Services
Air transport liberalization: A world apart
International air transport has traditionally been the subject of extensive regulatory controls. Imagine a world in which prices the number of seats the number of flights the types of aircraft and the cities to be served are all decided by agreements between states in which no third-party competition exists in which strict national ownership rules are applied and in which the only unknown parameter for airlines is the number of passengers who will turn up in the end. This is the “Bermuda II” type of agreement which served as the model for the organization of the post-war international air industry and whose features only partially “eroded” over the years still largely underpin the regulatory framework of the sector.
An introduction to domestic regulation and GATS
International trade in services is governed principally by regulatory measures. Unlike trade in goods border measures in the form of tariffs and quotas are not the main barriers to trade. This peculiarity of services trade is due to the manner by which services are produced and consumed. Due to the intangible and non-storable nature of services suppliers and consumers often have to be in physical proximity to each other for the transaction to be completed. For this reason economists have traditionally considered services to be non-tradable across borders and have paid little attention to it in trade theory.