Trade liberalization in services and developing countries

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The Central American Free Trade Agreement (CAFTA) between the USA and Central America has been one of the most discussed trading issues of this region for quite some time. In this study Benjamin Hauck analyzes the service dimension of CAFTA and examines the challenges and opportunities which it entails on El Salvador, Guatemala and Honduras. CAFTA’s principal merits are seen to be the establishment of a binding legal framework which serves as a lock-in-mechanism of previous reforms and the initiation of a broad public discussion about the competitiveness of the region. In the author´s opinion the range of promising service exports to the US is severely restricted by the insufficient qualification of the region’s workforce which often lacks the required professional expertise and English skills. In the financial sector CAFTA consolidates prior liberalization and necessitates further strengthening of the regulatory and supervisory authorities of the financial system. The study is addressed to decision-makers in development assistance in the region and to any reader who is interested in getting an overview of development-related aspects of trade liberalization in services in general.