MINISTRY OF FOREIGN AFFAIRS OF REPUBLIC OF UZBEKISTAN
UNIVERSITY OF WORLD ECONOMY AND DIPLOMACY
Faculty: International economics and managment
“International economics” department
Course work
Theme : “Foreign experience of influence WTO accession on country's tourism
sector”
Student: Abdumalikova Farangiz
Group 0-6a-19
Academic adviser: Ibrokhim Ilkhomjonov
Tashkent-2022
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Content
Introduction ................................................................................................................ 3
Chapter 1 Impact of WTO on Growth and Development of International
Tourism ......................................................................................................................... 4
Chapter 2 Georgia`s tourism industry ...................................................................... 9
Chapter 3 .................................................................................................................... 14
Conclusion .................................................................................................................. 16
References .................................................................................................................. 17
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Introduction
Today, all economies, small or big, are becoming interdependent due to globalisation,
and tourism contributes significantly to this process. Despite travel and tourism being
severely impacted by the global coronavirus (COVID-19) pandemic that began in
early 2020, both contribute positively to the global GDP.
The paper examines the connections and influence of joining the World Trade
Organization, mostly known as the General Agreement on Services (GATS), on a
small country's tourism industry, which makes it actual as well as Uzbekistan has
already applied to join WTO.
The object of research is the tourism sector of small economies after joining the
World Trade Organization, challenges and opportunities that every state may face
after WTO accession and solutions to make this process productive, while
the subject will be parameters of GATS/WTO, UNWTO, and small states'
development.
The goal of this work is to analyse the benefits and losses of the tourism industry of a
small country from joining the World Trade Organization, afterwards, to give
theoretical and practical recommendations for the Ministry of Tourism of Uzbekistan
in the field of tourism development within the framework of membership of the
World Trade Organisation.
The logical deduction will be tested by the statistical analysis method and supported
with a conclusion during the research.
The paper consists of an introduction part, a first chapter, which will profoundly find
policies and rules of WTO in the tourism industry, a second chapter is a case study by
choosing a small country, and a third chapter that makes conclusions about
Uzbekistan's accession to the World Trade Organisation.
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Chapter 1 Impact of WTO on Growth and Development of International
Tourism
1.1. Economic significance of international tourism
Tourism is one of the most studied from various aspects of the discipline; being a
rather complex and sensitive component of the economic system, the tourism sector,
among other sectors of the non-productive sector of the economy, is exposed to
external factors. International tourism impacts the development of individual
countries and the global economy. At a particular stage of economic development,
manufacturers and travel services appeared when the need for travel increased
dramatically and led to the formation of a special kind of product – tourism.
Consequently, tourism has emerged as a commodity that can be bought and sold on
the consumer market and is realized in tangible and intangible services. A peculiar
advantage of tourist services as a commodity is that a significant part of these
services is produced with minimal costs on the spot and, as a rule, without using
foreign currency. Tourism is not a commodity of the first necessity of life; therefore,
it becomes an urgent need of a person only at a certain level of income and a certain
level of wealth in society. The tourism industry is one of the most dynamically
developing forms of international trade in services. International tourism provides the
highest export revenues in the world and is a crucial factor in ensuring the balance of
payments for most countries. Tourism has become one of the most critical factors in
job creation worldwide. Tourism development stimulates massive investments into
the infrastructure, most of which goes to improving the quality of life of both the
local population and tourists. Some of the new jobs and enterprises in tourism are
created in developing countries, which allows balancing the opportunities for
economic growth, and also contributes to the consolidation of residents in rural areas,
preventing their outflow to overpopulated cities. Inter-cultural ties and personal
friendships that arise in tourist exchange are essential factors in improving
international understanding and strengthening peace between the peoples of the
globe.
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International tourism performs several vital functions:
- International tourism is a source of foreign exchange earnings for the country and a
means to ensure employment;
- International tourism contributes to the diversification of the economy by creating
industries serving the tourism sector.
The tourism industry is a set of production, transport and trade enterprises that
produce and sell tourist services and goods of tourist demand. This includes hotels
and other accommodation facilities, means of transport, catering establishments,
enterprises that produce souvenirs and other goods of tourist demand.
Organizational and economic opportunities for developing tourism on an
international scale have created favourable conditions for developing organizational
and economic processes in individual countries.
For many of them, international tourism is:
- a factor stimulating the growth of the balance of payments;
- a powerful incentive for developing and diversifying many industries (enterprises
and individual industries serving the tourism sector) are emerging.
1.2 World Trade organization and General Agreement on Trade in Services
The WTO is based on three international agreements signed by the majority of States
actively involved in world economic relations: the General Agreement on Trade in
Goods (GATT) as amended in 1994, the General Agreement on Trade in Services
(GATS) and the Agreement on Trade Aspects of Intellectual Property Rights (TRIPS).
The closest agreement to the tourism sector is GATS, which will be expanded
furthermore.
In 1984, the United States passed the law "On Trade and Tariffs", which, as the
analysis shows, primarily determined the content of the General Agreement on Trade
in Services (GATS). The specified law set the task – to increase the competitiveness
of the American industry related to trade in services on the world market. It was
necessary to develop international rules, including rules for dispute resolution. The
result of this task, as we know, was the development of the GATS, and the dispute
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resolution rules apply both to the sphere of goods, services and investments (the
"commercial presence" of the GATS, TRIMS).
Article 305 of the Law further stipulated that the purpose of negotiations on services
is to promote the development of trade in services and eliminate or reduce barriers,
including violations of the national regime and restrictions on the establishment and
activities of American companies in third-country markets. Result: One of the goals
of the GATS is to expand trade in services, and WTO member countries are obliged
to guarantee a certain level of access to their market in the service sectors recorded in
their national Lists of specific obligations.
Now, WTO has introduced an agreement on services - GATS, which has the
classification of services, and tourism looks like this:
9. TOURISM AND TRAVEL-RELATED SERVICES
A. Hotels and restaurants (incl. catering) 641-643
B. Travel agencies and tour operators services 7471
C. Tourist guides services 7472
D. Other1
GATS has the following obligations:
(a)General obligations
Most favourite nation (MFN) - due to Article II of the GATS, members are obliged
to immediately and unconditionally provide the services or service providers of all
other members with "treatment no less favourable than that provided to similar
services or service providers of any other country." ;
Transparency: GATS members are required, among other things, to publish all
measures of general application and to establish national reference centres authorized
to respond to information requests from other members2
1
2
MTN.GNS/W/120
WTO
|
Services
-
The
GATS:
https://www.wto.org/english//tratop_e/serv_e/gatsqa_e.htm
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objectives,
coverage
and
disciplines.
(b)Specific commitments
Market access and national treatment: In sectors where market access
commitments are made, measures that a member does not maintain or does not
establish either within the regional division or throughout the territory unless
otherwise specified in its List; In the sectors contained in its List and subject to the
conditions and requirements stipulated therein, each member shall grant to the
services and service providers of any other member, in respect of all measures
affecting the supply of services, treatment no less favourable than that which it
provides to similar domestic services or service providers3.
source: INTRODUCTION TO THE AGREEMENT ESTABLISHING THE WTO
GATS covers service sector as well as tourism, and before joining WTO states have
to schedule their commitments and exemptions. For developing country its crucial to
study each agreement, and make sure that obligatory commitments will help them
grow, while in service sector still country can protect their national industries.
1.3 International tourism impacts international trade.
According to economic theory, the economic effect of the movement of people across
borders is to facilitate the further exchange of goods, that is, traditional exports since
3
1 ARTICLE XVII OF THE GENERAL AGREEMENT ON TRADE IN SERVICES.
https://www.wto.org/english/res_e/publications_e/ai17_e/gats_art17_oth.pdf
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the trip involves the exchange of information of double content: about local products
and the tastes of foreigners. However, while empirical data are well known for
partially related flows, for example, in the case of migration analysis, where it was
found that more extensive bilateral migration networks are associated with more
significant trade flows, the impact of tourism on trade flows has been largely ignored.
The research by R. BRAU AND A. M. PINNA on "Movements of People for
Movements of Goods?" supports the view that tourism is essential for international
trade. In most specifications, the variable of international arrivals was statistically
significant, and the sign of the calculated coefficient corresponded to theoretical
expectations. The influx of foreigners into the country is associated with a specific
increase in exports to the country of origin of foreign flows. There are two possible
explanations behind the results: tourist arrivals are a way for domestic manufacturers
to present their products to foreign buyers, or, in other words, tourists' trips reveal the
tastes of foreign demand. In addition, arrivals also include business trips aimed at
establishing new commercial relations between the countries. Both explanations
interpret the movement of people across borders as a way to maintain the flow of
information needed to increase sales in foreign markets. Is tourism a channel for
creating exports, or does trade affect tourism? According to some previous studies
(e.g., Shan and Wilson, 2001), the first reference is more precise in its interpretation
and more interesting from a policy point of view. Considering aggregate exports and
total tourist flows: the relationship between inbound tourism flows and exports exists,
and it is positive and is a feature of consumer goods.
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Chapter 2 Georgia`s tourism industry
2.1 The Economic Impact of Tourism in Georgia
The economic impact of tourism in this analysis is expressed in terms of its annual
contribution to GDP and the total number of jobs it supports.
This activity can be grouped into three main channels of activity: direct, indirect and
induced. The sum of these three channels creates an overall economic effect.
• The direct impact is due to expenditures within a particular group of sectors (for
example, recreation and transport). This supports the relative share of jobs and GDP
in each sector.
• Indirect impacts are due to the costs of the supply chain, where each directly
affected sector also purchases goods and services as raw materials (e.g. food
wholesalers, utilities) for production.
• Induced impact occurs when workers whose wages are directly or indirectly
generated by travel and tourism spend these wages in the local economy.
Travel and tourism have made a direct contribution of 2 billion US dollars
Georgia's GDP in 2019 and the total impact of 4.4 billion US dollars, including
indirect and induced impacts. Georgia's travel and tourism industry accounted for
25% of the total GDP in 2019.
In 2019, the share of the travel and tourism industry in Georgia
It accounted for 25% of its total GDP, one of the highest rates among the countries in
our analysis of Eastern Europe. The dependence of the Georgian economy on tourism
is greater than that of neighbouring countries Croatia (25%), Albania (21%), Cyprus
(14%), Ukraine (7%), Romania (6%) and Russia (5%).
Employment in Georgia, directly supported by the travel and tourism industry,
peaked at 197,000 jobs in 2018, while total employment due to tourism was 497,000
jobs. Total employment supported by tourism increased by 157% between 2010 and
2019.
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Without intervention, the shock to international travel caused by the coronavirus
pandemic could lead to long-term consequences for the Georgian economy, as
tourism revenues will fall. The loss of Georgia's GDP of more than 3.5 billion US
dollars in 2020 alone will put almost 400,000 tourism-related jobs at risk. Our current
estimates show that the number of jobs supported by tourism has decreased by more
than 75% compared to 2019.
In 2020, Georgia received a total of two million tourists, ranking 80th in the world in
absolute terms. Smaller countries regularly show lower rates than the absolute
number of guests. Comparing the number of tourists with the population of Georgia,
the result is a much more similar picture: with 0.41 tourists per inhabitant, Georgia
ranks 71st in the world. In Western Asia, it ranks seventh.
In 2020, Georgia earned about 586.00 million US dollars in the tourism sector alone.
This corresponds to 3.1 percent of its gross domestic product and approximately 1 per
cent of all international tourism revenues in Western Asia.
On average, each tourist who arrived in 2020 spent about $327.
Development of the tourism sector in Georgia from 1995 to 2020
The following table shows the number of tourists arriving in Georgia annually.
Anyone who spends at least one night in the country, but only lives there for up to 12
months, is considered a tourist. Since the survey included the purpose of the trip,
business trips and other non-tourist purposes of the trip were already excluded. The
number of people passing through the country in one day, such as crew members of
ships or flights, are also only considered tourists in some countries. If the same
person travels back and forth more than once during the same year, each visit is
counted again.
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Source: WorldData.info
The data in the table is given in millions of tourists. The red line represents the
average value for all 18 West Asian countries.
Income from tourism
In 1997, tourism revenues amounted to US$ 75.00 million, or about 2.1 percent of the
gross national product. This corresponded to about 313,000 tourists at the time and
about $240 per person. For 23 years, the country's dependence on tourism has
increased dramatically.
Source: Driving the Tourism Recovery in Georgia
Before the outbreak of the COVID-19 pandemic, sales amounted to $3.55 billion, or
20.33 per cent of the gross national product. Thus, each visitor spent an average of
460$ on their vacation in Georgia. In 2020, tourist receipts plummeted due to the
COVID-19 pandemic. Of the $3.55 billion (2019), only $586.00 million remained.
This is an 83 per cent decrease in Georgia.
2.2 Aftercovid recovery of Georgian tourism with WTO
According to Tourism Economics*, Georgia has already recovered the tourism sector
and prepared two scenarios for the future of tourism in Georgia. In addition,
standards brought by developed countries and high levels of competition between
states also pulled Georgia to a new stage of development in the tourism sector. I
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reviewed the analysis made by Tourism Economics and will share some crucial
points below.
Recommendation 1: Upgrade and expand digital capabilities and skills
In general, the expansion of the digital presence of private sector enterprises will
raise the digital ecosystem of the destination and make it more attractive to potential
travellers.
More broadly, local and national government authorities should consider whether
existing education and training systems are adequate to ensure that future generations
have the right mix of digital skills to thrive in digitally transformed businesses,
including the tourism sector. Governments should also consider whether current
labour market policies support sufficient retraining of existing employees to enable
them to work effectively with the latest digital technologies.
Recommendation 2: Build a consistent brand message through digital collaboration
By building relationships with local tourism stakeholders, destinations need to
develop strategic relationships, if necessary, with travel service providers worldwide
(for example, marketing agencies, information companies, and OTA) to help shape
the brand message and disseminate it. The community of local guides, a collaboration
between GTA and Google, is an example of such a relationship.
Recommendation 3: Secure DMO(Destination marketing organizations) Funding
The Government of Panama, for example, has created a Tourism Promotion Fund,
which provides targeted funding for the promotion of international tourism. The
Tourism Promotion Fund is funded by international passenger service fees at
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Tocumen Airport (Panama City International Airport), contributions from private
companies and donations, and government sources.
Other examples include Brand USA and Colombia's National Tourism Foundation
(FONTUR). Brand USA is a public-private partnership responsible for promoting the
United States among international travellers and funded by contributions from more
than 700 partner organizations, supplemented by fees paid by international travellers
coming to the United States under the visa waiver program. Similarly, FONTUR
manages resources from parafiscal contributions to promote tourism in Colombia.
Contributions include transfers from central government funding, tourism-related
taxes, fees from tourism service providers, donations, funds from sponsorship and
commercial activities, and income from tourism assets owned by FONTUR. For more
information, see the appendix.
Recommendation 4: Utilize data analytics to support decision making
In Singapore, a data analytics platform called the Singapore Tourism Analytics
Network allows users to view visualizations, perform analytics, and derive actionable
insights from tourism data collected from the tourism authority and private operators
in Singapore.
Recommendation 5: Continue to tell stories with the extended reach of digital
platforms
Travellers are still dreaming and ready to travel when it is safe. Therefore, the
Georgian tourism industry should focus marketing efforts on domestic and regional
(Caucasus) travel while safety concerns and restrictions related to international travel
are in place.
Digital platforms can uniquely keep Georgia a preeminent destination, mainly social
media which can connect with consumers authentically and cost-effectively.
Recommendation 6: Adapt to new consumer sensitivities
Consumer traveller behaviour transformed due to the pandemic and will likely
continue to do so even as a new normal is established. Destinations must account for
these new behaviours in their marketing strategy, potentially targeting new markets
and considering additional consumer demographics and psychographics.
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2.3
Chapter 3
3.1 Risks and opportunities for the tourism industry from Uzbekistan's entry
into the WTO
Potential risks from WTO accession. Tougher competition compared to foreign
counterparts. The growth of competition will lead to increased marketing costs for
maintaining market positions on the market, non-compliance with international
quality standards of enterprises and products, and non-compliance with international
industry eco-standards (for inbound tourism).
Tougher competition; potential downside risks in related industries; closure of
enterprises and rising unemployment will cause a decrease in demand for tourism
sector products (in the direction of domestic tourism); threats to small tourism
businesses caused by the emergence of new large participants in the market (hotel
chains, tour operators, etc.) (for domestic and inbound tourism).
Tougher competition due to the need to open the tourist market for foreign
organizers. National tour operators, focused primarily on outbound tourism, will be
forced, unable to withstand competition, to leave the market or turn into their junior
partners or agents; the influx of cheap imports will lead to the closure of a number of
the weakest industries that could not withstand competition and an increase in
unemployment. The closure of enterprises and the growth of unemployment will
cause a decrease in demand for products in the tourism sector (in the direction of
outbound tourism); threats to small businesses (for outbound tourism).
Potential opportunities from WTO accession. "Cheap loans" for further business
development due to the uncontrolled arrival of foreign banks with huge capital and
low-interest rates; foreign insurers can completely capture the insurance market with
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significantly more capital than domestic companies. More favourable conditions for
insurance of tour services (for inbound and domestic tourism).
Foreign operators will be forced to invest in developing national tourism
infrastructure. This should serve as an incentive to attract customers (tourists) of
these operators to Uzbekistan(for outbound tourism).
Despite the prevailing new conditions – modernization of the economy taking into
account globalization processes, tourism continues to be an important sector of the
national economy. In the new conditions, the most effective and efficient way to
solve the identified problems and tasks formulated by the state in the field of tourism
is the development of close cooperation between the tourism sector and the state, i.e.
the use of innovative tools for the implementation of national tourism policy based on
the creation of programs and projects using public-private partnership (PPP)
mechanisms.
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Conclusion
The Georgian experience illustrates that WTO accession and severe economic
arguments based on economic analysis and forecasts require a strong political will
and determination.
In turn, it has a direct positive impact on expanding the country's foreign economic
relations. For countries like Georgia, with relatively short experience in undertaking
independent foreign business activities, the accession process presents an excellent
opportunity for local capacity building in this regard, and particular reference should
be made to the proper use of the various forms of technical assistance provided by the
WTO and its Member States. Particular attention should be paid to the continuation
of the process related to the development of relevant legislation in the country after
accession, intensive exchange of information, constructive dialogue between Member
States and accession countries, staff training and development of all institutions that
have accumulated significant information and events during the accession process.
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References
Brau, Rinaldo and Pinna, Anna Maria, Movements of People for Movements of
Goods? (October 2013). The World Economy, Vol. 36, Issue 10, pp. 1318-1332,
2013 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2336340
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