many developing countries will be conditional on such regulatory improvements. An important element of any Doha package on services should therefore be agreement to create mechanisms to promote pro‐competitive domestic regulatory reform. The aid for trade initiative has mobilized greater awareness of the need to consider trade‐related priorities in the allocation of government expenditures and assistance provided by the donor community. Knowledge platforms can act as an instrument to increase the focus on the services reform agenda in developing countries in the provision of aid for trade. They can also help prepare the ground for future commitments on services in trade agreements and support an expansion in mode 4 trade.

Although comprehensive liberalization of service markets in all 153 WTO members in the Doha round is neither possible nor at this point in time desirable, the largest services economies (a “G‐ 25”) can and should go further. There is both great scope and urgency for WTO members to demonstrate that greater ambition on services liberalization is possible. A binding commitment to lock‐in applied policies at current levels of openness and agreement to pre‐commit to a significant reduction in discrimination against foreign suppliers for a set of key services sectors/clusters would do much to change the perception that the WTO cannot deliver on services. At the same time the proposed critical mass approach will ensure that those countries with weak regulatory systems can decide for themselves whether and when they are ready to participate in making commitments.

The G‐25 group should have the regulatory capacity to ensure that liberalization will not affect the attainment of regulatory objectives. However, they may also need to pursue domestic regulatory reforms before opening up some services sectors to foreign competition, and will need to strengthen regulatory cooperation to facilitate greater trade in some services, especially those involving the movement of natural persons. A pre‐commitment approach will allow such pre‐ conditions to be put in place and ensure that there is an agreed timetable to open markets to greater competition. Explicitly recognizing that services liberalization cannot – and should not be – divorced from services regulation will do much to help harness the potential that trade agreements have to expand services trade and investment.

# **References**

- Abbott, K. and D. Snidal, (2000). “Hard and Soft Law in International Governance,” _International Organization_ 53(3): 421–56.

- Adlung, R. and M. Molinuevo (2008). “Bilateralism in Services Trade: Is there Fire behind the (BIT‐) Smoke?,” _Journal of International Economic Law_ 11(2): 365‐409.

- Adlung, R. and P. Morrison (2010). “Less than the GATS: ‘Negative Preferences’ in Regional Services Agreements,” _Journal of International Economic Law_ 13(4): 1103‐43.

- Adlung, R. and M. Roy (2005). “Turning Hills into Mountains? Current Commitments under the General Agreement on Trade in Services and Prospects for Change,” _Journal of World Trade,_ 39: 1161‐94.

- Arnold, J., B. Javorcik and A. Mattoo (2007). “The productivity effects of services liberalization: Evidence from the Czech Republic,” World Bank Policy Research Working Paper 4109.

- Arnold, J., A. Mattoo and G **.** Narciso (2008). “Services Inputs and Firm Productivity in Sub‐Saharan Africa: Evidence from Firm‐Level Data _<u>," Journal of African Economies</u>_ <u>, 17(4): 578‐99.</u>

- Arnold, J., B. Javorcik, M. Lipscomb, and A. Mattoo (2010), “Services Reform and Manufacturing Performance: Evidence from India”, CEPR Discussion Paper 8011 (see also <u>http://www.voxeu.org/index.php?q=node/5662).</u>

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