International Trade for services business
Service-based businesses and international trade have become an integral part of global commerce. As the world becomes more technologically advanced in sectors such as banking, transport and telecommunication, the scope of trading these services increases in a tremendous way. Nowadays, people are moving from one country to another to consume services such as education, tourism, and medical services. The same people bring with them services ranging from information technology, building, and construction and software development. Without any doubt, service-based business has undergone extensive growth over the past decade to become the fastest growing component of the modern global economy.
“liberalization opens up the domestic markets to foreign competition”
Regardless of experiencing this growth, red tape, bureaucracy, restrictions and poor policies continue to hinder service-based industries in developing countries. As a result, most service base multinationals find it hard to invest in such countries because the cost of doing business is high. However, one of the most viable solution to stimulate service based business is by introducing domestic liberalization and getting rid of restrictions and barriers. However, liberalization has its own set of challenges and therefore regulatory institutions must be established in order to correct specific market flaws and failures. This is because liberalization opens up the domestic markets to foreign competition.
Governments can improve their policies to remedy institutional flaws that hinder service-based industries, but international cooperation is also important. This is achieved through bodies such as the World Trade Organisation (WTO). Governments around the world have come to the realization of the impact the service industry has on the global economy. This has led to the incorporation of the service industry into the architecture of the WTO.
Developing countries need to understand the paramount advantages that come with international cooperation for the growth of service based business. In most developing countries, there are protectionist policies the hinder growth at all levels. The solution is to open up markets while at the same time enhance credibility. Sound policy development should also be considered.
Global cooperation will further enhance:
- Policy development
- Strengthen the regulatory institutions
- Participation in developing international standards
- Access to essential services to the poorest areas
The cooperation between both developing and industrialized countries should lead to the movement of service providers. This cooperation happens under the framework of General Agreement on Trade in Services. The existence of other regional and bilateral agreements can also be applied in this case. For example, skilled migration is temporary.
The openness between countries that provides for cross-border trade of services should be maintained. However, the growing concern is over the protectionist approach by countries that is aggravated by the likely cost of adjustment.
As the service industry grows and becomes more important for economic growth, it is becoming essential to include experts from the service industry, business and consumer associations, students and analyst in domestic reform development. This is true at the domestic level in order to create awareness on the implications of trading services and liberalization of domestic markets. Even as the service business sector is booming more needs to be done to create more efficient systems with time.