The structural shift to services during the 1990s has been quite remarkable. In 1990 services were already 39 percent of CARICOM's GDP and by 2000 this had increased to 47 percent. In the smaller island economies services are as much as 80-90 percent of the GDP and of employment.

Services have now become the principal link to the international economy for most of the island Caribbean. In the Dominican Republic, service exports grew from US$1,349 million to $3,227 million from 1992 to 2000; in Jamaica, from $1,105 million to $2,027 million. In Cuba, services replaced sugar as the leading export earner during the 1990s. The Bahamas already earns over $2,000 million annually from service exports and Barbados, over $1,000 million.

Tourism has led the growth of service exports in the 1990s and is now the largest single source of foreign income for the majority of the Association of Caribbean States member countries. International financial services are second in importance; followed some way behind by information services.

Other service industries that are important in GDP and in employment are distribution, transport and communication, and construction.

Given all this, there is a good case for services to be a central focus of economic strategising in the region. Sometimes, however, they seem to play second fiddle to more traditional agricultural, manufacturing and resource-based industries' activities.

One reason that this is changing is the growing pressure of external negotiations. The General Agreement on Trade in Services (GATS), which came into effect in 1994, calls for the liberalisation of all internationally traded services, except for public services provided on a non-commercial basis. Four modes of delivery are distinguished:

1. Cross border supply; for example, through e-commerce
2. Consumption abroad; as in the case of tourism
3. Commercial presence; as with branches of foreign companies; and
4. Movement of natural persons, for example, consultants.

Signatories to the GATS are required to make commitments for market access in each of these modes across a range of service sectors. Tourism, financial, business and communication services have so far received the most commitments globally; the focus being on Mode 2. But the Report suggests that Caribbean countries are lagging behind in making market access commitments.

Now the pressure to expand commitments by mode and by sector is growing. Trade in services is part of the "built-in" negotiating agenda of the World Trade Organisation and a new round of negotiations started in 2000. Financial services, maritime transport, basic telecommunications, professional and business services, distribution and tourism are all being targeted by the developed countries for improved market access in all delivery modes. Services liberalisation also features prominently is the Free Trade Area of the Americas (FTAA) negotiations.

One conclusion of the expert group meeting was the urgent need to update service industry statistics and to prepare inventories of legislation and regulations relating to the provision of services in order to strengthen the region's position in negotiations.

Another was the need to develop policies to enhance the development impact of services. More on this next week.

Professor Norman Girvan is Secretary General of the Association of Caribbean States. The views expressed are not necessarily the official views of the ACS. Feedback can be sent to mail@acs-aec.org.

(ends)

September 20, 2002