BPO no different from other trade: WTO

EXIM MATTERS

The World Trade Organisation (WTO) has released its annual world trade report. The report, besides reviewing the recent and medium term trends in world trade devotes special attention to use of quantitative techniques in assessing impact of trade policies, the advantages and disadvantages of uniform technical standards in the context of trade, need for reforms in the civil aviation industry and for the first time, the role and impact of the business process outsourcing (BPO) industry.

The report says in 2004 trade outstripped economic growth by five percentage points reinforcing the patterns observed since last several decades that trade is a crucial component of the global economic activity.

Although world trade grew at 9 per cent as against 4 per cent, the gross domestic product growth, many developing regions like Asia, central and south America and western Europe posted a double-digit growth in trade.

The high prices of commodities played an important role in the impressive trade growth, especially from the West Asia and Africa, says the report. As net exporters of commodities, the developing countries have gained.

But the share of world trade in pharmaceutical products at $300 billion has grown to 3 per cent of total world trade outstripping the share of textiles and iron and steel in world trade.

The rich countries have gained through these developments because poorer countries of net importers of medicines. Despite all the good news of world trade growth, the WTO itself remains moribund with the member countries not willing to take the negotiations forward.

"The crisis that threatens is all the more menacing because it is not a crisis of dramatic divergences or headline-grabbing conflict""it is a crisis of immobility", said the WTO director-general recently.

On standards, the report points out that they can deliver important benefits in terms of information for consumers, environmental protection and compatibility among related goods and services; but the technical standards can also be used as protectionist measures and can result in higher operating costs for developing country producers.

On civil aviation, the report bemoans that the agreement on trade in services has exerted limited influence on competitive developments in the sector, and only covers a narrow range of relevant services for example repair and maintenance services, the marketing and selling of air transport services, and computer reservation services.

Differing views persist as to whether a multilateral approach will be more effective than existing arrangements in delivering mutually beneficial liberalisation.

The report stresses that quantitative analysis cannot offer definitive answers to questions of legal compliance, but rather may serve as an aid to understanding the impact of policy actions and that reliance on quantitative economic analysis is likely to grow in the future, as cases become increasingly "fact-intensive".

For India, the best news is that, according to the report, BPO services are no different from other forms of trade driven by comparative advantage and that the adverse impact of off-shoring services on production, employment and trade is less severe than suggested by some press reports and public commentary.

The report calls for greater conceptual clarity between particular modes of supply (mode 1""cross-border transactions, and mode 2""consumption abroad), together with greater precision in the nomenclature used to describe service activities. India can take note of the report and work towards binding multilateral agreement that would protect the interests of the BPO industry for good.

tncr@sify.com