At the aggregate level the drop in international trade is one the worst since the mid-1960s. In the first quarter of 2009, the value of total goods exports in OECD countries fell by a seasonally adjusted 15.1% compared with the previous quarter. In late 2008 and the first half of 2009, however, trade in services seems to have effectively ‘decoupled’ from goods trade, with some OECD countries actually experiencing more resilient services exports. In the context of the economic crisis, we are also increasingly faced with the question how countries might ‘push the protectionist button’ when it comes to trade in services, what particular form this could take, and if WTO agreements are geared to prevent this.

All this goes to show that even after close to 15 years of research relating to the GATS, services are still ‘different’ from goods, special and mysterious – requiring study as offered by this book.

This volume of essays edited by Juan Marchetti and Martin Roy focuses, not on the economics of services, but rather on the process, achievement, and challenges of service trade negotiations. As such, it is essential for trade negotiators and very usefully complements recent publications on the topic.Footnote ¹ The contributors are very prominent, notably the uniquely qualified Secretariat of the WTO Trade in Services Division and of the World Bank Development Research Group.

The volume is divided into four parts with a short section on the economics of services trade, two parts covering the analysis of developments and challenges in general and sector-specific trade negotiations, and the final part on country case studies.

Chapter 1 by Hoekman and Mattoo provides the economic background to the rest of the book. It reviews recent global trade in service trends, the linkages between services and growth, the impacts of service trade liberalization, and policy implications. As such, it clearly uncovers the topics in which the greatest analytical gaps still exist.

Problems are the steadily improving, but still notoriously weak services trade data and a lack of analysis and metrics to capture the complex role of services in the economy (including in global value chains, for innovation, and as intermediate inputs into goods production). Importantly, the chapter shows that evidence is still missing as to the causal linkages between trade negotiations, services sector liberalization, and effects on growth and service sector performance. The authors note that ‘due to data constraints, there is only limited empirical ex post analysis of the impacts of liberalization of trade in services’ (p. 38). They also disclose that until today ‘no comprehensive, cross-country, comparable data set exist that would allow a summary assessment of the prevailing levels of services trade and investment barriers’ (p. 35). Of course, Hoekman and Mattoo are not to be blamed for this as – for more than a decade – they have heroically contributed to addressing these gaps. Yet it goes to show that the one essential element required to demonstrate that ‘service trade negotiations matter’ (and with it related months and months of GATS negotiations…) is still somewhat spurious and that the onus of making trade negotiations relevant to CEOs of services firms is in the camp of trade negotiators.

In Part II, Chapters 2 and 3 review the degree of service trade liberalization (as measured by the proxy of trade negotiation commitments) and the interrelationship between the multilateral as well as the preferential trade negotiations. In Chapter 2, Roy and Marchetti start by assessing the sectoral and modal coverage of GATS commitments while also analysing new offers made in the context of the WTO Doha round – all based on the WTO database on service trade commitments which has usefully been set up over recent years. While the results are not new, they are nevertheless still disturbing. In short, ‘the GATS has not so far been a showcase for market access in trade in services’ (p. 62). The authors also conclude that the current Doha negotiations have yet to show the promise of further liberalization. Luckily, the chosen proxies of GATS commitments are not perfect, as the latter only imperfectly indicate existing degrees of services openness (offers are generally more restrictive than even current service policies) and the value of trade negotiations. In times of protectionist pressures, it will be easy to appreciate the value in binding existing levels of openness. Also, there are surely some unmeasured interactions between GATS negotiations, preferential trade agreements, and de facto (unilateral) service sector liberalization.

Roy and Marchetti also build on previous GATS-plus work to analyse ‘where the action is’ in an unprecedented number of preferential trade agreements (PTAs). Their conclusion is that some PTAs lead to spectacular improvements of market access commitments, whereas the outcome of others is modest. While some sectors (e.g. audiovisual, telecoms services) have experienced a massive improvement of trade commitments in PTAs as compared to the WTO, others have not – in particular holy cows such as postal courier, health, maritime, and air transport services. PTAs have improved rule-making on the basis of the introduction of disciplines catered to investment, other modes of services trade, sectoral disciplines, and innovations with respect to scheduling modalities. The authors however assert that otherwise ‘PTAs have not introduced critical innovations to the framework of rules governing trade in services’ (p. 74). Personally, the author of this review has always thought that it was somehow flattering to the GATS that PTAs use WTO services rule language to such an extent, potentially as an explicit desire to avoid increasing the global diversity and fragmentation of services trade rules. Yet as Roy and Marchetti note, these conclusions also abstract from rule-making elements and other innovations: for example, the disciplines on mutual recognition, the complementary e-commerce chapters, and sectoral elements that are mostly visible in telecoms.

In Chapter 3, Fink complements the assessment of the relationship between preferential and multilateral service trade agreements based on his recent work in the field, including in East Asia. Beyond the detailed and insightful study and evaluation of the different types of PTAs, this chapter is commendable for its brilliant discussion on rules of origin, ‘leaky’ PTAs, and insights on their political economy. Fink calls for future work on understanding the impacts of market access commitments on actual trade and the effect of preferential opening – i.e., the extent to which PTA commitments lead to de novo liberalization and how these are implemented. Again, we still know relatively little about the economic effects of PTAs on services trade flows and specialization, sectoral transformation, and the bottom line of growth and employment. The relationship between one PTA and another, and from PTAs to the WTO negotiations or even unilateral liberalization is still murky. Particularly intriguing in this area is the increasing use and importance of liberalization ‘templates’ in preferential trade agreements and related outcomes and impacts on other bilateral or multilateral negotiations.

Chapters 4 to 13 of Part III shed light on individual services sectors (telecommunications, postal, distribution, air transport, financial, audiovisual, and energy services). These sector-specific chapters broadly follow a similar format: a review of major trends thus highlighting the evolution of market forces and regulatory practices; a discussion of sector-level trade policies and identification of the main trade barriers; and an analysis of market access achievements in both multilateral and bilateral settings. Beyond sectors, two modes of delivery (GATS Mode 1 and 4) and government procurement are covered. GATS veterans will be pleasantly reminded of the sectoral Background Notes of the WTO Secretariat during the late 1990s. Some chapters use new metrics such as the trade restrictiveness measures in the chapter on distribution services and other measures for air transport services. And ongoing work on services trade restrictiveness indexes at the OECD and elsewhere will advance sectoral analysis further.

These sectoral chapters of Part III are complete and of high quality. What is most interesting is that the sectors themselves are not static but that new technologies, new delivery modes, new services, and new regulations alter the economic and trade negotiation context on an almost daily basis.

Finally, Part IV with its Chapters 14–19 provides case studies illustrating the country-level experience of service trade negotiations, including some (e.g. Colombia, Uruguay, Costa Rica) that are not usually at the centre of attention. This section therefore provides an important historical track record on the process and background of negotiations, one which is often lost but which is of fundamental importance to understanding the agreements. While there are too many valuable contributions to cite them all here, the insights of Mukherjee, Stephenson, and Saez are particularly invaluable.

To conclude, this volume and the existence of a nucleus of dedicated GATS researchers shows that we have come a long way during the last 15 years. This volume also demonstrates that services and the trade therein will stay a very dynamic and fertile ground for negotiations and research in the years to come.