Opening up Trade in Services: Key for Tourism Growth

Tourism is one of the world’s largest and fastest-growing industries and its importance for economic development is widely acknowledged. What makes tourism different from many other services is that the supplier stays where he is, and the tourist comes to him rather than the supplier taking his services to the consumer. Tourism can thus play a key role in poverty alleviation, bringing jobs for unskilled or semi-skilled workers in hotels, resorts and at cultural sites, as well as encouraging job creation in supply industries.

These are all critical contributors to growth in developing economies. But if tourism is to offer a sustainable path to poverty alleviation, policies are needed to ensure that the benefits are shared and spread to poor communities, and that measures are taken to minimise the adverse impact of tourism on the environment.

The importance of the tourist sector is reflected in the relatively liberal environment currently in place in most countries. Nearly 130 World Trade Organization (WTO) members have made commitments to open up their tourist sector, more than for any other service sector, reflecting a desire to expand tourism and attract foreign direct investment.

But there is still a great deal of scope for developing countries to expand tourism and the opportunities it offers for socio-economic development. One factor restricting such growth is a lack of adequate services and infrastructure, such as transport, telecommunications, financial services, or electric power and sewage treatment facilities. Any country wanting to boost its tourism industry also needs to be able to build hotels, provide an adequately educated and trained workforce, and advertise for tourists.

Opening up markets to trade in services and investment, could substantially contribute to the development of tourism. But any market opening needs to be properly designed and implemented, taking account of the social and environmental impact, if sustainable tourism and growth are to be achieved.

This Policy Brief looks at the importance of market reforms in services for tourism development.