2011/SOM2/SYM/006rev1 Structural Reform: Prioritizing (Services) Regulation and Options for Moving Forward

Transcription

1 2011/SOM2/SYM/006rev1 Structural Reform: Prioritizing (Services) Regulation and Options for Moving Forward Submitted by: World Bank Symposium on APEC s New Strategy for Structural Reform Big Sky, United States 16 May 2011

2 Structural Reform: Prioritizing (Services) Regulation and Options for Moving Forward Bernard Hoekman International Trade Department World Bank APEC SOM2 meeting, Big Sky, Montana, May 16, 2011 APEC New Strategy for Structural Reform Leader s Agenda (LAISIR): (i) regulatory reform; (ii) economic/legal infrastructure; (iii) corporate governance; (iv) public governance; and (v) competition policy ANSSR: Extend LAISIR via action to: Foster more open, competitive markets Better regulated financial markets Improving labor market opportunities (skills) Support SMEs, vulnerable, disadvantaged groups Effective social protection/safety nets 1

3 Structural Reform: A complex, multi facetted agenda APEC Economic Committee: Structural reform = improving institutional frameworks, regulations and government policies to enhance efficiency of markets and reduce behind the border barriers Markets: products (goods & services) vs. factors Instruments: competition vs. regulation Horizontal vs. sectoral focus Many synergies with various elements of APEC work program, committees and action plans Take a growth perspective here: focus on measures ( structural reforms ) that will: Reduce costs for firms/households Especially SMEs and disadvantaged groups Research suggests focusing on services (1) APEC PSU report by Findlay et al. (2011): summary of sectoral case studies and prospective analysis Unbundling and removing entry barriers generated greater gains than trade liberalization Reflected in lower prices in 5 20 percent range Higher productivity for sectors concerned Francois Hoekman JEL survey Significant downstream productivity effects on industries i using services Econometric analysis of impacts of regulation Often restrict entry and raise costs; asymmetric effects on firms depending on size Matters more for SMEs 2

4 Research suggests focusing on services (2) Are in a world of trade in tasks, not products Global value chains Some two thirds of global GDP = services This is where the mass of business interest and concern lies not trade in agriculture or manufactures Growth driven by increases in the quantity and productivity of capital and labor inputs But services are determinants of the productivity of these inputs Financial sector (intermediation between savers/investors) Human capital (education, health.) Prevalence of regulation and barriers to entry higher than for goods Lessons from experience Weak regulation and legal framework can result in market power/rents reduce gains from openness Enhancing contestability of service markets therefore important Weak regulation can also result in adverse distributional effects Connectivity and conditions of access to networks is key for disadvantaged regions/groups Example: Effective and efficient universal access policies and programs can make a big difference Objective analysis of the effects of specific regulation important to build support for reforms 3

5 Taking stock: Where are we? Tariffs have fallen greatly Source: Mattoo and Neagu (2011). 4

6 but less progress on trade costs/ntms o Overall transaction costs (NTMs + transport + other) have fallen but remain very substantial in international trade: 40 50% range: strikingly high but consistent with recent literature Source: Shepherd, and services policies are highly restrictive in many countries 5

7 Many APEC economies have above average STRIs Services Trade Restrictiveness Aggregate STRI scores PHL IDN CHN THA VNM PER MYS MEX CHL RUS KOR JPNCAN AUSUSA NZL Log GDP per capita (2007) APEC Non-APEC Data source: Borchert, Gootiiz and Mattoo, "Policy Barriers To International Trade in Services: New Empirical Evidence", World Bank forthcoming. Note: 16 of 21 APEC economies covered. Average STRI across sectors for 102 countries. Implications of prevailing pattern of policies Share of goods traded >>> services Services: higher barriers in general (FDI, mode 4) Goods: higher barriers on consumer goods in developing countries Investment entry barriers: higher restrictions for services NTMs account for an increasing share of policyinduced market entry costs for firms, with greatest incidence on SMEs 6

8 Serious policy challenges.. Removing NTMs and increasing efficiency of services markets involves regulatory reform Concerns about the realization i of regulatory objectives Multiple players with different objectives within governments/countries Absence of information on extant regulations, their purpose and impact Limited knowledge of alternative regulatory options In some areas need international cooperation to maximize benefits, especially for SMEs Knowledge Platforms: for NTMs and Services Element of the new World Bank Trade Strategy Assess/analyze impacts of current policy regimes and identify beneficial reforms and needed investments Demand driven and action oriented Multi country: anchored in regional communities Connect stakeholders to different sources of expertise local, regional, global Facilitate South South knowledge exchange Build on existing networks of regulators and industry associations Connect with donor community link to aid for trade for support for implementation of reforms Connect with private sector for accountability/monitoring 7

9 Moving forward on services Challenge: Achieve regulatory objectives more efficiently Questions to ask: What is the rationale for regulation What is the market failure? What is the social or distributional/equity objective? What measures are actually applied? Are they effective? Is there a justification for reducing competition? Is there discrimination against foreign suppliers/ownership? A competition policy inspired approach Service sector regulation generally not subject to competition law even though they often: Restrict number of suppliers (through exclusivity and licensing entry) Limit ability to compete (through standards; limits on marketing, etc.) Reduce the incentive to compete (barriers to consumers switching; price regulation; permitting industry association to limit entry) Often this will raise prices, but behavior is exempt from competition law Australian example: Don t exempt laws from a competition policy test: require demonstration that restrictions on competition are in public interest More generally, apply competition policy concepts/approaches 8

10 Map and review laws/regulations by sector Focus on market access/national treatment is insufficient Regulatory inventories To map what is in place Understand the purpose/policy objective of regulation Independent review the impact of laws/regulation Effectiveness (whether efficiency or equity) the impact on competition (market contestability) the role oftrade asaa vehicle to promote competition Complex, resource intensive, time consuming but a necessary condition for ownership and political support A services platform can be a focal point for the expertise and resources needed to pursue these activities More general transparency gaps Existing sources of NTM data obsolete/inadequate Recent multi agency effort to collect up to date data Data for APEC members not systematic/readily accessible Inexpensive ($25K per country for 1 st round, 2 nd less) Handbook + technical assistance fromunctad/wb Similar situation for services regulation and policies OECD/World Bank filling the gap but would benefit from a concerted effort to compile such data 18 9

11 Structural Reform: Prioritizing (Services) Regulation and Options for Moving Forward Bernard Hoekman International Trade Department World Bank APEC SOM2 meeting, Big Sky, Montana, May 16,