A different approach to WTO negotiations in services

International studies predict substantial welfare benefits from removing trade obstacles for services. Negotiations on lowering these obstacles are complicated because government regulations are seldom strictly oriented at keeping foreign firms out their domestic service markets. Some of them (e.g. quantity-based restrictions) are clearly at odds with WTO principles. We argue however that in most cases regulators primarily aimed at correcting domestic market failures with disregard for the potential repercussions for foreign providers of services.

In negotiations this problem can be approached by introducing economic necessity tests, but that is a very long and tedious process. We propose a different negotiation approach based on lessons learned from WTO negotiations on agricultural support measures.