# **1. Introduction**

Even though services account for around 55-75 percent of total output and employment in many countries in the world, their contribution to trade is far less.<sup>1</sup> These numbers form a sharp contrast with respect to trade in goods. A great deal of explaining this gap relates to the fact that trading services is still costly. Due to the non-storability of services and the requirement for either the service supplier or consumer to move in order to make a transaction, trade costs in services have historically been much higher than in goods. Moreover, Figure 1 shows that over the past 10 years little evidence exists that points to a substantial decline of trade costs in services, despite advances being made in transportation and ICT technologies.

Many services that were unimaginable to be traded a decade ago are now able to be supplied across borders in one way or another (Gervais and Jensen, 2013). While technological progress, advanced transport networks and the amplified use of international supply chains have led to more services being traded, a big reason why services still suffer from low tradability is because of costly regulatory policies and procedures. In many parts of the world, market access restrictions in services are still high and, given that services markets are rippled with regulatory procedures as a result of structural and historical factors, non-discriminatory policies beyond market access have also remained substantial. Burdensome regulatory rules and procedures therefore form an important factor in explaining the high trade costs from which services suffer even though some policy reforms have made services more tradable in recent years.

This paper focuses on the latter aspect of trade costs in services. More specifically, the paper looks at how regulatory policies are implemented and administered, which for the most part (but not always) does not discriminate between domestic and foreign service suppliers, and can help reduce trade costs in services. As stated in Hoekman (2017), trade facilitating measures in services relate to costs that stem from (a) (asymmetric) information on the rules and requirements that apply to the delivery of the services; (b) the associated certification / conformity assessment process of the service, and (c) the uncertainty / variability in the administration (governance) of (a) and (b), such as related to procedures. What needs to be made clear in this context is that measures that fall into the area of facilitating trade in services (TFiS) are largely non-discriminatory in nature, but not always.

In short, regulatory policies that relate to facilitating trade in services center around how regulatory and administrative procedures have been implemented and conducted in countries’ jurisdictions. If compliance to regulatory rules and procedures is considered costly by service suppliers because of inadequate information, non-transparency, uncertainty and unclear documentation, this category of trade cost potentially forms a significant share of the overall trade cost in services. In some instances, TFiS measures can also entail discriminatory barriers such as visa measures which are inherently applied in a discriminatory manner. However, depending on how visa requirements are implemented, this policy area may therefore fall under the scope of TFiS. This paper conceptualizes and discusses the various aspects of TFiS-related measures in detail to provide clarity on what is covered by the TFiS agenda.

To date, domestic regulatory policies going beyond up-front market access barriers to facilitate trade in services are largely unknown. Contrary to the case in goods where over the years a clear trade 1 This lower share of services in trade compared to output and employment in services remains even when taking account of the measurement issues that plague services trade data particularly in developing countries.

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