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To Fuse or Not To Fuse? Assessing the Case for Convergent Disciplines on Goods and Services Trade

July 2015
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With the rise of global value chains (GVCs) and the growing prominence of services as both facilitators or very objects of supply chain dynamics, it has become commonplace for goods and services to be supplied as a bundled offering within enterprise networks. Separated (politically) at birth since the launch of the Uruguay Round of multilateral negotiations that saw services placed for the first time on the world trade agenda, the goods and services divide reflected in today’s structure of global trade governance has increasingly come into question. The fact that goods and services are increasingly supplied together and that the manufacturing process itself offers evidence of ever-heightened co-mingling of goods and services production (for example, contract-based manufacturing; automobile or aircraft financing, and so on) begs the question of the desirability and political economy feasibility of pursuing economies of scale in global rule-making by fusing the law of goods and services trade into one undifferentiated whole.

This essay explores this case for fusing the law of goods with that of services in a world of trade in tasks and production fragmentation. It does so by directing attention to the questions of whether the current architectures of multilateral and preferential trade governance are compatible with a world of trade in tasks; whether the existing rules offer globally active firms a coherent structure for doing business in a predictable environment; whether it is feasible to redesign the structure and content of existing trade rules to align them to the reality of production fragmentation; and what steps can be envisaged to better align policy and realities in the marketplace if the prospects for restructuring appear unfavourable.

The paper argues that fusing trade disciplines for goods and services is neither needed nor feasible and may actually deflect attention from a number of worthwhile policy initiatives where more realistic (if never easily secured) prospects of generic rule-making may well exist. What is needed is not so much rule-making unification between goods and services but rather more holistic negotiating frameworks that embrace the reality of the goods-services nexus in a pragmatic yet pro-active manner. Whether the increasingly diverse and fractured World Trade Organization (WTO) membership is currently capable of any form of policy pro-activeness remains, without doubt, an important open question. Still, examples abound of areas where useful, development-enhancing, synergies between goods and services trade and between trade and investment policy could readily be explored in a manner that would show greater responsiveness and adaptability to the reality of doing business today. Pursuing such synergies would require a commitment to negotiating parallelism with regard to both rule-making and market-opening objectives which has yet to gain currency in the Doha Round context nor been taken up extensively in preferential settings.

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