Services Trade: Past Liberalization and Future Challenges

Services trade has truly become an engine of world growth. Overthe past two decades, international trade in services has grownfaster than world merchandize trade, which in turn has grownfaster than world output. A combination of policy liberalizationand technological progress has facilitated trade in many previouslyuntradable services. However, very little progress has beenmade towards new policy liberalization in the ongoing Doha DevelopmentRound. This article discusses trade in services in five sections.Following a short introduction, Section I presents data on thepast growth of services trade flows and makes rough projectionsof future expansion. The second and third sections summarizethe achievements of the WTO in the service field, both as anegotiating forum and a dispute settlement system. The thirdsection also emphasizes how FTAs are now playing the leadingrole in services liberalization. The fourth section critiquesthe absence of progress in the Doha Round and the fifth sectionexamines the hot issue of services outsourcing. The concludingsection offers policy recommendations for containing a possibleprotectionist backlash and promoting new liberalization.