OECD Calls for Cutting Red Tape

The world's richest economies must do more to tear down trade barriers in services that ramp up costs for consumers and businesses, according to the Organization for Economic Cooperation and Development.

The OECD said restrictions to services trade, which encompasses a wide range of sectors including banking, accounting, telecoms and insurance, had created costs for businesses that "largely exceeded" average tariffs on goods, news outlets reported.

While restrictions differed by country and sector, the OECD said red tape across services markets added an average tariff equivalent of 40% for exporters seeking to enter multiple markets. In some sectors regulatory barriers had even higher costs.

"For instance, the average level of restrictions in force in the telecommunications sector amounts to trade costs of up to 150% on cross-border exports," the OECD said in a report on trade policies in services.

Prices in the transport, logistics and construction sectors were estimated to be about 20% higher on average than they would be in the absence of restrictions, according to the OECD.

"The costs of services trade and investment barriers are high, largely exceeding the average tariff on traded goods, and these costs apply to all modes of supplying services abroad," it said.

The services sector has become an increasing driver of growth and employment in advanced economies, accounting for almost 80% of UK output. Data published by the Office for National Statistics show the share of jobs accounted for by the services sector increased from 63.2% in 1978 to 83.6% at the end of last year.

Angel Gurria, the OECD's secretary general, urged economies to do more to liberalize trade in services to raise productivity and living standards. "Open and well-regulated services markets are the gateway to global value chains,” he said.

The OECD said trade costs arose "both from policies that explicitly target foreign suppliers, and more generally from domestic regulation falling short of best practice in the area of competition and rule-making". Gurria said smaller businesses had the most to gain from slashing red tape.

He said: "Services trade policy reform can boost small and medium-sized enterprises, reduce trade costs, strengthen the digital economy and help make globalization work for all."

Recent OECD research suggests progress in harmonizing services rules to make doing business easier has been slow.

An OECD report published last year showed progress towards deepening Europe's single market had "stalled" as policymakers dragged their heels on reforms, including scrapping red tape and reducing trade barriers.