TRADE IN SERVICES:
India had objected to the inclusion of trade in services in the agreement for the UR negotiations. The Indian negotiations continued to raise objections to libralisation in the subsequent negotiations. Few could have anticipated that trade in services would be the dynamic sector in Indian export performance.
Trade in services has been dynamic growing at 6 per cent a year between 1990 and 2002. Undoubtedly, the developed countries have comparative advantages as they have the lion's share of exports of commercial services. Furthennore their share in commercial services is higher than their share in goods exports. However, developing countries, both low income and midd'le- income countries, increased their share of commercial services exports between 1990 and 2002. But this better performance of developing countries as a whole, hides the uncomfortable fact that this is mainly because of the performance of the Asian countries. The share of other developing country regions in exports of commercial services has declined.
But when commercial services are broken into transport, travel and other services such as banking, insurance, professional, data related, consumption etc. developing countries have made a substantial gain in travel services. All regions except Latin America have increased their share. Small gains have also been made by developing countries in both transport and other services. But whereas only East Asia increased its share in transport services, all regions, except SSA(Sub Saharan Afiica), increased their share of other services. So developing countries are doing well in the dynamic services as exports of travel services increased at an annual rate of 5.6% and other services at 7.0%, whereas exports of transport services grew annually at only 1.1%. But developing countries started off with a relatively low share of the dynamic "other services" sector.
India has increased its share of all types of services, and particularly of other services. India's share of exports of services at 1.4% is double its share of world exports of goods. Furthermore, its share of the "other services" sector is even higher at 2.2%. This points to the dangers of negotiating without adequate analysis, though one should not be too harsh on the Indian negotiators as little was known about services trade and the technological leap in IT was difficult to predict. The success of Indian service exports in the past decade points to the difficulties in anticipating the benefits from liberalisation. Analysis is made more difficult in the case of services (J.Whalley, 2003) by the difficulties of defining services, measuring service trade and indicators of baniers to trade. Services can range from purely intermediate goods, such as some back office operations, to those that are partly intermediate and partly final consumer goods, e.g., banking and telecommunications, to those that are basically final consumer goods e.g., tourism.
Lumping them together as services suggests that the analysis may be seriously flawed. Data on the level and composition of international trade in services is poor because there is no formal customs clearance for services trade. Barriers to trade are sometimes measured by price differences and sometimes by frequency data showing prevalence of regulatory measures etc. But there are problems with all such measures. For instance, regulatory measures may or may not be barriers to trade. Such conceptual differences make difficult estimation of the benefits from liberalisation.