Costs of services trade, investment barriers remain high – OECD

The costs of services trade and investment barriers remain high, largely exceeding the average tariff on traded goods.

An OECD report noted that consumers and business pay for these restrictions. In sectors such as transport, logistics and construction, the cost of services are estimated to be about 20% higher on average than they would be in the absence of restrictions, and in some countries are nearly 80% higher than otherwise, imposing substantial additional burdens on manufacturing enterprises and eventually on final customers.

Red tape across services markets also creates additional costs for exporters seeking to enter multiple markets – the ad valorem tariff equivalent of regulatory differences is estimated at about 40%.

Small and medium-sized enterprises (SMEs) would benefit from more open and better regulated services markets. SMEs often find that identifying the regulatory requirements of each country and documenting compliance is beyond their capacity.

Reducing the costs of market entry would help improve the inclusiveness of services trade by allowing more SMEs to take up global opportunities.

“Open and well-regulated services markets are the gateway to global value chains,” said OECD Secretary-General Angel Gurría.  “Services trade policy reform can boost SMEs, reduce trade costs, strengthen the digital economy and help make globalisation work for all.”

The report recommends that countries pursue co-ordinated services trade policy and regulatory reforms by scaling back restrictions on foreign entry and barriers to the movement of professionals that discriminate against foreign services providers.

Countries should adopt strategic reforms across a spectrum of trade, investment and competition policies to facilitate trade in services, targeting bottlenecks in transportation and logistics services to reduce trade costs.