Empirical literature confirms the significant contribution that services trade can play in developing economies. High-quality and low-cost services can enhance competitiveness, connect countries to the global economy, and help diversify their exports.
The question is how to foster the development of the services trade in these countries. Research shows that the liberalization of services barriers can increase the performance of manufacturing and agricultural exports, for example, and help boost quality and cut costs, as well as increase service exports.
But liberalization alone is insufficient for successful reform. Services liberalization requires that a country design a careful liberalization process that takes into account its specific conditions. Many countries which have acceded to the WTO and have adopted significant liberalization commitments have not fully reaped the benefits of those reforms. One of the explanations is probably that their process was incomplete. In general, liberalization needs to be complemented by strong and solid regulatory frameworks. Without these conditions in place--- contestable markets, strong regulatory governance, and enforcement capacity--- liberalization will not provide the expected benefits.
Why is it so difficult to create the necessary conditions for successful services trade reforms?