By Swati Sharma, independent trade law and policy professional; and Neil Balchin, Economic Adviser, Commonwealth Secretariat, London
Services is the fastest growing segment of international trade. Yet, while service exports from least developed countries (LDCs) grew by 9% in 2021, they still accounted for less than 1% of global services trade.
Recognising the potential for trade in services to create jobs and accelerate development, the World Trade Organisation (WTO) adopted a Waiver in 2011 to support LDC service suppliers.
In addition to non-market access preferences, the Waiver enables developed and developing countries to grant direct-market-access preferences to LDCs that would otherwise be inconsistent with the most-favoured-nation rules of the WTO’s General Agreement on Trade in Services. In response, LDCs collectively identified their export interests under the Waiver.
Over a decade later, what has been achieved?
As of June 2023, 51 economies, representing almost 90% of global services trade, have provided over 2,000 preferential offers to LDCs under the Waiver (Figure 1) through 25 notifications to the WTO. These cover a range of services across all modes of supply.
Figure 1: Market access preferences for LDCs by sector and mode of supply, June 2023
(click to enlarge)
Source: Sharma (2023)
However, the practical impact of the Waiver has been limited for three main reasons:
- Complex regulatory regimes and quotas on specific modes of service supply (imposed by preference-granting countries) affect the extent to which LDCs can utilise these opportunities. A lack of awareness and understanding of the preferences among LDC service providers compounds this challenge.
- Many LDC service suppliers have limited capacity to meet standards and quality requirements for accessing markets.
- Some of these preferences provide little or no real value to LDCs. Many do not satisfy their demands in their areas of export interest, and some are not offered exclusively to LDC services and service suppliers.
Delivering more commercially meaningful preferences and support
The Waiver could have a greater economic impact for LDCs if it were to offer improved market access and more relaxed regulations, and if it was backed by capacity building for their services and service suppliers.
Preferences and support in priority export sectors for LDCs, addressing both general and market-specific barriers, would be likely to provide more commercial value.
With these factors in mind, LDCs, preference-granting countries, and other development partners should prioritise the following to improve the implementation and operationalisation of the Waiver:
- Collect accurate and reliable data on LDCs’ services trade, including across sub-sectors, modes of supply and trading partners.
- Provide capacity building and technical assistance to help LDC governments design and implement more coherent and development-oriented domestic policies and regulations for services. Service suppliers in LDCs also need assistance to comply with market access requirements in preference-granting countries.
- Improve awareness and understanding of preferences and how to use them effectively, including by sharing best practices.
- Monitor and peer review the implementation of preferences and unilateral support to assess their relevance and effectiveness against the needs expressed by LDCs.
* This blog is based on an in-depth publication available here: Improving the Operationalisation and Implementation of the WTO’s LDC Services Waiver: A Commonwealth Perspective. The authors are grateful to Salamat Ali, Brendan Vickers and Collin Zhuawu for helpful comments and suggestions on an earlier draft.