Table III.1 World (Hertel) 350 50 Notes: BDS: Services coverage includes construction, trade and transport, other private services, government services. Service protection measured by excess operating profits of firms listed on stock markets. Scenario shows liberalization of implied protection of 33 percent. Taken from Table 2, pp. 25. D&H: Services protection measured by telecom and banking estimates, extended to trade and transport, business and recreational services, and half of public administration, defense, education and health (but not utilities, construction which are assumed to be non-traded).
Scenario shows liberalization of protection, including extensive induced of FDI flows and implied change in protection-induced rents. Tertiary = services. Taken from Table 6, p 132. Hertel: Services coverage includes construction and business and financial services. Service protection measured by deviation from that expected from a gravity model of trade. Scenario shows liberalization of protection. At first blush, the source of the gains focuses on benefits to industrial economies.
Barriers to trade in services (including through barriers to investment) are generally much higher than are barriers to manufactures, so industrial economies generally would export more services if barriers were lower. Global welfare rises through this increased trade in services. However, a second (and potentially more important) reason for the improvement in global GDP is that developing economies gain resource efficiency through imports and investment in the services sector, which raises their GDP. This is made clear by considering the relative importance of gains to GDP from liberalization of both manufacture and service trade.
(Table III.2) It would seem that developing economies would stand to gain much more from liberalization of manufactures both because they export manufactured goods and because their manufactured exports generally face higher barriers than do those of industrial economies. 51 In contrast, it would seem that liberalization of trade in services would not have much of an impact on the developing world because these economies generally do not export services and their domestic service sector is generally quite small.
However, Table III.2 shows that the gains to GDP for developing economies of liberalizing and improving the performance of the services sector are nearly as large as the gains through exports of manufactured goods. Given the generally small size of the domestic service sector in most developing economies, this means that the multiplier effects to raise GDP must be much larger for services liberalization than from increased exports of manufactured goods. In other words, the productivity gains throughout the economy from improved service sector performance are dramatic. 51 See Hertel, Table 2, page 80..
- 34- Sectors Liberalized ($ billion gain) All sectors Services sectors only World (BDS) 613 390 World (D&H) 267 133