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This paper describes the Services Trade Policy Database, a joint initiative by the World Bank and the World Trade Organization Secretariat, which builds on a database developed by the World Bank nearly 10 years ago and draws on a recent Organisation for Economic Co-operation and Development database. The Services Trade Policy Database offers comparable information on services trade policies for 68 economies in 23 subsectors across five broad areas -- financial services, telecommunications, distribution, transportation, and professional services. The database features several improvements. First, the data are collected according to a newly developed policy classification, consistent with the earlier World Bank database and the current Organisation for Economic Co-operation and Development database, enabling a comparison of services policies over a significant period and across a large cross-section of industrial and developing economies. Second, in addition to trade policies, the database contains information on licensing conditions and data restrictions. Third, policy restrictiveness is quantified following a more systematic approach that aggregates the information within a single consistent and transparent framework. Building on these innovations will make it possible to identify global patterns of services trade policies and secular trends in policy making over the past decade.

Are changes in services markets provoking reform, restrictions, or inertia? To address this question, this paper draws on a new World Bank-World Trade Organization Services Trade Policy Database. The paper analyzes the services trade policies of 68 economies in 23 subsectors across five broad areas -- financial services, telecommunications, distribution, transportation, and professional services. Policy measures are quantified into a Services Trade Restrictions Index (STRI) following a novel, consistent and transparent framework. The paper identifies patterns of services trade policies across sectors and economies, and secular trends over the past decade. Higher income economies are still more open on average than developing economies, but the chronology of reform differs markedly across sectors. In telecommunications and finance, there is convergence toward greater openness driven by liberalization in the previously more restrictive developing economies. In the hitherto universally protected transport and professional services, there is policy divergence, as some higher income economies pioneer reform. But while explicit restrictions are being lowered in most services sectors—in contrast to recent developments in goods trade policy -- there is greater recourse to regulatory scrutiny, especially in higher income economies. These measures could reflect legitimate prudential or security concerns, but they could also reflect recourse to less transparent forms of protection.

Should the China-U.S. trade agreement prompt relief because it averts a damaging trade war or concern because selective preferential access for the United States to China's markets breaks multilateral rules against discrimination? The answer depends on how China implements the agreement. Simulations from a computable general equilibrium model suggest that the United States and China would be better off under this"managed trade"agreement than if the trade war had escalated. However, compared with the policy status quo, the deal will make everyone worse off except the United States and its input-supplying neighbor, Mexico. Real incomes in the rest of world would decline by 0.16 percent and in China by 0.38 percent because of trade diversion. China can reverse those losses if, instead of granting the United States privileged entry, it opens its market for all trading partners. Global income would be 0.6 percent higher than under the managed trade scenario, and China's income would be nearly 0.5 percent higher. By creating a stronger incentive for China to open its markets to all, an exercise in bilateral mercantilism has the potential to become an instrument for multilateral liberalization.

East Asia, for long the epitome of successful engagement in trade, faces serious challenges: technological change that may threaten the very model of labor intensive industrialization and a backlash against globalization that may reduce access to important markets. A detailed analysis of the evolution of East Asia's trade and trade policy in goods and services leads to the conclusion that how East Asia copes with these global challenges will depend on how it addresses three more proximate national and regional challenges. The first is the emergence of one East Asian country, China, as a global trade giant—accounting for nearly one-seventh of global exports and one-tenth of global imports -- which is fundamentally altering the trading patterns and opportunities of its neighbors. The second is the asymmetric implementation of national reform -- remarkable openness to goods trade and investment coexists with relative restrictiveness of services policies -- which is affecting the evolution of comparative advantage and productivity in each country. The third is the divergence between the relatively shallow and fragmented agreements that regulate the region’s trade and investment and the growing importance of regional and global value chains as crucial drivers of productivity growth.

Does "infant industry" preferential access durably boost export performance? This paper exploits significant trade policy changes in the United States around the turn of the 21st century to address this question. The expansion of Generalized System of Preferences (GSP) products for less developed countries in 1997 and the implementation of the African Growth and Opportunity Act (AGOA) in 2001 is used to assess whether preferential access boosts exports of eligible products in general and apparel specifically. The phase-out of the Multi-Fiber Arrangement (MFA) in 2005 is used to assess whether any expansion in apparel exports survived the erosion of preferences. To find a causal impact of these changes on exports to the United States from a given beneficiary country, the analysis uses a triple-differences regression and 26 years of newly constructed trade and tariff data at the country-product-year level (1992-2017). The analysis finds that the AGOA boosted African apparel exports, and the expansion of the GSP increased African exports of other eligible products. While the marginal impacts on African apparel exports grew sharply in the first years of AGOA, the impacts leveled off after 2005, when the end of the MFA quotas unleashed competition from Asian countries. The illusion of sustained African apparel exports is created by three late-bloomers in East Africa offsetting the boom-bust pattern in Southern Africa and the never-significant response in Central and Western Africa. Firm-level customs data for selected countries reveal that even in East Africa, the recent export growth was driven by new entrants rather than by incumbent firms whose competitiveness might have been nurtured by the big preference margins during the early AGOA period. Understanding the heterogeneous response to trade preferences remains a challenge. However, preliminary evidence suggests that preferential access per se was not sufficient but needed to be complemented by specific domestic reforms: tariff liberalization, reduced regulatory burden, enhanced connectivity, and competitive exchange rates.

This paper presents evidence on the determinants of cross-border mergers and acquisitions in services sectors. It develops a stylized model of mergers and acquisitions that predicts that the incidence of merger and acquisition deals depends, inter alia, on the target economy's size, industrial structure and investment policies, as well as on bilateral transactions costs. These predictions are examined with bilateral merger and acquisition flow data and detailed information on policy barriers from a new database of restrictions on services investment. The analysis finds that: (1) geographical factors affect mergers and acquisitions in services and manufacturing similarly but cultural factors affect mergers and acquisitions in services more than in manufacturing. (2) Controlling for these bilateral factors, restrictive investment policies reduce the probability of merger and acquisition inflows but this negative effect is mitigated in countries with relatively large shares of manufacturing and (to a lesser extent) services in gross domestic product. The same results hold for the number of merger and acquisition deals received. These findings suggest that the impact of policy is state-dependent and related to the composition of gross domestic product in the target economy.

The costs of shipping containerized cargo on liner vessels play a pivotal role in determining a country's integration into international trade. We examine how policy governing the liner shipping sector affects maritime transport costs and seaborne trade flows. Using a novel data set of services trade policy information, we find that restrictions, particularly on foreign investment, significantly increase maritime transport costs. The cost-inflating effect ranges from 26% to 68%, and the resultant reduction in trade flows from 48% to 77%, depending on the level of restrictiveness. We estimate the elasticity of seaborne trade flows with respect to distance to be nearly unity, and are able to disentangle the direct effect of distance from the one that is operating indirectly through higher maritime transport costs. Since the bulk of global merchandise goods trade is seaborne, the magnitude of frictions identified in this paper and their spatial distribution have ramifications for connectivity and growth.

Decades of services trade negotiations have produced a plethora of rules and commitments but limited real liberalization. One reason is a form of "negotiating tunnel vision," which has led to a focus on reciprocal market opening rather than on creating the regulatory preconditions for liberalization. This paper makes four points. First, current trade disciplines are a useful but inadequate restraint on regulatory protection. Second, proposed disciplines on domestic regulation would add value but would not solve problems with the application of existing trade law and could create a hold-back problem in securing new liberalizing commitments. Third, insulating domestic consumers from international market failure is a precondition for further liberalization in many services sectors, and the relevant international bargain needs to be an exchange of regulatory commitments by exporters in return for market access commitments by importers. Fourth, such bargains create a risk of exclusion for nonparticipants that can and should be addressed. The paper illustrates these arguments drawing upon recent developments relating to data privacy, financial services, labor mobility, and competition policy.

Can regionalism do what multilateralism has so far failed to do—promote greater openness of services markets? Although previous research has pointed to the wider and deeper legal commitments under regional agreements as proof that it can, no previous study has assessed the impact of such agreements on applied policies. This paper focuses on the Association of Southeast Asian Nations (ASEAN), where regional integration of services markets has been linked to thriving regional supply chains. Drawing on surveys conducted in 2008 and 2012 of applied policies in the key services sectors of ASEAN countries, the paper assesses the impact of the ASEAN Framework Agreement on Services (AFAS) and the ambitious ASEAN Economic Community Blueprint, which envisaged integrated services markets by 2015. The analysis finds that over this period, ASEAN did not integrate faster internally than vis-a-vis the rest of the world: policies applied to trade with other ASEAN countries were virtually the same as those applied to trade with rest of the world. Moreover, the recent commitments scheduled under AFAS did not produce significant liberalization and, in a few instances, services trade policy actually became more restrictive. The two exceptions are in areas that are not on the multilateral negotiating agenda: steps have been taken toward creating regional open skies in air transport, and a few mutual recognition agreements have been negotiated in professional services. These findings suggest that regional negotiations add the most value when they are focused on areas that are not being addressed multilaterally.

As the fate of the Trans-Pacific Partnership (TPP) hangs in balance, an evaluation of what it offers could inform current decisions and shape future negotiations. The TPPs services component has been hailed as one of the agreement's major accomplishments. To assess the agreement's impact on national policy in the major services sectors, we created a new public database. This database reveals that TPP commitments seldom go beyond countries' applied policies, suggesting the explicit liberalization resulting from the agreement is limited only to a few countries and a few areas. However, the TPP enhances transparency and policy certainty because parties' services commitments cover more trading partners, more sectors and are in some cases closer to applied policies than their commitments under previous agreements. Furthermore, new TPP rules, including on state-owned enterprises, government procurement and competition policy, could enhance services market access. In particular, the TPP breaks new ground in prohibiting restrictions on international data flows, while at the same time creating unprecedented obligations on all parties to protect consumers from fraud and protect privacy. These dual obligations on importing and exporting countries represent a model for regulatory cooperation that could elicit greater market opening if applied to other areas.

Surprisingly little is known about policies that affect international trade in services. Previous analyses have focused on policy commitments made by countries in international agreements but these commitments do not in many cases reflect actual policy. This paper describes a new initiative to collect comparable information on services trade policies for 103 countries, across a range of service sectors and the relevant modes of service delivery. The resultant database reveals interesting patterns in policy. Across regions, some of the fastest growing countries in Asia and the oil-rich Gulf states have the most restrictive policies in services, whereas some of the poorest countries are remarkably open. Across sectors, professional and transportation services are among the most protected in both industrial and developing countries, while retail, telecommunications and even finance tend to be more open. An illustrative set of results suggests that trade policies matter for investment flows and access to services. In particular, restrictions on foreign acquisitions, discrimination in licensing, restrictions on the repatriation of earnings and lack of legal recourse all have a significant and sizable negative effect, reducing the expected value of sectoral foreign investment by $2.2 billion over a 7-year period, compared with"open"policy regimes. In terms of access to services, credit as a share of gross domestic product is on average 3.3 percentage points lower in countries with major restrictions on the establishment of foreign banks as compared with those that only impose operational restrictions.

In industrial countries contemplating emissions reductions, there have been calls for additional border taxes on imports from countries with lower carbon prices. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. Our quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high-income countries but with serious consequences for trading partners. For example, China’s manufacturing exports would decline by one-fifth and those of all low- and middle-income countries by 15 %; the corresponding declines in real income would be 3.7 and 2.4 %. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high-income countries and less adversely affect developing country trade.

Regional agreements on standards have been largely ignored by economists and unconditionally blessed by multilateral trade rules. The authors find, theoretically and empirically, that such agreements increase trade between participating countries but not necessarily with the rest of the world. Adopting a common standard in a region-that is, harmonization-boosts exports of excluded industrial countries to the region. But it reduces exports of excluded developing countries, possibly because developing country firms are hurt more by an increase in the stringency of standards and benefit less from economies of scale in integrated markets. Mutual recognition agreements are more uniformly trade promoting unless they contain restrictive rules of origin, in which case intra-regional trade increases at the expense of trade with other, especially developing, countries. The authors propose a modification of international trade rules to strike a better balance between the interests of integrating and excluded countries.

The demand for accountability in aid-for-trade is increasing but monitoring has focused on case studies and impressionistic narratives. The paper reviews recent evidence from a wide range of studies, recognizing that a multiplicity of approaches is needed to learn what works and what does not. The review concludes that there is some support for the emphasis on reducing trade costs through investments in hard infrastructure (like ports and roads) and soft infrastructure (like customs). But failure to implement complementary reform -- especially the introduction of competition in transport services -- may erode the benefits of these investments. Direct support to exporters does seem to lead to diversification across products and destinations, but it is not yet clear that these benefits are durable. In general, it is difficult to rely on cross-country studies to direct aid-for-trade. More rigorous impact evaluation is an underutilized alternative, but situations of clinical interventions in trade are rare and adverse incentives (because of agency problems) and costs (because of the small size of project) are a hurdle in implementation.

A new Services Trade Restrictions Database collects and makes publicly available information on services trade policy assembled in a comparable manner across 103 countries, five sectors (telecommunications, finance, transportation, retail and professional services) and the key modes of service supply. It contains richly textured policy information as well as a preliminary quantification of policy measures. This paper is a guide to the database, and provides a description of the data, how it was collected, how policy information was quantified, and how the data are presented in the publicly available, interactive Web database. The database is best seen as a first response to the strong demand for better information from policy-makers, negotiators, researchers and the private sector. Even in its present version, the database can play an important role in advancing policy reform by facilitating the analysis of services policies, informing international negotiations by providing data on actual policies, and provoking dialogue and refinements by making information on policies publicly available. Through feedback from various interested parties, the database may evolve into a collectively created public good.

A new cross-country database on services policy reveals a perverse pattern: many landlocked countries restrict trade in the very services that connect them with the rest of the world. On average, telecommunications and air-transport policies are significantly more restrictive in landlocked countries than elsewhere. The phenomenon is most starkly visible in Sub-Saharan Africa and is associated with lower levels of political accountability. This paper finds evidence that these policies lead to more concentrated market structures and more limited access to services than these countries would otherwise have, even after taking into account the influence of geography and incomes, and the possibility that policy is endogenous. Even moderate liberalization in these sectors could lead to an increase of cellular subscriptions by 7 percentage points and a 20-percent increase in the number of flights. Policies in other countries, industrial and developing alike, also limit competition in international transport services. Hence, “tradefacilitating” investments under various “aid-for-trade” initiatives are likely to earn a low return unless they are accompanied by meaningful reform in these services sectors.

The World Trade Organization has been until recently an effective framework for cooperation because it has continually adapted to changing economic realities. The current Doha Agenda is an aberration because it does not reflect one of the largest shifts in the international economic and trading system: the rise of China. Although China will have a stake in maintaining trade openness, an initiative that builds on but redefines the Doha Agenda would anchor China more fully in the multilateral trading system. Such an initiative would have two pillars. The first is a new negotiating agenda that would include the major issues of interest to China and its trading partners, and thus unleash the powerful reciprocal liberalization mechanism that has driven the World Trade Organization process to previous successes. The second is new restraints on bilateralism and regionalism that would help preserve incentives for maintaining the current broadly non-discriminatory trading order.

The focus of trade policy has shifted in recent years from economy-wide reductions in tariffs and trade restrictions towards targeted interventions to facilitate trade and promote exports. Most of these latter interventions are based on the new mantra of “aid-for-trade” rather than on hard evidence on what works and what doesn’t. On the one hand, rigorous impact-evaluation is needed to justify these interventions and to improve their design. On the other hand, rigorous evaluation is feasible because unlike traditional trade policy, these interventions tend to be targeted and so it is possible to construct treatment and control groups. When interventions are not targeted, such as in the case of customs reforms, some techniques, such as randomized control trials, may not be feasible but meaningful evaluation may still be possible. We discuss examples of impact evaluations using a range of methods (experimental and nonexperimental) highlighting the particular issues and caveats arising in a trade context, and the valuable lessons that are already being learnt. We argue that systematically building impact evaluation into trade projects could lead to better policy design and a more credible case for “aid-for-trade.”

Trade and investment in services are inhibited by a range of policy restrictions, but the best offers so far in the Doha negotiations are on average twice as restrictive as actual policy. They will generate no additional market opening. Regulatory concerns help explain the limited progress. This paper develops two proposals to enhance the prospects for both liberalization of services trade and regulatory reform. The first is for governments to create mechanisms ("services knowledge platforms") to bring together regulators, trade officials, and stakeholders to discuss services regulatory reform. Such mechanisms could identify reform priorities and opportunities for utilization of"aid for trade"resources, thereby putting in place the preconditions for future market opening. The second proposal is for a new approach to negotiations in the World Trade Organization, with a critical mass of countries that account for the bulk of services production agreeing to lock-in applied levels of protection and pre-committing to reform of policies affecting foreign direct investment and international movement for individual service providers -- two areas where current policy is most restrictive and potential benefits from liberalization are greatest. If these proposals cannot be fully implemented in the Doha time frame, then any Doha agreement could at least lay the basis for a forward-looking program of international cooperation along the proposed lines.

There is growing clamor in industrial countries for additional border taxes on imports from countries with lower carbon prices. The authors confirm the findings of other research that unilateral emissions cuts by industrial countries will have minimal carbon leakage effects. However, output and exports of energy-intensive manufactures are projected to decline potentially creating pressure for trade action. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content in domestic production. Their quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high income countries but with serious consequences for trading partners. For example, China’s manufacturing exports would decline by one-fifth and those of all low and middle income countries by 8 per cent; the corresponding declines in real income would be 3.7 per cent and 2.4 per cent. Border tax adjustment based on the carbon content in domestic production, especially if applied to both imports and exports, would broadly address the competitiveness concerns of producers in high income countries and less seriously damage developing country trade.

The Doha Round must be concluded not because it will produce dramatic liberalization but because it will create greater security of market access. Its conclusion would strengthen, symbolically and substantively, the WTO’s valuable role in restraining protectionism in the current downturn. What is on the table would constrain the scope for tariff protection in all goods, ban agricultural export subsidies in the industrial countries and sharply reduce the scope for distorting domestic support - by 70 per cent in the EU and 60 per cent in the US. Average farm tariffs that exporters face would fall to 12 per cent (from 14.5 per cent) and the tariffs on exports of manufactures to less than 2.5 per cent (from about 3 per cent). There are also environmental benefits to be captured, in particular disciplining the use of subsidies that encourage over-fishing and lowering tariffs on technologies that can help mitigate global warming. An agreement to facilitate trade by cutting red tape will further expand trade opportunities. Greater market access for the least-developed countries will result from the"duty free and quota free"proposal and their ability to take advantage of new opportunities will be enhanced by the Doha-related"aid for trade"initiative. Finally, concluding Doha would create space for multilateral cooperation on critical policy matters that lie outside the Doha Agenda, most urgently the trade policy implications of climate change mitigation.

Services trade reform matters, but what is Doha doing about it? It has been hard to judge, because of the opaqueness of services policies and the opaqueness of the request-offer negotiating process. This paper attempts to assess what is on the table. It presents the results of the first survey of applied trade policies in the major services sectors of 56 industrial and developing countries. These policies are then compared with these countries' Uruguay Round commitments in services and the best offers that they have made in the current Doha negotiations. The paper finds that at this stage, Doha promises greater security of access to markets but not any additional liberalization. Uruguay Round commitments are on average 2.3 times more restrictive than current policies. The best offers submitted so far as part of the Doha negotiations improve on Uruguay Round commitments by about 13 percent but remain on average 1.9 times more restrictive than actual policies. The World Trade Organization's Hong Kong Ministerial had set out ambitious goals for services but the analysis here shows that much remains to be done to achieve them.

Trade ministries will soon meet in Geneva in an effort to move the Doha Development Agenda (DDA) negotiation towards conclusion. The negotiations have been under way for almost seven years. In the areas where negotiations are most advanced, they have generated complex and detailed proposals. This note takes stock of the major components of what is currently on the table in goods and services, as well as the key elements relating to economic development: duty-free, quota-free access for the poorest countries, trade facilitation, and aid for trade. The headline conclusion is that Doha round, perhaps not as ambitious as ministries had hoped at its launch in 2001, compares favorably with the Uruguay round in terms of market access, and surpasses it in terms of breadth of coverage and tangible benefits for developing countries. Ministries, if they turn their back on deal, will be leaving on the table a significant multilateral achievement.

India's trade policy establishment is perceived to be somewhat wary of multilateral engagement, even though India is implementing substantial economic, and trade policy reforms. Some essays in this well-researched volume may throw light on this paradox. More important, the essays take a hard look at India's interests, and concerns with respect to international trade. They suggest ways that India could deploy its domestic reform agenda in the Doha Round negotiations, to secure concessions from its trading partners, while using multilateral engagement to reinforce the domestic reform process, and enhance the process' credibility. The book should prove of considerable value to policymakers, market participants, and other stakeholders.

The authors examine the determinants of market access commitments in international financial services trade in the General Agreement on Trade in Services (GATS). Based on a theoretical model, they investigate empirically the role of domestic political economy forces, international bargaining considerations, and the state of complementary policy. The empirical results confirm the relevance of the authors' model in explaining banking and (to a somewhat lesser degree) securities services liberalization commitments. The findings imply that those who seek greater access to developing country markets for financial services must do more to counter protectionism at home in areas of export interest for developing countries.

Every major regional trade agreement now has a services dimension. Is trade in services so different that there is need to modify the conclusions on preferential agreements pertaining to goods reached so far? The authors first examine the implications of unilateral policy choices in a particular services market. They then explore the economics of international cooperation and identify the circumstances in which a country is more likely to benefit from cooperation in a regional rather than multilateral forum.

If negotiations on trade in services at the World Trade Organization are to advance liberalization beyond levels undertaken unilaterally and lead to more balanced outcomes, reciprocity must play a greater role in negotiations. This may be facilitated by the use of negotiating rules that establish credible links across sectors and modes of delivery. Negotiations on trade in services at the World Trade Organization (WTO) have so far produced little liberalization beyond levels countries have undertaken unilaterally. One reason: limited application of the traditional negotiating principle of reciprocity. In particular, participants have failed to exploit the scope of the services agreement (GATS) for the exchange of market-access concessions across different modes of supply - cross-border delivery and the movement of capital and workers. Using the Heckscher-Ohlin-Vanek framework, Mattoo and Olarreaga propose a negotiating formula that generalizes the fundamental WTO principle of reciprocity to include alternative modes of delivery. Adoption of this formula as a basis for negotiations could bring greater commitments to liberalization on all modes of delivery, producing substantial gains in global welfare and more balanced outcomes. This paper - a product of Trade, Development Research Group - is part of a larger effort in the group to improve trade policy in goods and services. The authors may be contacted at amattoo@worldbank.org or molarreaga@worldbank.org.

Some countries in the World Trade Organization initially opposed WTO's decision to exempt electronic delivery of products from customs duties, out of concern for the revenue consequences. Others supported the decision as a means of securing open trading conditions. The authors argue that neither the inhibitions nor the enthusiasm is fully justified. First, even if all delivery of digitizable media products moved on-line--an unlikely prospect--the revenue loss for most countries would be small. More important, however, the prohibition of customs duties does not ensure continued open access for electronically delivered products and may even prompt recourse to inferior instruments of protection. Barrier-free electronic commerce would be more effectively secured by deepening and widening the limited cross-border trade commitments under the General Agreement on Trade in Services (GATS), and by clarifying and strengthening certain GATS disciplines.

As each new round of multilateral trade negotiations approaches, there is a demand for a negotiating rule that would give credit for autonomous (unilateral) liberalization. The authors show that the feasibility, and desirability of such a rule depend on when it is instituted. A credit rule established at the beginning of a round of negotiations has a primarily distributional effect, favoring those who have already undertaken liberalization. Implementing such a rule would depend on the generosity of those who have not liberalized. The authors propose instead establishing a credit rule at the end of a round of negotiations, which creates an ex-ante assurance that any unilateral liberalization will receive credit in the next round. Such a rule would help induce, or enhance liberalization in some countries between negotiating rounds, by reducing the gains from retaining protection as negotiating currency. More strikingly, it could also lead to deeper levels of multilateral liberalization, and induce other countries to go further than they would in the absence of a rule. Most important, such an ex-ante rule would not rely on altruism to be generally acceptable.

Maritime transport costs significantly impede international trade. The authors examine why these costs are so high in some countries, and, quantify the importance of two explanations: restrictive trade policies, and private anti-competitive practices. Both matter, they find, but private anti-competitive practices have the greater impact. Trade liberalization, and the breakup of private carrier agreements, would lead to a reduction in average liner transport prices of a third, and cost savings of up to $ 3 billion on goods carried to the United States alone. The policy implications are clear: not only should government policy be further liberalized, but there should be stronger international disciplines on restrictive business practices. The authors propose developing such disciplines in the current round of services negotiations at the World Trade Organization.

The authors argue that India should engage more actively in the multilateral trading system for four reasons: First, such engagement could facilitate domestic reform, and improve access to export markets. If the government could show that domestic reform would pay off with increased access to markets abroad, those who gain from such access - whether they export textiles, software, professional services, or other products - could represent a countervailing voice to reform's opponents. In turn, the need for this external payoff to secure domestic reform makes India a credible bargainer, which could induce trading partners, to open their markets to India. Second, external commitments can foster good domestic policies, by providing guarantees against the reversal of current policies, or lending credibility to promises of future reform. Such pre-commitments could help strike a balance between the reluctance to unleash competition immediately, and the desire not to be held perpetual hostage to vested interests, or weak domestic industries. Third, engagement can help enforce India's market access rights. If other countries do not eliminate quotas on textiles, and clothing as scheduled, India can credibly threaten to withdraw its obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). Fourth, multilateral tariff reduction could reduce the disadvantage (to India) of not being part of regional agreements. The value of multilateral engagement might be limited, if the prospects for securing increased market access are dim, as the failed Seattle negotiations might appear to suggest. India must credibly test negotiating pessimism by showing its willingness to open its markets in return for improved access to foreign markets. Success is not certain, but India's chances are improved if aligns itself with countries pressing for sound policies of open trade.

The author examines how the market structure is likely to evolve where there is multistage oligopolistic production - and what the implications of this are for antitrust policy. The author treats the decision to merge across or within stages of production as endogenous. He shows that when firms at a particular stage of production are relatively dominant, simultaneous merger decision are conducive to competitive vertically integrated outcomes, while sequential decisions are not. The persistence of non-integrated market structures may be explained by the existence of equally dominant firms that make merger decisions sequentially. The credible threat of retaliatory merger may deter both socially desirable and undesirable forms of merger. What implications does the author's findings have for antitrust policymakers? For one thing, partial antitrust policy may lead to less competitive market structures than the total absence of such policy, because policy barriers to horizontal mergers only at a particular stage of production eliminate the deterrent effect of retaliatory merger. For example, if the two stages of production are located in countries with different antitrust legislation, a policy that protects consumers from domestic mergers may ultimately hurt them by rendering foreign mergers more attractive. When the equilibrium market structure does not contain socially undesirable mergers, there is no need for antitrust (or competition) policy. Moreover, there may sometimes be a case for the government actually providing supplementary incentives to encourage particular forms of merger - as, for instance, when the threat of retaliatory merger deters socially desirable vertical mergers.

Eco-labelling has been introduced in a number of countries2 for a wide variety of products.3 This chapter analyses the effects of eco-labelling both on the environment and on international trade. It first establishes the conditions under which the introduction of labelling would have a beneficial impact on the environment and suggests an appropriate empirical test. Then it assesses the consequences of labelling schemes for international trade. Four factors are identified as important: the distribution of environmental concern, the structure of the market, the nature of environment-friendly technology and the precise form of labelling policy.