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WORLD TRADE ORGANISATION Symposium on CROSS-BORDER SUPPLY OF SERVICES

Explore the economic importance of Mode 1 in international transactions, its relevance for developing countries, and the challenges faced by regulators in liberalizing regulations. Discover the impact on taxation and the way forward for cross-border services supply.

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WORLD TRADE ORGANISATION Symposium on CROSS-BORDER SUPPLY OF SERVICES

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  1. WORLD TRADE ORGANISATIONSymposium on CROSS-BORDER SUPPLY OF SERVICES Sebastián Sáez CONSULTANT

  2. CONTENT • ECONOMIC IMPORTANCE OF MODE 1 • RELEVANCE FOR DEVELOPING COUNTRIES • REGULATORS’ PERSPECTIVE • THE WAY FORWARD

  3. ECONOMIC IMPORTANCE OF MODE 1: International transactions by mode of supply Sources: (a) Karsenty (2000), Deardorff & Stern (2004);

  4. RELEVANCE FOR DEVELOPING COUNTRIES • Less expensive way to supply services; • Developing countries invest relatively small amount of capital abroad; • Successful experiences have emerged: real opportunities exist; • Mode 4 is highly sensitive from a political point of view; • Efforts to expand trade under mode 1.

  5. REGULATORS’ PERSPECTIVE THE PROBLEM: • Market Access and National Treatment commitments do not provide effective access to market; • Non-discriminatory regulations may act as deterrents to trade in services; • Issue is relevant to developing countries: the sum of all regulatory costs is equivalent to a specific tariff on services export; • Asymmetric impact of regulations on trade opportunities.

  6. REGULATORS’ PERSPECTIVE IMPACT OF MODE 1 LIBERALISATION ON REGULATIONS AND REGULATORS • How to maintain domestic regulations effective?; • Raison d’être is closely linked to its capacity to exert effective control; • New forms of regulation must be devised and a more flexible approach with regard to “trade restrictions” must be applied; • Mutual co-operation between regulators at the international level: very difficult venue.

  7. Whose laws and regulations: key to enforcement; Double taxation, evasion and loss of tax-collection; Consumer protection Double or inappropriate taxation Unintentional non-taxation Lack of supply chain efficiency (i.e., lack of securing global contracts) Inability to enter markets Distortion of competition High compliance costs Non-compliance Uncertainty REGULATORS’ PERSPECTIVE Taxation: issues identified

  8. THE WAY FORWARD • Understanding of Cross-border supply of services; • Defined cross-border trade: modes 1+2; • Electronic commerce; • Domestic regulation; • New services; • Subsidies; • Taxation; • Data processing • Horizontal commitments • Specific commitments: exceptions to general rule.

  9. ADVANTAGES • Similar level of liberalisation for WTO members: avoids selective negotiations and addressing some members’ trade interests; • Provides a common understanding and avoids disputes; • Dynamic: it does not depend on classification, and it captures technology change;

  10. ADVANTAGES • Developing countries have less leverage in negotiations with industrialized countries: a common approach circumvents “power politics;” • Domestic regulations: provide comfort to regulators and public opinion, not a blank cheque; • Members may still negotiate exception under specific commitments for politically sensitive sectors.

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