2019 – Posted in: Daily News – Tags: OECD, Services Trade Restrictiveness Index, STRI

SERVICES TRADE RESTRICTIVENESS INDEX (STRI)

For: Preliminary & Mains
Topic covers: STRI, India’s stand on Issues & Problems, Solutions & development of new methods, OECD

News Flash

India has found problems with the current method under which the Organisation for Economic Cooperation and Development (OECD) ranks countries based on their services trade policies, indicating the outcomes are biased and counter-intuitive.

The 2018 edition covers a total of 45 economies (36 OECD and the rest non-OECD) and 22 sectors.

Issues and Problems

The OECD index has a large number of problems associated with it, including some significant design issues that render it impractical for use, for example, the index seems to show the Indian services sector as one of the most restrictive, particularly in policy areas like foreign entry. This seems surprising as since 1991, the one area that has seen maximum liberalisation in India is FDI.
There are both theoretical and empirical inconsistencies in the OECD methodology. For example, change in regulatory measures in one policy area can lead to dramatic changes in the STRI in another policy area which is not very useful for policy purposes.
The data seems to have been generated by rather arbitrary procedures and reflects a developed country bias.

New methodology

In order to rectify this, OECD designed a new way of measuring restrictiveness in the services trade that would be more robust and would not have a bias either for developed or developing countries.
For this India approached several developing countries during recently-concluded WTO Ministerial talks held in New Delhi. It has also approached South Africa, Indonesia, China, Turkey and Brazil.

Services Trade Restrictiveness Index (STRI)

It was launched in 2014.
It is computed by the Organisation for Economic Cooperation and Development (OECD).
It purpose is to rank countries based on their services trade policies.
STRI indices take the value from 0 to 1, where 0 is completely open and 1 is completely closed.

Organisation for Economic Cooperation and Development (OECD)

It is an intergovernmental economic organisation with 36 member countries, founded in 1961 to stimulate economic progress and world trade.
Most OECD members are high-income economies with a very high Human Development Index (HDI) and are regarded as developed countries.
In 1948, the OECD originated as the Organisation for European Economic Co-operation (OEEC), led by Robert Marjolin of France, to help administer the Marshall Plan (which was rejected by the Soviet Union and its satellite states).
In 1961, the OEEC was reformed into the Organisation for Economic Co-operation and Development by the Convention on the Organisation for Economic Co-operation and Development and membership was extended to non-European states.
The OECD’s headquarters are in Paris, France.

Source: The Hindu

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