
1990-2005 period, and
•input-output linkages, finds that
banking, telecommunications and
transport reforms all have significant
positive effects on the productivity of
manufacturing firms
3
2
1
0
industries with
limited
dependence
on banking
Source: Arnold, Javorcik, Lipscomb and Mattoo (2008).
industries with
high
dependence on
banking
industries with
limited
dependence on
telecomms
industries
with high
dependence
on telecomms
Using CGE Models to Produce ex ante
Estimates of Gains from Mode 4
Liberalization
Welfare Gains from a 3% Increase in
Developed Countries' Temporary Labor
Quota
Unskilled Labor
Skilled Labor
100,000
80,000
60,000
40,000
20,000
0
Developed
Note: Data in million US$
Source: Walmsley and Winters (2002)
Rest of the world
The paucity of data on performance
• The different dimensions of performance:
productivity, prices, quality, variety, access
• The distributional consequences: across
income groups and regions
• The costs of adjustment: for firms and
individuals
III. What are the elements of
successful reform of services trade
policy?
Case studies using survey data:
Openness has not improved access to financial
services in Zambia
• Banking was liberalized before establishing a
proper regulatory framework.
 1991-1994: Ten new bank licenses issued
 1995-2001: Nine bank failures, causing estimated
losses equivalent to 7 percent of GDP.
• Foreign banks today account for over two thirds
of total assets, loans and deposits.
 But credit to the private sector is only 8 per cent of
GDP - lower than in 1990 and in most other SubSaharan African countries.
 Only 5,000 people hold 90 percent of loans.
Source: Mattoo and Payton (2007)
Step 1: Compiling cross-country data on the
sequence of policy reform: Privatization,
competition and regulation in basic
telecommunications
The sequence of telecom reform in
selected countries
Country
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Malaysia
Privatization
Competition
Regulation
India
Privatization
Competition
Regulation
Argentina
Privatization
Competition
Regulation
Brazil
Privatization
Competition
Regulation
El Salvador
Privatization
Competition
Regulation
Nigeria
Privatization
Competition
Regulation
South Africa
Privatization
Competition
Regulation
Uganda
Privatization
Competition
Regulation
Source: World Bank/ITU Telecommunications Policy Database & Fink, Mattoo, Rathindran (2001),
forthcoming.
Note: Competition refers to the fixed -line local services segment.
Step 2: Combining policy data with ITU
data for an econometric analysis of the
impact of alternative sequences of reform:
Delaying competition after privatization can
dampen growth of telecommunications
Growth in mainlines
30.00%
25.50%
25.00%
20.00%
15.00%
12.40%
10.00%
5.00%
0.00%
Privatization before
competition
Competition before
privatization
Source: World Bank/ITU Telecommunications Policy Database & Fink, Mattoo, Rathindran (2001), forthcoming.
Understanding the politics behind
policy
Two examples of contrasting transparency:
• Zambia telecommunications and transport
• US financial regulation and maritime
transport
Using data to measure the exercise
of political influence in the US
Campaign Contributions during the 2008 Election Cycle by US Commercial Banks
Rank
1
2
3
4
5
6
7
Organization
JPMorgan Chase
& Co
Citigroup Inc
American
Bankers Assn
Bank of America
Wells Fargo
Deutsche Bank
AG
Independent
Community
Bankers of
America
Total contributions by all US
commercial banks
Amount
$4,280,866
Democrats
61%
Republicans
39%
$3,467,047
$3,067,061
65%
43%
35%
57%
$2,200,793
$1,578,597
$1,356,754
56%
50%
72%
44%
50%
28%
$1,013,075
53%
47%
$36,329,595
IV. What should be the focus of
international cooperation on services?
Remedying the gaps in data on services trade
policy by sector
Transport and Mode 4 are heavily protected
but neither is being seriously negotiated
Restrictiveness index: by income group
90.00
80.00
70.00
60.00
Fin. Serv
50.00
40.00
Retail
Telecom
Transport
30.00
20.00
Professional
10.00
0.00
Low
income
Low er
middle
Source: Gootiiz and Mattoo (2009).
Upper
Middle
High
income
Assessing the Value of Trade Agreements
100
Uruguay Round Commitments, Doha Offers and
Actual Policy
TZA
80
IND
PAK
TTO
20
40
60
LKA
KEN PHL
TUN
EGYCOL
MAR
GHA
IND
SEN IDN
CHL
VEN CHL
IDN
LKAEGYCOLTHA
ECU
MYS
NGA
THA
IND
MNG
MAR
PER BRA
PHL CHN
PAK
MEX
TUN
CHN
IDNCHN
THA
MEX
ZAF
MYS
EGY
ZAF
BRA
JOR
ARG
LKA
JOR
ARG
VEN
TZAPAK JOR
MAR
BRA
ARG
KEN
MEX
KHM
PER
COL
UKR
ZAF
NGA
KHM
CHL
PER
GHA
SEN
ECU
MNG
TTO
KOR
SAU
SAU
KOR
_EUN
JPN
KOR
HNG
HNG
LTN
HNG
LTN
LTN TTO
_EUN
_EUN
JPN
CZR
CZR
CAN
AUS
CAN
USA
USA
CAN
AUS
AUS
USA
0
NZL
0
10000
20000
30000
GDP per capita in 2006 (constant 2005 USD)
Restrictiveness of GATS commitments
Restrictiveness of Doha Offers
Restrictiveness of actual policies
Source: Gootiiz and Mattoo (2009).
40000
Fitted values
Fitted values
Fitted values
Looking ahead: Cost-Benefit
Analysis of Data Itself
How valuable from a policy-perspective are certain types of information and
how much would it cost to collect the relevant data with a certain degree
of reliability ?
• Policy makers and negotiators: What are the key policy questions? E.g.
to have a better sense of exports of IT-enabled services from India; of
tourist expenditures in the Caribbean; of the importance of foreign banks
in Eastern Europe; of the sources of remittances for Bangladesh and
Yemen? Where is the protection? Where are the gains from cooperation
– regionally, multilaterally?
• Economists and analysts: What types of data can help address the
specific questions?
• Statisticians: What is the cost of collecting specific types of statistics?