SERVICES: SECTOR BY SECTOR
In all countries, distribution represents a large share of domestic production and employment. The industry is highly dynamic and changing rapidly. There is a trend towards greater concentration and the rapid development of new forms of competition — for example, through electronic commerce.
Distributions services includes commission agents' services, wholesale trade services, retailing services and franchising.
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Developments in the sector
The distribution sector provides the necessary link between producers and consumers, within and across borders. The efficiency of the sector is crucial to ensuring that consumers have access to a wide variety of goods at competitive prices. Failure of the distribution sector to perform its role well – which can arise if government policies restrict competition – can lead to a significant misallocation of resources and economic costs.
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Current commitments and exemptions
As of 31 January 2009, a relatively low number of WTO members had commitments in distribution services (57 schedules of commitments covering 69 members). This contrasts with the economic importance of the sector.
For consolidated information on countries’ commitments and exemptions on distribution services go to the services database. If you are seeking the commitments of a specific WTO member, go to “Jump to a specific sector for a given Member”, select distribution services from the sector dropdown list, select the Member of interest and click “go”. To see a table showing which Members have made commitments in distribution services choose “See which Members have made commitments in a specific sector”, select Distribution services and click “go”.
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Distribution services are included in the new services negotiations, which began in January 2000. The principles of trade in distribution services are contained, as for all services, in the General Agreement on Trade in Services (GATS).
In the first years of the services negotiations, various negotiating proposals were submitted — by both developed and developing countries — on distribution services. These were submitted by the United States, the European Communities, Canada, Switzerland, Mercosur, Korea (Rep. of), Colombia and Australia; there were also multi-sectoral proposals by Japan and Chile.
Many of the negotiating proposals lamented the low number of members with commitments in the sector. The proposals mentioned a number of prevailing restrictions, which significantly affected trade in the sector and which should be addressed in the course of negotiations. Often, these were specific to Mode 3 (a foreign company setting up subsidiaries or branches to provide services in another country), although some related to Mode 1 (services supplied from one country to another) and Mode 4 (individuals travelling from their own country to supply services in another).
Barriers mentioned included: foreign equity limitations; economic needs tests on establishment and expansion of stores (a government screening for the purpose of deciding whether the entry into the market of a foreign firm is needed); limitations on the type of legal entity, including joint-venture requirements; limitations on the scope of operations (e.g. number of outlets, geographical areas); discrimination against franchises or direct selling as opposed to other forms of business; discriminatory taxes and subsidies; discriminatory limitations on the purchase or rental of specific assets, such as real estate and land (often listed in the horizontal section of schedules); citizenship/residency requirements; and performance requirements on the marketing of domestically produced goods. Furthermore, several of the negotiating proposals sought a reduction or elimination of the product exclusions found in the schedules of several members.
In more recent discussions, various members indicated that the sector was an area of importance in the negotiations and called for greater progress. For information on the negotiating objectives expressed by members, see the Annexes to the Reports by the Chair of the Special Session of the Council for Trade in Services to the Trade Negotiations Committee in 2005 (TN/S/20 and TN/S/23).
- Proposals on distribution services
Following the Hong Kong Ministerial Declaration of December 2005, a group developing and developed countries prepared a plurilateral request on distribution services in March 2006. It essentially seeks commitments with no limitations for modes 1 to 3 throughout the sector, although sponsors of the request indicate that flexibilities regarding such issues as the exclusion of a limited number of sensitive products, transition periods, or certain non-discriminatory economic needs tests could be discussed.
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Some useful links and other resources
A. T. Kearney (2008), “Emerging Opportunities for Global Retailers; the A.T. Kearney 2008 Global Retail Development Index”.
Bertrand, Marianne and Francis Kramarz (2002), “Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry”, “Quarterly Journal of Economics”, Vol. 107, No. 4, pp. 1369-1413.
Boylaud, O. (2000), “Regulatory Reform in Road Freight and Retail Distribution”, OECD Economics Department Working Paper No. 255, Paris.
Boylaud, O. and Nicoletti, G. (2001), “Regulatory Reform in Retail Distribution”, OECD Economic Studies No. 32, Paris.
Bradford, Scott (2005), “The Welfare Effects of Distribution Regulations in OECD countries”, “Economic Inquiry”, Vol. 43, No. 4, October, pp. 785-811.
Bradford, Scott and Alexandre Gohin (2006), “Modeling Distribution Services and Assessing their Welfare Effects in a General Equilibrium Framework”, “Review of Development Economics”, 10(1), pp. 87-102.
Carree, M. A., and J. Nijkamps (2001), “Deregulation in Retailing: TheDutch Experience”, “Journal of Economics and Business”, 53, pp.225-35.
Deloitte (2008), “Global Powers of Retailing”.
Dries, L. et al. (2004), “The Rapid Rise of Supermarkets in Central and Eastern Europe: Implications for the Agrifood Sector and Rural Development”, “Development Policy Review”, 22 (5), pp. 525-56.
Euromonitor (2006), “World Retail Data and Statistics 2007/2008”.
François, Joseph and Ian Woonton (2007), “Market Structure and Market Access”, World Bank Policy Research Paper 4151.
Hoffmaister, Alexander W. (2006), “Barriers to Retail Competition and Prices: Evidence from Spain”, IMF Working Paper, WP/06/231.
Joseph, Matthew, N. Soundararajan, M. Gupta and S. Sahu (2008), “Impact of Organized Retailing on the Unorganized Sector, Indian Council for Research on International Economic Relations”.
Kaleeswaran Kalirajan (2000), “Restrictions on Trade in Distribution Services”, Staff Research Paper, Australian Productivity Commission.
Kim Hyun Chul, Itoh, M., Wenping Luo, G. McGuire, W. Moon, and N. Shimoi (2003), “The Costs and Benefits of Distribution Services Trade Liberalization: China, Japan and Korea”, APEC.
Mukherjee, A. and N. Patel (2005), “Foreign Direct Investment in Retail Sector: India”, Indian Council for Research on International Economic Relations, p. 32.
Nordås, Hildegunn Kyvik, Massimo Geloso Grosso and Enrico Pinali (2008), “Market Structure in the Distribution Sector and Merchandise Trade”, OECD Trade Policy Working Paper No. 68, 1 Feb. 2008, Paris.
Pellegrini, L. (2000), “Regulations and the Retail Trade” in “Regulatory Reform and Competitiveness in Europe; Vertical Issues”, edited by G. Galli and J. Pelkmans, Northhampton, MA, Edward Elgar.
Pilat, D. (1997), “Regulation and Performance in the Distribution Sector”, OECD Economics Department Working Paper No. 180, Paris.
Reardon, T., C.P. Timmer, C.B. Barrett and J. Berdegué (2003), “The Rise of Supermarkets in Africa, Asia, and Latin America”, “American Journal of Agricultural Economics” 85 (5), December, pp. 1140-1146.
Reardon, T., P. Timmer and J. Berdegué (2004), “The Rapid Rise of Supermarkets in Developing Countries: Induced Organizational, Institutional and Technological Change in Agrifood Systems”, “Electronic Journal of Agricultural and Developmental Economics” 1 (2), pp. 168-83.
Roy, Martin (2008), “Out of Stock or Just in Time? Doha and liberalization of distribution services”, in Marchetti and Roy (eds.), “Opening Markets for Trade in Services; Countries and Sectors in Bilateral and WTO Negotiations”, WTO and Cambridge University Press.
Roy, Martin, Juan Marchetti and Hoe Lim (2008), “The Race Towards Preferential Trade Agreements in Services: How Much Market Access Is Really Achieved?”, in Panizzon, Pohl, and Sauvé (eds.), “GATS and the Regulation of International Trade in Services”, Cambridge University Press. (see section on Distribution Services).
Traill, W. Bruce (2006), “The Rapid Rise of Supermarkets?”, “Development Policy Review” 24 (2), pp. 163-174.