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OECD: 21st Century Trade Agreements & Regulatory Coherence

In the past, services markets were largely local and countries mostly worked out their regulation without consideration for how other countries regulate. As a result, an abundance of different regulatory measures and systems exist across countries and sectors.

Technology and the cost and convenience of travel have brought most services onto international markets. With this development, the plethora of regulatory approaches and systems that is in place to solve the same problems has become an important constraint the effective and efficient international operations on firms.

To reduce the cost of international operations, regulatory cooperation in various shapes and forms has taken centre stage in trade and investment negotiations. Such agreements can substantially reduce trade costs and stimulate trade in services. However, regulatory harmonisation brings by far the largest gains when the harmonizing countries are relatively open to foreign trade and investment. Where significant barriers to services trade still exist, bringing them down is a prerequisite for regulatory cooperation to make a substantial difference for businesses.