Opportunities and Risks of Liberalising Trade in Services in Tanzania
Trade in Services Series Series • Issue Paper 4
Eleven years after services were included in the multilateral trading system, the WTO’s General Agreement on Trade in Services (GATS) remains an unfinished project. It continues to arouse skepticism among its original proponents, given the arguably low level of liberalization attained so far, and there exists a deep concern among others with regard to the policy orientation of its provisions.
In the context of international negotiations, the GATS was the result of a complex process of political quid pro quos that propelled services on the agenda of the Uruguay Round negotiations. By and large, major services providers in the US and Europe acted as demandeurs for services rules and for a process that would lead to global trade expansion in the sector. Their counterparts in developing countries were more perplexed and their development concerns, though omnipresent in the process, were ultimately left vague. The absence of data, commercial insecurity and a crippling perception of an unfavorably tilted playing field prevailed in development circles throughout the negotiations. Broad public policy issues remained off the negotiating table. Difficult tensions — arising, for instance, from the fundamentally different approaches of diverse public law traditions to the role of the state in the provision of certain services — permeated the discussions. In short, the eight years of discussions that led to the creation of the GATS represented a hugely rich, creative and analytical effort, characterised by complexity, technicality and a high degree of politisation.
The implementation of the agreement has perpetuated this pattern. As we move into the liberalisation phase mandated as a built-in agenda in the GATS, policy-makers in developing countries, academics, civil society analysts and advocacy organisations have expressed serious reservations about the potential implications of requiring developing countries to make greater market access concessions; the need to sequence liberalisation; the lack of adequate domestic regulatory frameworks; the imperative of universal access for essential services; and institutional reform and good governance. The unresolved discussions on whether liberalisation and the further advancement of negotiations can proceed in the absence of the mandated impact assessment of implementation seems to be most troubling for practically all parties. Indeed, a comprehensive policy analysis of the implications of trade in services for sustainable development, and of the policy spaces available for implementing public policies, is still missing.
At the national level, the impact of services liberalisation on the local economy is among the most challenging and controversial issues. In many developing countries, the services sector has grown over the last two decades to comprise roughly half of their gross domestic production. At the same time, trade in services continues to comprise only a small portion of total trade flow, with most services being domestically generated and supplied, yet the sector remains largely underdeveloped, and the regulatory framework is still incomplete, ineffective and regulatory authorities lack capacity.
At the international level, most developing countries have had difficulties articulating their negotiating positions beyond rhetoric and general statements. So far, only a handful of developing countries have submitted formal requests and offers. While it is true that there may have been posturing due to the perception of deficient progress in other negotiating areas, for some it is simply a lack of genuine understanding or familiarity with the GATS and the WTO negotiating context. This is symptomatic of a lack of deeper, substantive knowledge of their interests in specific sectors and modes of supply and rules, as well as a lack of human resources in relation to negotiating capacity. However, as heavy domestic support measures in agriculture, non-tariff barriers, preference erosion and supply side constraints continue to hamper least developed country (LDC) exports to the markets of developed industrialized countries, the services trade is steadily gaining momentum as an alternative channel for providing new opportunities for diversification and export oriented economic growth.
To address this concern, ICTSD has commissioned a series of studies on the opportunities and risks of liberalising services trade in selected developing countries as part of its programme on Trade in Services and Sustainable Development. These country studies look at Bangladesh, Guatemala, Mozambique, Nicaragua, Pakistan, South Africa and Tanzania. The studies have been carried out in cooperation with local researchers and experts through a participatory process involving a wide range of domestic stakeholders. As such, these studies are intended as a practical tool for policy makers and non-state actors with an interest in services trade. They have been designed to contribute to the reality of developing countries’ services economy and to identify offensive and defensive negotiating interests.
As a least developed country, Tanzania is not obliged to take on additional commitments, though it remains actively involved in the GATS negotiations by pursuing a strategy of ‘critical engagement’. For Tanzania, services liberalisation can play a positive role in improving the competitiveness of the goods sector and other services, as well as increasing the efficiency of domestic services sectors and export opportunities. At the same time, Tanzania is involved in other regional and bilateral trade negotiations such as the Economic Partnership Agreements with the European Union where further liberalization in services has been high on the agenda.
Produced in collaboration with Daima Associates Limited, this present study identifies tourism, transportation, communication, construction, health and education as priority sectors for Tanzania. Possessing a significant untapped potential, the tourism sector remains the most promising as a source of future economic growth. The transport sector can also play a major role in the facilitation of the process of development given its position as a transit trade route for eight neighbouring states, most of which are land-locked.
This study comes at an opportune time for Tanzania. By implementing concerted measures for macroeconomic stabilization and structural reforms, the country looks to transform its economy towards a higher degree of openness and export orientation. In this context, the paper provides a much needed backstopping analysis for the definition of Mozambique’s negotiating interests in bilateral, regional and multilateral negotiations
We hope you will find this pleasant and informative reading and an effective contribution to the debate.