Geneva: Services are the most dynamic and fastest growing sector of today’s global economy. They represent over 60% of world GDP in value-added terms and more than 50% of employment worldwide. Services also provide critical inputs to other sectors. For instance, transport, logistics, communications or financial services facilitate the functioning of global value chains while research, development or engineering services foster productivity and innovation in all economies. Thereby, services constitute a critical component of a sound, sustainable, and inclusive economic recovery from the COVID-19 pandemic.
However, the ability of service suppliers to engage in trade and the potential of the services sector overall remains constrained by a variety of trade barriers: the cost of trading services is twice as high as that of goods, and regulation-related factors account for more than 40% of these costs.
The Organisation for Economic Co-operation and Development (OECD) estimates suggest that the barriers recorded in the OECD Services Trade Restrictiveness Index (STRI) involve average trade costs between 50% and 250% of export values. Among the obstacles, the lack of transparency of laws and regulations, and pervasive procedural inefficiencies figure prominently.
OECD and the World Trade Organization (WTO) today released a trade policy brief entitled “Services domestic regulation in the WTO: Cutting red tape, slashing trade costs, and facilitating services trade“, highlighting the economic benefits that would result from a new deal on services domestic regulation being finalised by a group of 67 WTO members.
The study finds that annual cost savings in services trade could amount to USD 150 billion globally due to a reduction in red tape and increased transparency, with particularly important gains for financial, business, communications and transport services.
In the services field, many activities require licenses or authorisations to operate. International discussions on services domestic regulation aim to facilitate trade in services by eliminating the unintended trade-restrictive effects of such measures. The study looks at how improved regulatory systems for licensing and authorizing services suppliers would lead to savings.
The 67 WTO members taking part in this initiative represent 90 per cent of world services trade. They are aiming for a successful outcome to be announced at the 12th Ministerial Conference (MC12), which begins on 30 November. The final deal will be applied on a “most-favoured nation” basis, meaning that it will benefit all WTO members.
The study finds that implementing the outcome will:
- improve the business climate: by enhancing the transparency, efficiency and predictability of regulatory frameworks, the new disciplines will address the practical challenges that affect the ability of businesses and suppliers to operate in foreign markets.
- lower trade costs and lead to other trade benefits: annual savings could amount to USD 150 billion globally, with important gains for financial, business, communications and transport services. Moreover, the implementation of the new disciplines would increase the value of services trade and lead to enhanced participation in global value chains.
- facilitate services trade: while an increasing number of “new generation” ambitious trade agreements are being concluded, economies at all levels are also implementing reforms on services trade. Implementing the outcome of the negotiations would ensure that domestic regulatory arrangements can open trade opportunities for services providers, particularly for small businesses.
- generate widespread gains beyond the participants: exporters from all WTO members will benefit from the improved regulatory conditions when they trade with participants in this joint initiative.
– global bihari bureau
