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Martín Molinuevo and Sebastián Sáez

Services policies and regulations often fail to respect the basic principles of transparency and non-discrimination. Regulatory quality depends not only on the regulation-making process but also on regulatory institutions. In developing countries, these institutions are often weak. Reforming regulations affecting trade in services requires an assessment of whether a country should also remodel, strengthen, or create the regulatory institutions responsible for issuing and enforcing laws and regulations. Policymakers need to address both regulations and the framework in which they are designed, adopted, and applied to fully reap the benefits of services trade. The empirical literature on trade in services identifies a number of factors that affect performance in the sector. Chief among them are the quality of regulations, regulatory institutions, and governance. But countries confront a number of different options when undertaking policy reforms. This chapter proposes a methodology to assist countries in identifying restrictions to services trade, assessing their impact, and developing suitable regulatory alternatives. The methodology also covers the institutional setting and institutional arrangements for reform, because the way governments administer and implement the laws and regulations may affect trade. The objective of the methodology is to help policymakers assess regulations consistently, streamline the regulatory framework, and set up a process for introducing new regulations. The chapter concludes with policy recommendations.

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Martín Molinuevo and Michael Jacobson

International rules on foreign investment in trade agreements came from two sets of disciplines. Investment chapters are the obvious source of rules on foreign investment. In addition, chapters on trade in services, especially those following the GATS structure, feature rules on foreign direct investment (FDI) in the services sector. The chapter focuses on disciplines in ‘trade in services’ and their relation to FDI. In particular, it assesses the relationship between the concepts of FDI and trade in services, reviews the scope of main disciplines in services and investment chapters in trade agreements, and brings attention to potential legal conflicts between them. Finally, it considers potential implications of this relationship in dispute resolution by considering how investment disputes in services would be considered at the dispute settlement mechanism of the WTO, and how a trade in services dispute would be viewed in investment arbitration.