The Explorer Islamabad: Journal of Social Sciences ISSN: 2411-0132(E), 2411-5487(P) Vol-1, Issue (10):390-393 www.theexplorerpak.org
AN OVERVIEW OF GENERAL AGREEMENT ON TRADE IN SERVICES AND PAKISTAN Khurram Ellahi Khan1, Nida Khan2, Shaheer Ellahi Khan3, Muhammad Habib-ul-Arifeen4 1 Lecturer, PIDE University, Islamabad, 2Program Coordinator, Association for Social Development Islamabad, 3Senior Lecturer, Bahria University Islamabad, 4Social Scientist, Association for Social Development Islamabad Corresping Author: Khurram Ellahi Khan PIDE University, Islamabad Khurram_ellahikhan@gmail.com
Abstract: The first of the development concerns is the changed economic role of the services sector. It has been common to describe these as Cinderella sectors, which are not getting appropriate attention from the researchers and the professionals of the field. As the shares of services in national economies continue to prosper, and linkages of these elements of the economy with other economic sectors are extended, this tendency to overlook services has become less justifiable. There has been increasing effort to understand service activities since the early 1980s.
Key Words: Services, Agreement, Trade, Goods INTRODUCTION Services differ from trade in products and goods as services are intangible and not visible as of goods. Goods can be stored after production however services cannot be stored and are consumed instantaneously by the customer/consumer. Services play an integral role for the growth of developing countries and also of developed countries, this strength of services industry lies in their need in all major kinds of manufacturing concerns. Services sector holds an important place even in downstream manufacturing. Thus regulatory services can hinder the growth of services sector which can reduce the noticeable gains which services can bring to the society. Services have the biggest segment in GDP of various developing countries: services account for 45% of GDP in countries with low-income but it reaches up to 55% of GDP in countries with middle-income and accounting 70% of GDP in countries with high income. Growth of services sector is the fastest In the present day world and plays an important role in global economy and it accounts for 70 percent of world production, 40 percent of global employment, 20 percent of trade at global level.
Income elasticity is observed for the demand of services. Services sector working at par helps achieving competitiveness also. From 1990 to 2002 the world services trade grew up to 155 percent while those for manufacturing and agriculture were ninety seven percent and forty percent respectively. From time span of last twenty years services activities in low and middle-income countries have been growing faster than gross domestic product (GDP). The growing trend in services sector is reflected by the enhancing productivity of the economy due to services. The growth of services can be credited to several factors including speedy urbanization, the growth of the public sector and amplified demand for intermediate and final consumer services. Access to well-organized services has become an integral factor for the productivity and competitiveness of the economy. FINDINGS Global Trade in Services and GATS Till year 1995 no multilateral agreement was available for the services sector, the major reason was the lack of knowledge for services sector and decline in interest of researchers in the said field.
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Still various private sector groups triggered the need to add up internationals services in Round of negotiations in Uruguay. The GATS is an inter-governmental agreement while ensuring transparency and progressive liberalization and this will result into economic development of major stakeholders and progress in developing countries. Commercially traded services are encompassed under GATS but this does not include services offered or exercised under the authority of government. Members of World Trade Organization (WTO) have accepted on the responsibilities of the GATS and support specific commitments accepted by members. After accepting the terms of GATS a member will not bring any rule which may bring adverse effects on the trade. The main goal of this agreement is to have common rules using which service providers across the globe can deliver services in the national economies and to decreases the hindering forces which may affect the trade (WTO nd) The rising competition among the service providers will result into effective and more efficient service providers providing better services in terms of quality and affordability. Agreement under discussion does not encompass services provided under government control. The GATS differentiates between four approaches of services in terms of supply; Cross-border supply relates to movement of services from one member country to the geographical region of another member country. Consumption abroad implies when a consumer of one member country receives services in another member country Commercial presence refers when supplier of one particular service ensures its presence in another member country either through franchise or lease Presence of natural persons explains when professionals from one country move to another member country to provide services GATS obligations can be kept under two major sets out of which General obligations are important to be considered here. General obligations of GATS are applied to all Members of the GATS and allied services sector. Every country or the member has a different schedule which changes as per the use of each member. The relevant terms and concepts are similar to those
used in the GATT, but not necessarily identical. For example, national treatment is a general obligation in goods trade and not negotiable as under the GATS. Another major imperative is to establish procedures and rules to keep a check on monopolies and suppliers of unique products. Global Trade in Services: Uneven growth is observed in trade of services. Services achieved a boom from 1981 to 2004 which is visible in figure given below. US$ 825 billion in 1980 US$ 4.36 trillion in 2004 Growth of trade in service:
„ Growth of the goods sector: 1980s: 8% goods / 10% services 1990s: 9% goods / 13% services 2001-2004: 15% goods / 17% services Irregularity is present between the numbers of developed and developing countries in the trade of services. Pakistan’s Services Sector: Pakistan's service sector accounts for approximately 53.8% of the economy’s GDP. Transport, storage, communications, finance and insurance account for 24% of this sector, and wholesale and retail trade about 30%. The contribution of service sector to Pakistan’s GDP is gradually increasing. Growth can be observed by having a strong services sector as during the current period of financial downturn. While GDP of Pakistan was growing with the rate of 2% services sector was enjoying the growth of 3.6% and had a large contribution up to 96% to the GDP. Although the growth in service sector was significantly better than the commodity producing sector, it was 45% lower than the growth rate recorded in the previous year 391
(Pakistan
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National Steering Committee has been set up by the Ministry of Commerce recognizing the export potential of the services sector, to chal out a long term strategic plan for enhancing the export of Pakistani services: • providing consultation for enhancing exports of services; • supporting national services export strategy; • to keep an eye on national services export and implementation of its plans; • To take stock of the current state of affairs in the sector on the basis of available objective evidence and to identify research needs; • Allied matters associated to export of services The trade promotion agency (TDAP) has also set up a Services Export Development Cell (SEDC) at TDAP which has identified Financial Services, Construction & Architectural Services, Professional Services, Health & Medical Services and Information Technology as priority sectors. SEDC works with all stakeholders to deal with core issues and develop strategies for each sector. A Services Export Development Fund is being established under the Trade Policy 2009-10 to help services sector grow and expand. It will be backing up by reimbursing grants to Pakistan services exporters for strengthening their export capacity. Considering key areas like production, exports and future development plans and the emerging trends across the globe, certain key areas relating to export potential have been acknowledged for Pakistan and future development. Emerging field of communications especially in particular telecommunications is undergoing speedy growth across the globe. Privatization has lead to sudden explosion in the field of communication and privatization has been allied and supported with the enhancement in technology in said field.
Pakistan is also focusing to deregulate and privatize the telecommunication sector. This has attracted a lot of foreign direct investment and growth in trade in Pakistan. The impact of this policy can be measured by looking at the amount Pakistan received in financial year 2005; Pakistan received more than $300 million by the exports of communication services while only paying of $59 million only. The growth of this sector heavily relies on development of facilities, bringing latest technology, competitiveness, training human resource, and through the adaptation of total quality management. Another major field identified is of transportation sector which is strongly associated with industrial and agricultural wings of any nation. It shares 25% of trade globally. Stress should be given to growing the national transportation fleet (ships and aircrafts), reducing cargo handling cost and time to handle cargo more effectively, improving the facilities at ports and terminal, and ensuring excellence of service. In the end, Pakistan has been a major exporter of unskilled labor, however the trend is demanding for professional and skilled laborers. Hence Pakistan should attend the need for the demand of skilled labor. Pakistan and GATS: Pakistan has the right to put in or to remove any part of offer until they reach at final agreement which may suit their objectives. Under the new developments, Pakistan has shown commitment to liberate ten major sectors out of twelve under the GATS. These contain business services, communications, construction/engineering services, financial services, health and tourism, veterinary, education, accounting and legal services. Beside these commitments in aforementioned sectors Pakistan has assured restrictions at horizontal level applying at all the service sectors, hence homogeneously applied to all the sectors. Pakistan has submitted the conditional initial offer lists to the WTO, Pakistan has also began bilateral negotiations with WTO members countries for receiving offers of their interest before finally submitting the final list. Pakistan is currently enjoying the share of services up to 53& however this ratio touches the limit of 75% in developing countries (Ahmed 2000).
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REFERENCES Ahmed, Mushtaq 2000 Pakistan and the GATS: An Assessment of Policies and Future Prospects Retrieved from http://siteresources.worldbank.org/INTR ANETTRADE/Resources/Ahmad.pdf
Pakistan, Government nd Trade in Services Sector in Pakistan. Retrieved from http://www.commerce.gov.pk/Downlo ads/Services_%20Export_Web_%20Pag e.pdf WTO nd Global Trade in Services and GATS: An Overview retrieved from http://wtopunjab.gov.pk/gats.html
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