Instructive Differences: Contrasting the Political Economy of WTO Services Negotiations for the United States and Brazil.

Much global attention has been focused on the Doha Round of negotiations in the World Trade Organization (WTO), and in particular, on the negotiations for agriculture. However, trade in services is already three times that of the value of trade in agriculture, its value increased by 16% in both 2003 and 2004, and continued growth is expected. Increased trade in services reflects the dynamic role that services plays in the maturation of economies, with the service sector accounting for 64 percent of US gross national product, and 54 percent in Brazil. This paper will explore the political economy of liberalization of trade in services, and discusses differences and similarities between the United States and Brazil. This contrast is expected to be instructive due to the important but critically different roles that these two countries play in negotiations for the Doha Round. The political economy of trade liberalization in services differs markedly from that of agriculture. Agricultural interests are clearly defined and very well organized, with a long history of seeking domestic subsidies and, over the past twenty years, of defending these and other protective measures in trade negotiations. WTO service sectors include business, communication, construction and engineering, distribution, education, environment, financial, health, tourism and travel, recreation, cultural and sporting, and transportation. Players are diverse. Interests regarding trade in services vary greatly within a countries and subsectors. Domestic protection differs between countries and the sector as a whole does not to adopt common postures at trade negotiations. The issues differ as well. Transnational corporations play a pivotal role. One mode of service delivery is through the establishment of commercial presence, and so concerns over foreign direct investment, and its attendant regulation, become intertwined. Natural monopolies or oligopolies are common, and so issues of market power can be relevant as well.Substantial investments into understanding and publicizing both the benefits and the potential downfalls of agricultural liberalization have been made in the last ten years. On the contrary, relatively little effort has been devoted to understanding and publicizing the consequences of liberalization of trade in services. The introduction of new and more efficient services into an economy can be pivotal in increasing the efficiency and the well being of the entire economy ? particularly for agriculture in LDCs and small farmers. However, trade in services and the consequences of liberalization are challenging to adapt to the kind of empirical models used to assess trade liberalization in manufactured goods or agriculture.Finally, the dynamics of how service negotiations are conducted will be essential for understanding outcomes. In the General Agreement on Trade in Services, commitments are specified on positive lists, with specific exceptions to market access and national treatment being noted in a country?s commitments. In services, the plurilateral negotiations are conducted by demanduers making collective and specific requests from other WTO members. This form of negotiations can be likened to how tariff reductions were negotiated in early GATT rounds. The level of control over concessions by national governments, and the bilateral tit for tat may be factors contributing to the success that has been experienced. Given its increasing importance, the political economy of service trade liberalization is key to understand and measure the success of the Doha Round and further developments of the WTO regime. An analysis of the issues associated with service trade liberalization, its history and players, concerns of the public and non-governmental organizations, the format of the negotiations and the size of potential economic gains and losses are all relevant in an assessment of what is at stake... ..PAT.-Unpublished Manuscript [ABSTRACT FROM AUTHOR]