The Benefits of Reducing Barriers to International Trade

Reducing the Barriers to International Trade in Accounting Services AEI STUDIES ON SERVICES TRADE NEGOTIATIONS Claude E. Barfield, series editor R EDUCING THE B ARRIERS TO I NTERNATIONAL T RADE IN A CCOUNTING S ERVICES Lawrence J. White I NSURANCE IN THE G ENERAL A GREEMENT ON T RADE IN S ERVICES Harold D. Skipper, Jr. Reducing the Barriers to International Trade in Accounting Services Lawrence J. White The AEI Press Publisher for the American Enterprise Institute WASHINGTON, D.C. 2001 Available in the United States from the AEI Press, c/o Publisher Resources Inc., 1224 Heil Quaker Blvd., P.O. Box 7001, La Vergne, TN 37086-7001. To order, call 1-800-937-5557. Distributed outside the United States by arrangement with Eurospan, 3 Henrietta Street, London WC2E 8LU, England. ISBN 8447-7157-0 1 3 5 7 9 10 8 6 4 2 © 2001 by the American Enterprise Institute for Public Policy Research, Washington, D.C. All rights reserved. No part of this publication may be used or reproduced in any manner whatsoever without permission in writing from AEI except in the case of brief quotations embodied in news articles, critical articles, or reviews. The AEI Press Publisher for the American Enterprise Institute 1150 17th Street, N.W. Washington, D.C. 20036 Printed in the United States of America v Contents F OREWORD , Claude E. Barfield v A CKNOWLEDGMENTS xi 1I NTRODUCTION 1 2B ACKGROUND 3 3W HY I NTERNATIONAL T RADE IN S ERVICES I S ( AND I S N OT ) D IFFERENT FROM T RADE IN G OODS 5 4A CCOUNTING S ERVICES IN I NTERNATIONAL T RADE 11 5T HE I MPEDIMENTS TO T RADE IN A CCOUNTING S ERVICES 18 6D IFFERING A CCOUNTING S TANDARDS : H OW I MPORTANT I S H ARMONIZATION ?22 7T HE C URRENT F RAMEWORK FOR N EGOTIATIONS 28 8T HE R OAD A HEAD 34 9C ONCLUSION 37 N OTES 39 R EFERENCES 43 G LOSSARY OF T RADE T ERMS 47 A BOUT THE A UTHOR 55 vii Foreword T he service sector accounts for more than 70 percent of the gross domestic product (GDP) of advanced industrial economies. Though trade in services is dif- ficult to calculate and many transactions still go uncounted, current estimates place the worth of such trade as at least $2.5 trillion, or about a third of total world trade. For the United States, the world’s most advanced indus- trial economy, the service sector looms even larger. Services account for almost 80 percent of U.S. production and U.S. employment (while manufacturing accounts for 19 percent of U.S. GDP and 18 percent of U.S. employment). The sur- plus in U.S. services trade also partially offsets persistent U.S. merchandise trade deficits. In 1999, the services trade surplus was $76 billion; the merchandise deficit, $347 bil- lion. Despite the increasing importance of services trade and investment, only in 1995 did the multilateral trading system establish rules for opening markets in these economic sec- tors by negotiating the General Agreement on Trade in Services (GATS). This first effort at a discipline for services trade and investment created a framework of general princi- ples and rules but left the large-scale liberalization of indi- vidual sectors to later negotiations. Subsequently, under a mandate established as a part of the Uruguay Round negotiations, important advances toward real liberalization were achieved in two key sectors, telecommunications (1998) and financial services The Benefits of Reducing Barriers to International Trade The Benefits of Reducing Barriers to International Trade By: OpenStaxCollege Tariffs are taxes that governments place on imported goods for a variety of reasons Some of these reasons include protecting sensitive industries, for humanitarian reasons, and protecting against dumping Traditionally, tariffs were used simply as a political tool to protect certain vested economic, social, and cultural interests The World Trade Organization (WTO) is committed to lowering barriers to trade The world’s nations meet through the WTO to negotiate how they can reduce barriers to trade, such as tariffs WTO negotiations happen in “rounds,” where all countries negotiate one agreement to encourage trade, take a year or two off, and then start negotiating a new agreement The current round of negotiations is called the Doha Round because it was officially launched in Doha, the capital city of Qatar, in November 2001 In 2009, economists from the World Bank summarized recent research and found that the Doha round of negotiations would increase the size of the world economy by $160 billion to $385 billion per year, depending on the precise deal that ended up being negotiated In the context of a global economy that currently produces more than $30 trillion of goods and services each year, this amount is not huge: it is an increase of 1% or less But before dismissing the gains from trade too quickly, it is worth remembering two points • First, a gain of a few hundred billion dollars is enough money to deserve attention! Moreover, remember that this increase is not a one-time event; it would persist each year into the future • Second, the estimate of gains may be on the low side because some of the gains from trade are not measured especially well in economic statistics For example, it is difficult to measure the potential advantages to consumers of having a variety of products available and a greater degree of competition among producers Perhaps the most important unmeasured factor is that trade between countries, especially when firms are splitting up the value chain of 1/4 The Benefits of Reducing Barriers to International Trade production, often involves a transfer of knowledge that can involve skills in production, technology, management, finance, and law Low-income countries benefit more from trade than high-income countries In some ways, the giant U.S economy has less need for international trade, because it can already take advantage of internal trade within its economy However, many smaller national economies around the world, in regions like Latin America, Africa, the Middle East, and Asia, have much more limited possibilities for trade inside their countries or their immediate regions Without international trade, they may have little ability to benefit from comparative advantage, slicing up the value chain, or economies of scale Moreover, smaller economies often have fewer competitive firms making goods within their economy, and thus firms have less pressure from other firms to provide the goods and prices that consumers want The economic gains from expanding international trade are measured in hundreds of billions of dollars, and the gains from international trade as a whole probably reach well into the trillions of dollars The potential for gains from trade may be especially high among the smaller and lower-income countries of the world Visit this website for a list of some benefits of trade From Interpersonal to International Trade Most people find it easy to believe that they, personally, would not be better off if they tried to grow and process all of their own food, to make all of their own clothes, to build their own cars and houses from scratch, and so on Instead, we all benefit from living in economies where people and firms can specialize and trade with each other The benefits of trade not stop at national boundaries, either Earlier we explained that the division of labor could increase output for three reasons: (1) workers with different characteristics can specialize in the types of production where they have a comparative advantage; (2) firms and workers who specialize in a certain product become more productive with learning and practice; and (3) economies of scale These three reasons apply from the individual and community level right up to the international level If it makes sense to you that interpersonal, intercommunity, and interstate trade offer economic gains, it should make sense that international trade offers gains, too 2/4 The Benefits of Reducing Barriers to International Trade International trade currently involves about $20 trillion worth of goods and services moving around the globe Any economic force of that size, even if it confers overall benefits, is certain to cause disruption and controversy This chapter has only made the case that trade brings economic benefits Other chapters discuss, in detail, the public policy arguments over ...WORKING PAPER SERIES NO 883 / MARCH 2008 ASSESSING THE BENEFITS OF INTERNATIONAL PORTFOLIO DIVERSIFIC ATION IN BONDS AND STOCKS by Rober to A. De Santis and Lucio Sarno Format: (210.00 x 297.00 mm); Date: Mar 13, 2008 16:49:21; Output Profile: SPOT ISO Coated v2 (ECI); Preflight: Failed WORKING PAPER SERIES NO 883 / MARCH 2008 In 2008 all ECB publications feature a motif taken from the 10 banknote. ASSESSING THE BENEFITS OF INTERNATIONAL PORTFOLIO DIVERSIFICATION IN BONDS AND STOCKS 1 by Roberto A. De Santis 2 and Lucio Sarno 3 This paper can be downloaded without charge from http://www.ecb.europa.eu or from the Social Science Research Network electronic library at http://ssrn.com/abstract_id=1105383. 1 This paper was partly written while Lucio Sarno was a Visiting Scholar at the International Monetary Fund. We are grateful for constructive comments at various stages of this paper to Lorenzo Cappiello, John Cochrane and Robert Engle. The authors alone are responsible for the views expressed in the paper and for any errors that may remain. 2 Corresponding author: European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany; Tel: +49 69 1344 0; e-mail: roberto.de_santis@ecb.int 3 University of Warwick and Centre for Economic Policy Research (CEPR). Contact address: Finance Group, Warwick Business School, University of Warwick, Coventry CV4 7AL, United Kingdom; e-mail: lucio.sarno@wbs.ac.uk © European Central Bank, 2008 Address Kaiserstrasse 29 60311 Frankfurt am Main, Germany Postal address Postfach 16 03 19 60066 Frankfurt am Main, Germany Telephone +49 69 1344 0 Website http://www.ecb.europa.eu Fax +49 69 1344 6000 All rights reserved. Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the ECB or the author(s). The views expressed in this paper do not necessarily refl ect those of the European Central Bank. The statement of purpose for the ECB Working Paper Series is available from the ECB website, http://www.ecb. europa.eu/pub/scientifi c/wps/date/html/ index.en.html ISSN 1561-0810 (print) ISSN 1725-2806 (online) 3 ECB Working Paper Series No 883 March 2008 Abstract 4 Non-technical summary 5 1 Introduction 7 2 A factor pricing model of exchange rates, bonds and stocks 10 2.1 Setup 10 2.2 Uncovered interest rate parity 11 2.3 Uncovered return parity for equities and bonds 11 2.4 Equity and bond returns equilibrium 12 2.5 The full parity system 12 3 Empirical implementation 13 3.1 GMM estimation and restrictions to test comovement 13 3.2 Stochastic discount factor 14 3.3 Risk premia 15 4 Data 15 5 Empirical results 17 5.1 The base case 17 5.2 The US discount factor 18 5.3 The model with time-varying risk premia 19 5.4 Performance of global and domestic portfolios 20 5.5 Time-varying comovement from the 1980s 22 6 Concluding remarks 23 References 25 Tables and fi gures 29 European Central Bank Working Paper Series 41 CONTENTS 4 ECB Working Paper Series No 883 March 2008 $453#%5 +:;E B3B7D 5A@E;67DE 3 EFK>;L76 3EE7F BD;5;@9 ?A67> I:7D7 F:7 D7FGD@E 8DA? 7J5:3@97 D3F7E EFA5=E 3@6 4A@6E 3D7 >;@=76 4K 43E;5 D;E=3D4;FD397 D7>3F;A@E:;BE ?B>AK;@9 %% 7EF;?3F;A@ 3@6 ?A@F:>K 63F3 8AD  75A@A?;7E 3@6 F:7 ,* FD73F76 3E F:7 6A?7EF;5 5AG@FDK I7 ;67@F;8K F:DAG9: 3 E;?B>7 F7EF F:7 5AG@FD;7E I:AE7 3EE7FE EFDA@9>K 5A?AH7 I;F: ,* 3EE7FE 3@6 F:7 5AG@FD;7E I:AE7 3EE7FE ?;9:F AU7D >3D97D 6;H7DE;M53F;A@ Reducing the Barriers to International Trade in Accounting Services AEI STUDIES ON SERVICES TRADE NEGOTIATIONS Claude E. Barfield, series editor REDUCING THE BARRIERS TO INTERNATIONAL TRADE IN ACCOUNTING SERVICES Lawrence J. White INSURANCE IN THE GENERAL AGREEMENT ON TRADE IN SERVICES Harold D. Skipper, Jr. Reducing the Barriers to International Trade in Accounting Services Lawrence J. White The AEI Press Publisher for the American Enterprise Institute WASHINGTON, D.C. 2001 Available in the United States from the AEI Press, c/o Publisher Resources Inc., 1224 Heil Quaker Blvd., P.O. Box 7001, La Vergne, TN 37086-7001. To order, call 1-800-937-5557. Distributed outside the United States by arrangement with Eurospan, 3 Henrietta Street, London WC2E 8LU, England. ISBN 8447-7157-0 1 3 5 7 9 10 8 6 4 2 © 2001 by the American Enterprise Institute for Public Policy Research, Washington, D.C. All rights reserved. No part of this publication may be used or reproduced in any manner whatsoever without permission in writing from AEI except in the case of brief quotations embodied in news articles, critical articles, or reviews. The AEI Press Publisher for the American Enterprise Institute 1150 17th Street, N.W. Washington, D.C. 20036 Printed in the United States of America v Contents FOREWORD, Claude E. Barfield v ACKNOWLEDGMENTS xi 1INTRODUCTION 1 2B ACKGROUND 3 3WHY INTERNATIONAL TRADE IN SERVICES IS (AND IS NOT) DIFFERENT FROM TRADE IN GOODS 5 4ACCOUNTING SERVICES IN INTERNATIONAL TRADE 11 5THE IMPEDIMENTS TO TRADE IN ACCOUNTING SERVICES 18 6D IFFERING ACCOUNTING STANDARDS: HOW IMPORTANT IS HARMONIZATION?22 7THE CURRENT FRAMEWORK FOR NEGOTIATIONS 28 8T HE ROAD AHEAD 34 9CONCLUSION 37 NOTES 39 R EFERENCES 43 G LOSSARY OF TRADE TERMS 47 A BOUT THE AUTHOR 55 [...]... living This chapter will first explore the latter notion, in order to motivate the general discussion in this study of the importance of reducing the barriers to international trade in accounting services We will then turn to the important ways that services are different Trade in Services Is Not Different: Improving Efficiency The basic economics argument for reducing or eliminating impediments to trade. .. dismantling of barriers in the services areas than is true for goods Nevertheless, the GATS represents a substantial effort toward freer trade in services, and accounting services are an important part of that effort We now turn to a deeper exploration of accounting services 4 Accounting Services in International Trade T he scope of accounting services 11 is usually understood to include accounting. .. trade in goods and the recent substantial interest in liberalizing trade in services, however, it seems likely that the Seattle events will represent only a brief stumble on the path to freer international Staff Research Study 27 Office of Industries U.S. International Trade Commission India’s Textile and Apparel Industry: The views expressed in this staff study are those of the Office of Industries, U.S. International Trade Commission. They are not necessarily the views of the U.S. International Trade Commission as a whole or any individual commissioner. Growth Potential and Trade and March 2001 Publication 3401 Investment Opportunities U.S. International Trade Commission Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 Director, Office of Industries Vern Simpson This report was principally prepared by Sundar A. Shetty Textiles and Apparel Branch Energy, Chemicals, and Textiles Division i TABLE OF CONTENTS Page Executive Summary v. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 1. Introduction 1-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Purpose of study 1-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Data and scope 1-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Organization of study 1-2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Overview of India’s economy 1-2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 2. Structure of the textile and apparel industry 2-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . Fiber production 2-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Textile sector 2-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Yarn production 2-4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Fabric production 2-4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dyeing and finishing 2-5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Apparel sector 2-5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Structural problems 2-5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Textile machinery 2-7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chapter 3. Government trade and nontrade policies 3-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Trade policies 3-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tariff barriers . 3-1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Nontariff barriers 3-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Import licensing 3-3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Customs procedures 3-5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Marking, labeling, and packaging requirements 3-5. . . . . . . . . . . . . . . . . . . . . . . . . . . ... interstate trade offer economic gains, it should make sense that international trade offers gains, too 2/4 The Benefits of Reducing Barriers to International Trade International trade currently... rice production 3/4 The Benefits of Reducing Barriers to International Trade Review Question Are the gains from international trade more likely to be relatively more important to large or small... of the world Visit this website for a list of some benefits of trade From Interpersonal to International Trade Most people find it easy to believe that they, personally, would not be better off