Trade |  Sweden’s international image is that of a free-trade-friendly nation. But that openness does not apply to the service sector, according to a scrutiny of the WTO’s latest free trade rounds.

“It’s strange that the service sector is not applying one of the most effective methods ever: trade. Sweden’s swelling protectionism in trade politics implies enormous losses,” says Fredrik Erixon, economist at the Brussels-based think tank European Centre for International Political Economy (ECIPE).

His conclusion that Sweden is becoming increasingly protectionist will surprise many. But for the service industry, and particularly businesses traditionally regarded as “non-tradable”, it is reality.

“Looking at the World Trade Organisation’s latest free trade rounds, we see that, of the old EU member countries, Sweden has made least commitments where the service sector is concerned,” says Erixon.

Sweden has done nothing to ease the establishment of foreign-owned hospital and medical care units, or to apply the WTO principle of not favorising local actors to the detriment of foreign ones. In negotiations, the Swedish standpoint has often been that many service industries should not be affected by trade liberalizations.

The protectionist attitude goes for the entire service sector but the strongest opposition to increased trade exchange seems to be for sectors characterized by a strong public presence and management — primarily the health and education sectors.

Erixon believes the opposition is largely political.

“And the domestic-market-based service sector seems to have a sort of ‘protectionist instinct’ since many apparently believe there’s nothing to gain by opening up the sector. The telecom sector can be reformed but for health care, for example, the answer’s no,” he observes.

Another reason is that trade in services also implies more liberal rules for the movement of labour across national borders.

“The monopoly-structured labour market in Sweden and the strength of the unions make this a sensitive and controversial issue in Sweden,” says Fredrik Erixon.

But other service industries should be liberalized too, he believes, not least to increase the mobility of the work force. There is huge potential in services directly to private individuals: legal services, economic advice and domestic services.

“That sector hasn’t grown at all over the last ten years, since most people haven’t got the money,” says Erixon.

Pär Krause