EU regional trade agreements: development and barriers

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EU regional trade agreements: development and barriers

Lisitsa E.S.

Регіональні торгові зобов'язання: розвиток і обмеження (на прикладі ЄС). Лісіца К.С.

Ключові слова: способи поставок послуг, торгівля, послуги, ЄС, ЄАЕС, регіональні торгові угоди, договори про співробітництво та кооперації, транспортні послуги.

Региональные торговые соглашения: развитие и ограничения (на примере ЕС). Лисица Е.С.

Предмет исследования: взаимосвязь между уровнем либерализации, специальными обязательствами ЕС в ВТО и ограничениями в соглашениях ЕС о партнерстве и сотрудничестве.

Ключевые слова: способы поставки услуг, торговля, услуги, ЕС, ЕАЭС, региональные торговые соглашения, соглашения о сотрудничество и кооперации, транспортные услуги

The object of the research: interrelations of liberalization, special commitments of EU countries in WTO and EU partnership and cooperation agreements. regional trade agreement

Key words: modes of supply, trade, services, EU, EAEU, regional trade agreements, partnership and cooperation agreements, transport services.

Relevance: The services have been the neglected component of International trade, and the missing element in the search for increased productivity and economic dynamism. The need for a trade agreement in services has long been questioned. Large segments of the services economy have traditionally been considered as domestic activities that do not lend themselves to the application of trade policy concepts and instruments. GATS is the first multilateral trade agreement to cover trade in services. This was almost half a century after the entry into force of GATT of 1947, the GATS' counterpart in merchandise trade.

Object of the research: interrelations of liberalization, special commitments of EU countries in WTO and EU partnership and cooperation agreements.

Reference review: There are a lot research papers on the sphere of trade in services (Shmarlouskaya H., Mattoo A., Hoekman B., Grasstek van C., Nordas K.H., Kuo C.-L., Turban G., Bongini P., Stephenson S., Pobert M., Guillin A., Rueda-Cantuche J. M., Kerner R., Kutlina-Dimitrova Z., Cernat L. and oths.). There are different theoretical approaches to the measurement of trade in services among international organizations like OECD, World Trade Organization, World Bank, European Commission, UNCTAD and others.

The aim of the work: on the ground of revealing the world trade in services to define the main directions of regional development, drivers of economic growth and to find some possible solutions for strengthening performance and cooperation agreements in international trade in services (transport services).

Targets of the research are the following:

analysis of trade in services;

revealing the main tendencies in trade in services by modes of supply in the world and EU;

indicate main services to promote competition within EU Partnership and Cooperation Agreements based on EU GATS commitments and limitations on modes of supply 1 and 3.

The methods: general scientific methods of analysis and synthesis, methods of grouping, detailing, generalization and systematization of data, as well as economic and mathematical models.

The content of the article: As services are becoming increasingly «tradable» thanks to advancement in the technology, international services trade has become the new frontier for expanding and diversifying exports, providing significant opportunities for developing and least developed countries (LDCs). WTO statistics show that the share of developing economy services export increased from 24% in 2005 to 32% in 2015, and the share of LDCs in global services export increased from 0.4% in 2005 to 0.8% in 2015. Increased services export from the LDCs is an important contributor of meeting the sustainable development goals of doubling the export from LDCs by 2020.

Thus, no sector of the world economy has grown as a fast as services. The value added generated by services grew from about 58% of the global GDP in 1995 to 68% of the global GDP by 2014.

Although the services sector accounts for over 68% of global GDP and close to 50,9% (2010 y.) of employment in the world, the role it plays in economic development has been poorly understood. In many developing countries account for about 50% of their aggregate GDP and employment opportunities, and contribute close to 15% to their total exports [5, p. 23].

Recent analysis shows that the services sector plays an important role in overall economic competitiveness and in the development of the manufacturing and agriculture sectors.

Over the past 20 years the services sector has been growing in importance as shown in Figure.

All countries are in the process of becoming service economies as the share of service industries in economic activities and employment continues to grow. In majority of economies, employment in the services sector exceeds 40% of total employment.

In all the countries considered in 2012 the level of the employment share in services was more than double that recorded in industry and agriculture. A breakdown of the service sector into a finer classification further highlights the differences in service employment shares between different economic groups:

high income countries - 73,6%;

European Union - 70,7%;

developing countries: Latin America and the Caribbean - 64,0%; Central Europe and the Baltics - 57,3%;

Middle East and North Africa - 49,4%.

For purposes of structuring their commitments, WTO member have generally used a classification system comprised of 12 core service sectors, known as the Services Sectoral Classification List (MTN.GNS/W/120), which is largely based on the United Nations Central Product Classification System. It was compiled by the WTO in July 1991 and its purpose was to facilitate the Uruguay Round negotiations, ensuring cross-country comparability and consistency of the commitments undertaken. The 160 sub-sectors are described as aggregate of the more detailed categories contained in the United Nations provisional Central Product Classification (CPC).

Services covered by the GATS are not automatically opened to competition. WTO members guarantee access to their markets only in those sectors and modes of supply specified in their «schedules of commitments», subject to any «limitations» they wish to maintain. These schedules provide legally binding commitments. The only obligation that applies across all services covered by the GATS is the most-favoured-nation principle, meaning suppliers of services from all countries are treated in the same way.

GATS defines trade in services through 4 possible modes of supply: cross-border supply (mode 1), consumption abroad (mode 2), commercial presence (mode 3), and presence of natural persons (mode 4).

As mentioned above, the «cross-border supply» of services (or «mode 1 ») is defined as «the supply of a service from the territory of one Member into the territory of any other Member» (Art. I:2(a)). Examples of cross-border supply include international transport as well as services supplied through telecommunication or mail. Electronic transactions also fall under mode 1.

Mode 3 covers natural persons who are themselves service suppliers, as well as natural persons who are employees of foreign service suppliers in the host country (intra-corporate transferees like foreign engineer temporary transferred to a foreign branch from a parent construction company).

The service supplier establishes a commercial presence through a foreign owned affiliate, subsidiary, representative office or branch in the country where the consumer is located. Examples might be foreign banks or telecommunications companies established in host countries. It thus includes corporations, joint ventures, partnerships, etc. In many cases, investment flows are involved. Sometimes, the production of the service occurs in the foreign parent company, and the local agents act as trade-facilitating intermediary, for instance, in travel; wholesale banking; reinsurance; auditing and consultancy.

Table 1. Structure of developing and developed economies' exports of commercial services, 2015 (%)