Monday, November 19, 2012

Bring it on

Georgetown's Brad Jensen says, the USA should find infrastructure needs overseas, and offer to fill them as international trade theory says; that's where our comparative advantage lies.

The USA has a large business services sector--things like software, financial and legal, engineering and consulting--and is exporting from that sector.  Developing countries that are now getting richer, especially through manufacturing, will be needing that expertise in the future.

Business services are larger than manufacturing in the USA, and pay better.  So, trade negotiators should be leaning on developing countries that have restrictive trade practices to liberalize.  Further, other developed countries, such as Western Europe, are in the same boat and should be natural allies in the General Agreement on Trade in Services (GATS).
Much of the spending for infrastructure in the coming boom is likely to be controlled or financed, at least in part, by governments -- national, regional, and local. Those governments are sure to be subject to political pressure to favour domestic producers when granting. This makes guaranteeing equal treatment in government procurement a crucial issue for foreign service providers.
Jensen cautions that;
The WTO’s Government Procurement Agreement was negotiated with the intention of reducing preferences to domestic firms in public procurement and opening public works spending to international trade. Its coverage was extended tenfold in the subsequent Uruguay Round, but this large sum obscures the fact that to date only a relative handful of countries have signed the agreement, virtually all of them in the developed world. In particular, none of the large developing countries expected to account for the bulk of infrastructure spending in coming decades, that is, Brazil, China, India, and Russia, are participants in the agreement.
Hmmm.  Where is Barack Obama right about now.

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