Market reforms that permit private sector participation and competition in the natural gas industry directly promote growth in international trade in services, reports the U.S. International Trade Commission (ITC) in its publication Natural Gas Services: Recent Reforms in Selected Markets.

The ITC, an independent, nonpartisan, factfinding federal agency, completed the investigation at the request of the United States Trade Representative (USTR). The ITC report examines the nature and extent of natural gas industry reforms in Argentina, Australia, Brazil, Canada, Korea, Japan, Mexico, Spain, and the United Kingdom. Following are highlights of the report.

• Reform programs undertaken by different countries are broadly comparable. By encouraging private participation, limiting market power of incumbent firms, and guaranteeing nondiscriminatory access to common facilities, these programs can create an environment conducive to new market entrants and vibrant competition. The result of reform can be seen in the expansion of customer choice and the development of trading markets for natural gas, transportation capacity, and gas-related financial instruments. Anecdotal evidence suggests that reforms have also resulted in price declines and performance improvements.

• At the international level, regulatory reform creates new opportunities for private firms to participate, either through direct investment in foreign natural gas transmission, distribution, and marketing firms, or by providing marketing, risk management, and related services on a cross-border basis. In trade terms, these new business prospects constitute new market access opportunities.

• Although reform programs have generally succeeded in introducing competition, controlling the market power of incumbent service providers and implementing effective, nondiscriminatory third-party access to common pipelines have proven to be enduring impediments to competitive market development.

• Few impediments appear to apply specifically to foreign firms. The general uniformity of treatment between foreign and domestic firms may be explained by the fact that regulatory reform programs are essentially intended to facilitate entry by any and all potential new market participants. In some cases, investment from foreign firms may be an essential element to support competitive market development. Consequently, imposing impediments selectively on foreign firms would appear to be counterproductive.

• The prevailing trend appears to suggest that the market for natural gas will continue to expand globally and that the competitive market model will be adopted by a progressively larger group of countries. As a consequence, international trade and investment in natural gas services will likely continue to expand, resulting in broader significance for trade rules such as those contained in the General Agreement on Trade in Services of the World Trade Organization.

Natural Gas Services: Recent Reforms in Selected Markets (Investigation No. 332-426, USITC publication 3458, October 2001) will be posted in the Publications area of the ITC Internet site at www.usitc.gov. A printed copy may be requested by calling 202-205-1809 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street, SW, Washington, DC, 20436. Requests may also be made by fax to 202-205-2104.

ITC general factfinding investigations, such as this one, cover matters related to tariffs or trade. The investigations are generally conducted at the request of USTR, the Senate Committee on Finance, or the House Committee on Ways and Means; the ITC may also self-initiate investigations. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public, unless they are classified by the requester for national security reasons.