Www. thecommonwealth.org Trade in Professional Services – Effective Participation by the Commonwealth Caribbean Commonwealth Secretariat May 2006 Barbados

www. thecommonwealth.org

Trade in Professional Services –

Effective Participation by the

Commonwealth Caribbean

Commonwealth SecretariatMay 2006Barbados.

By. Andrew O. Satney


• The WTO and the General Agreement on Trade in Services (GATS)

• What are Professional Services?• How are Professional Services Traded• The Main Challenges• How to address them.• Professional Services Promotion Projects - the

Trade Section Experience

• Global trend .

Programme Focus: the issues


Trade in Services governed by the WTO (1994)• Defining what are Services?• Professional Services: What are they?• Modes of Supply.• The global trade.• Improving Export Competitiveness

WTO and GATS (Rules)


Defining International Trade in Services

Services are traded internationally when the supplier and customer

are from different countries, regardless of

Location of the transaction


Professional Services TradeModes of Trade in Services:

All “modes” of supply

Mode 1 - Cross-border supplyMode 2 - Consumption abroadMode 3 - Commercial presenceMode 4 - Movement of natural persons


Professional Services Trade

The Four Modes:

Mode 1 – Cross-border Supply – information flows from one

country to another via communication networks.

E.g.. Accounting Services, architectural drawings transmitted via email,


Professional Services Trade

Mode 2: A consumer travels to another

country to purchase a service.

E.g. Health Tourism, Education Services.


Professional Services Trade.

Mode 3: Commercial Presence – a service supplier from one country establishes an office or branch in another country

to provide a service.

E.g.. Subsidiary of an insurance company.


Professional Services Trade.

Mode 4: Movement of Natural Persons -

Where the individual(s) supplying the service

physically go to another country to provide services.

E.g. consultants; doctors.


Global Services Trade

World Trade in Services (millions US$)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1993

1995

1997

1999

2001

2003

Exports

Imports

Growth averaged 7% per annum 1993-2004 Growth recently reaccelerated after slow 2000-

2001 Moving away from traditional industries

(transport, travel) and towards ICT, BPO, etc.


Percentage Service Trade by Industry


CARICOM Services Trade Main Trends 1997-2002

• Total Services Exports increased by 14% from US$6.2 billion in 1997 to $7.1 billion in 2002

• Total Services Imports increased by 24% from $3.7 billion in 1997 to $4.6 billion in 2002

• Services trade balance stagnated or declined from 1999

• Deficit on goods trade averaged more than US$ 5 billion over period

• Net deficit on external account in Caricom of US$2.7 billion in 2002


0.0

20.0

40.0

60.0

80.0

100.0

120.0

Ant

igua

&B

arbu

da

St.

Luci

a

Mon

tser

rat

Sub

-tot

al O

EC

S

S. V

ince

nt &

Gre

nadi

nes

The

Bah

amas

Gre

nada

Dom

inic

a

Jam

aica

St.

Kitt

s &

Nev

is

Bel

ize

Hai

ti

Guy

ana

Trin

idad

&T

obag

o

Sur

inam

e

ServicesGoods

CompositionPercent total exports of goods and services


SERVICES AS % GDP: 2000SERVICES AS % GDP: 2000

Source: ECLAC (2002)

AntiguaAntigua 92.9%92.9% JamaicaJamaica71.1%71.1%

St. LuciaSt. Lucia 87.1%87.1% TrinidadTrinidad67.9%67.9%

St. KittsSt. Kitts 84.2%84.2% BelizeBelize62.4%62.4%

BarbadosBarbados 84.1%84.1% HaitiHaiti61.8%61.8%

GrenadaGrenada 83.9%83.9% SurinameSuriname61.5%61.5%

St. VincentSt. Vincent 83.3%83.3% GuyanaGuyana 46.5%46.5%

DominicaDominica 76.4%76.4%


SERVICES AS % EXPORTSSERVICES AS % EXPORTS

Source: IMF and ECCB

AntiguaAntigua 91.4%91.4% JamaicaJamaica56.6%56.6%

Montserr.Montserr. 91.0%91.0% DominicaDominica55.0%55.0%

St. LuciaSt. Lucia 81.9%81.9% BelizeBelize44.8%44.8%

BarbadosBarbados 79.6%79.6% HaitiHaiti37.6%37.6%

The BahamasThe Bahamas 78.6%78.6% GuyanaGuyana21.1%21.1%

GrenadaGrenada 72.1%72.1% SurinameSuriname18.6%18.6%

St. KittsSt. Kitts 68.2%68.2% TrinidadTrinidad12.5%12.5%

St. VincentSt. Vincent 66.9%66.9%


Trends in OECS Services Trade: 1993-2002

-

200

400

600

800

1,000

1,200

1,400

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

US

$ m

ill

Total OECS Services Exports Total OECS Services Imports

Balance of services trade


Composition of Caricom Services Imports 1997-2002

Transportation34%

Government Services

5%

Other Business Services

24%

Personal, cultural, and recreational

services0%

Royalties & Licence fees

2%

Computer and Information

0%

Travel21%Communications

2%

Financial 1%

Construction 3%

Insurance8%


OECS Services & Merchandise Trade Balances

(1,500)

(1,000)

(500)

-

500

1,000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

US

$ m

ill

Balance of services trade Balance of merchandise trade


Overall Caricom Trade Balance 1997-2002

-7000

-6000

-5000

-4000

-3000

-2000

-1000

0

1000

2000

3000

4000

1997 1998 1999 2000 2001 2002

Services Trade Balance(US$ m)

Merchandise TradeBalance (US$ m)

External Balance


Relative Share of Individual Caricom States in Total Services Exports 1997-2002

Suriname1%

St. Lucia4%

Montserrat0%

Jamaica28% Belize

2%Grenada2%

Guyana2%

Dominica1%

Barbados15%

St. Kitts & Nevis1%

St. Vincent & Grenadines

2%

Trinidad & Tobago

9%

Antigua & Barbuda

6%

Bahamas27%


What are Professional Services?

• Referred to as “knowledge-based” Services.

• There are over 69 identified sub sectors in the GATS;

• Difficult to define because it is not physical line a “good”.

• Involves mainly people and technology.


Professional Services Contd.

Construction-related LegalHealth-related Market researchEducation-related Management

consulting ICT and Software Development.Engineering Printing and

Publishing.


Trade in Professional Services:How can St. Lucia Participate..

• No. 1. THE ENABLING ENVIRONMENT:

The Role of Government in Providing the “Enabling Environment” !!!!!!!!!!

• No. Being Competitive – globally i.e. quality of service, competitive pricing, etc.


Exporting Professional Services: Main Challenges

• Qualifications and \procedures to qualify (MRA and accreditation);

• Nationality and residency requirements;• Restrictive visa and work permit;• Government procurement laws• Slow and inadequate legal processes;• Lack of transparency – e.g. publication of

regulations;• Excessively high fees for obtaining services.


Exporting Challenges (Contd).

• Cultural (business or social)• Language;• Unnecessary bureaucracy;• Attitude – you must be prepared to take risks.• Rapidly changing global trade environment.• Bi-lateral and multilateral trade negotiations.• Myopic approach to the business.• Competitiveness • Financial resources (risks).“


Exporting Challenges (contd.)

• Scale – too small to for pre-qualifications

• Cost of Communication and Travel.

• Your reputation is not known.

• Inadequate knowledge

• Inadequate support facilities.

• Lack of data and information on local supply situation (trade statistics).


Challenges: Contd…

• Economic philosophies have changed, but bureaucracy hasn’t

• Governments take control-oriented approaches• Private sector is considered “guilty until proven

innocent”• Bureaucracies designed to prevent abuse - not to be

efficient• Opportunities for corruption• “Murphy’s Law”


How to address them.

- Creative approach to marketing.

- Your own knowledge of the market, etc.

- Ensuring that the “supply-side” is prepared: – knowledge of preparing and submitting proposals.

- Using local and international support services.


Addressing the Challenges.

- Knowledgeable trade officials.- Adequate representation in the markets;- Collaboration between government

officials and professional service providers.

• Providing support Services - Government. E.g. Austrade – http://www.austrade.gov.au/.


Addressing Challenges (Ctd.)

• Formation of partnerships (Joint Venture).• Provide reliable and updated information.• Taking a global approach to business.• Establish a strong local base.• Developing the “softer skills” of doing business. • Meeting International standards.• An enabling environment (removing

unnecessary impediments).


Projects on Export Promotion by Trade Section

• Cyprus

• Sri Lanka

• Malta

• Malaysia.


The Global Trend.

• Growth in Global trade in Services is estimated at over 7% in 2003 dominated by professional services.

• Valued at over US$2.5 trillion.• Services account for at least 20% of global trade• Why can’t The Commonwealth Caribbean benefit from

this?• The challenges are not insurmountable• Take the Global Approach.


In this day and age of global internet connectivity and inexpensive telecommunication costs, any country with the right mix of talent, infrastructure and conducive business environment can compete in the global marketplace for knowledge workers and IT- enabled services.

OPPORTUNITYIn this day and age of global internet connectivity and inexpensive telecommunication costs, any country with the right mix of talent, infrastructure and conducive business environment can compete in the global marketplace for knowledge workers and IT- enabled services.






What is your Vision? Your Horizon?

• Is it Local – your town?

• Is it Your country?

• Is it within the OECS?

• Is CARICOM?

• Is it The Americas?

• Is it Global?


A Tale of Many Cities

- Dubai Internet City

- Dubai Media City

- Dubai Industrial City

- Dubai Sports City

- Dubai Motor City

- Dubai Maritime City

- Dubai Humanitarian City

- Dubai Healthcare City

- Festival City

- The Lost City

- International City

- Academic City

- Knowledge Village

- Global Village

- Dubailand


Palm Islands - Three man-made islands in the shape of palm trees. 500apartments, 2 000 villas, 25 hotels and 200 shops.

125 km of additional coast line created.


Dubai Sports City - 7.5 km² complex of outdoor & indoor stadiums


Hydropolis - Unique submarine hotel of 220 under sea apartments with their panoramic view of marine life.


Dubai Waterfront - Extending to 81 sq km, world’s largest sea front. Larger than Manhattan in New York.


Sources of Information and Support

1. The Commonwealth Secretariat – Trade Section: www.thecommonwealth.org;

2. UNCTAD;3. ITC;4. The World Bank;5. European Union.6. Global Services Network:

www.globalservicesnetwork.com 7. Government Ministries/agencies, colleagues.8. The Internet

Documents

Www. thecommonwealth.org Trade in Professional Services – Effective Participation by the Commonwealth Caribbean Commonwealth Secretariat May 2006 Barbados