DP2481 | Reciprocity Across Modes of Supply in the WTO: A Negotiating Formula

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The negotiations on trade in services at the WTO have so far produced little liberalization beyond levels unilaterally undertaken by countries. One reason is the neglect of the traditional negotiating principle of reciprocity. In particular, there has been a failure to exploit the scope built into the services agreement (GATS) for exchange of market access 'concessions' across the different modes of supply - cross-border delivery, and the movement of capital and individuals. Using the Heckscher-Ohlin-Vanek framework, this paper proposes a negotiating formula that generalizes the fundamental WTO principle of reciprocity to include alternative modes of delivery. Adoption of this formula as a basis for negotiations could help deliver greater liberalization commitments on all modes - producing substantial gains in global welfare and more balanced outcomes.