New Trade Negotiations on Services

Of all the international trade negotiations being talked about these days, the one I’m most enthusiastic about is on trade in services.  Today, the U.S. Trade Representative’s Office notified Congress of the Obama Administration’s intent to enter into negotiations for a new trade agreement on international trade in services, with a group of 20 trading partners.  Brazil, China and India are not participating, which is disappointing, but most other major trading nations are in.  (This is in contrast to many of the narrower bilateral or regional trade agreements under discussion, which create a mess of overlapping agreements.)

It can be frustrating to hear how the U.S. government talks about these initiatives, for example, when they refer to “a new international services agreement to support additional U.S. exports and jobs.”  Producer interests are always put front and center, while consumer interests are ignored.  And they say:  ”The agreement we envision will place a high priority on enabling our service suppliers to compete on the basis of quality and competence rather than nationality.”  Here, I like the general sentiment, but I would simply apply it to service suppliers from foreign countries as well – we should be able to compete there, and they should be able to compete here.  It’s great that U.S. producers will benefit from this agreement, but it’s just as good that U.S. consumers will have additional choices.

In terms of the scope of the agreement, services holds great potential for opening up a variety of new sectors to competition.  Liberalization started much later with services than with goods, so there is more that can be accomplished.  As USTR puts it:  “The agreement must also permit comprehensive coverage of all services, including services that have yet to be conceived.”  In the Internet age, trade in services is now possible in many new sectors.  It would be nice to get as many service sectors covered as possible.

It’s not clear yet which sectors will be the focus.  Let me give two suggestions.  First, there has been a lot of talk recently about online higher education.  In a policy analysis to be published soon, I argue that we should encourage free trade in online higher education, and this new trade in services agreement would be a good place to do it.  And second, I have written about the idea of free trade in health insurance.  I’d love to see that included in these talks.  But those are just two small possibilities, and I look forward to seeing the United States and other governments push to liberalize as many service sectors as possible.