The time is ripe for G-20 policymakers to take strong and decisive action to reduce the costs of providing services abroad, because:
1. The costs of trading services internationally are at least twice as high as for goods, so the benefits from reform—increased production, trade, and employment at a time when they are critically needed to consolidate recovery—are potentially much larger.
2. Trade costs facing service providers have fallen more slowly than those facing manufacturers over the 2000-2005 period, despite the spread of advanced information and communication technologies. Policy action is clearly needed to reduce trade costs more rapidly.
3. Ambitious policy reforms, backed up by external commitments, have proven highly effective in reducing the costs of trading services internationally.
The Asia-Pacific Economic Cooperation (APEC) has moved forward on trade costs by adopting a result-based approach—a 5% reduction in trade costs over 5 years—that leaves member economies relatively free to choose the policies they adopt to reach their common goal. G-20 leaders should take a leaf out of APEC’s book. The G-20 can demonstrate commitment to consolidating and sustaining global recovery by agreeing to reduce the costs of trading services internationally by at least 1% before end-2010. Policy reforms should be fully consistent with the WTO’s non-discrimination obligations, and listed publicly on the G-20’s website.