Technology Uncertainty and Incompleteness in Trade Agreements: Reflections from the Design of India’s Bilateral Agreements Covering Services
| Date | 01 August 2021 |
| DOI | 10.1177/0015732520981511 |
| Author | Tanu M. Goyal |
| Published date | 01 August 2021 |
| Subject Matter | Articles |
Technology Uncertainty
and Incompleteness in
Trade Agreements:
Reflections from the
Design of India’s
Bilateral Agreements
Covering Services
Tanu M. Goyal1
Abstract
International trade agreements are incomplete contracts. The international envi-
ronment is non-stationary, and technological progress affects both the nature
of services and modes of service delivery. This creates uncertainty about future
developments in technology-based services. In the presence of transactions costs
and due to limited foresight, it is difficult to specify all contingencies within trade
agreements ex ante, resulting in contractual incompleteness. This article investi-
gates the design of India’s services agreements to assess the approach followed
while listing the ex ante commitment and its implication on technology-based
services. It also discusses the ex post mechanism under these agreements to
address the gaps in the commitments with respect to new services, and the
enforcement mechanism to facilitate the inclusion of these services. It is found
that India’s bilateral agreements leave the inclusion of services that may not be
technically feasible, ex ante, at the discretion of the trading partners, ex post.
Some of India’s agreements also institute a governance mechanism for facilitat-
ing this inclusion. The article argues that there is a need for addressing the issue
of technology uncertainty both at an international-trade-policy level and under
bilateral agreements. Internationally, efforts are underway for a technology-neutral
classification of services. Bilateral agreements must include a robust mechanism
Article
1 Indian Council for Research on International Economic Relations (ICRIER), New Delhi, Delhi, India.
Corresponding author:
Tanu M. Goyal, Indian Council for Research on International Economic Relations (ICRIER), New Delhi
110003, India.
E-mail: tanu31@gmail.com
Foreign Trade Review
56(3) 322–340, 2021
© 2021 Indian Institute of
Foreign Trade
Reprints and permissions:
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DOI: 10.1177/0015732520981511
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Goyal 323
within the scope of the Agreement for filling gaps that may arise with techno-
logical advancements. For furthering the objective of trade agreements, these
mechanisms must be backed by sound governance structure.
JEL Codes: L80, L84, L86, F13, K33, F53, F55
Keywords
Technological uncer tainty, international trade, preferential trade agreements,
WTO, GATS, international law and economics
Introduction
The linkages between international trade and technological progress are well
established and widely acknowledged (World Trade Organization [WTO], 2018).
It is argued that international trade and globalisation are driven by advances in two
connective technologies, namely transportation and transmission of information
through communication and information technology (Baldwin, 2011). From the
time of the first industrial revolution in the mid-eighteenth century till the fourth
(World Economic Forum [WEF], 2019), globalisation has also moved four steps
ahead to reach Globalisation 4.0.1 The current wave of globalisation is associated
with progress in the digital technologies and their impact on the transformation of
production of not only goods but also services, such as health, transportation, com-
munication, distribution and energy services, among others (WEF, 2019).
Technological progress changes the nature of trade in services, both in terms of
its components and modes of services delivery. Technological progress often
results in the emergence of new working methods and workplace organisations
(Baldwin, 2016). However, existing studies emphasise that technological disrup-
tions race ahead of the regulatory regime required to further international coop-
eration (WEF, 2019), which may result in non-cooperative behaviour among trade
partners. While on the one hand technology is facilitating greater integration, on
the other, there are emerging challenges in the form of regulatory divergences
across the world.
To facilitate trade and economic cooperation and overcome term-of-trade
externality, countries enter into international agreements (WTO, 2018). Trade
agreements set out the broad rules governing trade relations between the signato-
ries and are considered as a formal expression of intergovernmental cooperation
(Grossman, 2016). However, most trade agreements are designed to bind the sta-
tus quo or the prevalent regime. Compared to this, rules and regulatory measures
related to services continue to evolve with technological progress and the emer-
gence of new services. Thus, one manifestation of the incompleteness in the trade
agreements is that they say very little about the standards for products that may
arise in future (Battigalli & Maggi, 2003). This creates an uncertainty regarding
the inclusion of new services into trade agreements, especially those that are
driven by changing technologies.
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