Concept of quotas in the field of services is a recent phenomenon and is still non-standardised. This is explained, amongst others, by the following facts:
1. Use of merchandise and capital transactions itself requires use of some services. Depending upon the situation, none, some or all of them may have to be “purchased” from abroad. Moreover, this situation can vary as between different transactions and countries.
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2. Till recently, inter-country factor mobility was minimal. It was because labour was reluctant to migrate in search of higher wages (although in India Punjab and Kerala are notable exceptions).
Most governments also did not favour international migration of labour unless there were geographical and socio-economic considerations that prompted them to act otherwise, as in the case of Canada.
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Historically, of course, some imperialist powers did arrange migration of labour from India and other places to some countries which were being colonised by them.
Today, the descendants of those migrant labourers have integrated themselves, raised to positions of eminence, and play decisive roles in their adoptive countries, e.g. UK. Mauritius and Africa.
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3. Now times have changed and workers are eager to migrate from one country to the other in search of higher wages and improved quality of life.
At the same time, developed countries need a variety of labour but do not want an unrestricted immigration. Therefore, they make a detailed assessment of their needs and allow a restricted inflow of migrant labour.
4. In recent years, trade in services has grown in both volume and variety. We have already noted its different modes. Factors like trade in technology, machinery and equipment, as also FDI in services, are also contributing to the growth of trade in services.
5. It is noteworthy that the “impact” of importing services via FDI is not easy to assess. Such an exercise presents a lot of conceptual and accounting problems.
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Thus, for example, in its initial stages, FDI improves the balance of payments position of the host country.
However, future payment obligations flowing from FDI depend upon a number of variables like (i) the actual profit earned by foreign investors, (ii) the extent to which they plan to remit back their earnings, and (iii) the laws of the host country.
6. All this means that it is not possible to have a standardised system of determining and allocating ‘quotas’ in the sphere of trade in services, particularly as a means for improving balance of payments.