Services trade policies: still restrictive, but shifting in surprising ways

Services - spanning finance, transportation, health care, and tourism - power modern economies. They generate more than  two-thirds of global GDP, employ the largest share of workers, and create most new jobs, especially for women and young people. Yet despite the critical role they play, many policies regulating services trade remain restrictive, and reform paths vary significantly across countries. Identifying and understanding how open or restrictive these policies are today, and how they are evolving, is key for any country seeking to boost competitiveness and accelerate growth.
 

How Restrictive are Service Trade Policies today?

The latest Services Trade Policy Database (STPD) and the Services Trade Restrictions Index (STRI), jointly developed by the World Bank and the World Trade Organization (WTO), offer the most comprehensive picture to date of services trade policy. Covering 134 economies and 34 services subsectors, the STRI measures the restrictiveness of services trade policies from 0 (completely open) to 100 (completely closed). The headline findings are:

• The global median STRI is 47, indicating that services trade is still relatively closed.
• High-income countries’ STRI scores tend to cluster at lower restrictiveness (around 40)
• LMICs’ scores are higher across many service sectors.
• Restrictiveness varies widely by sector and region, with transport, professional services, and financial services facing higher barriers, particularly at entry and in operations.

These differences reflect diverse regulatory approaches, institutional capacity, and development priorities.
 

Trends over Time: The Tide Has Turned

Recent analysis comparing services trade policies for 69 economies in 2016–2022 with the post–Great Recession period (2008–2016) reveals a shift. While the first period was characterized by sector-specific liberalization by many high-income economies, the most recent period shows a liberalization driven my LMICs, particularly Myanmar, Nigeria, Tunisia, and the Philippines -  which have progressively liberalized their services trade policies across all broad sectors and several specific subsectors, including commercial banking, legal, and maritime transport.

In contrast, several high-income countries - including Luxembourg, Panama, Singapore - stabilized or even tightened their services trade restrictions. Much of this restrictiveness is largely driven by horizontal measures that apply across all services sectors, rather than sector-specific rules.

Interestingly, while advanced economies have become more restrictive, the magnitude of liberalization among LMICs has generally been larger.

Figure 4.2 illustrates these contrasting trends between the two periods.

Channels of trade: changes across the four modes of supply

Part of this shift also reflects changes in policies across the various channels through which services are traded:

• Cross-border delivery (mode 1): Restrictions on cross-border data flows have increased across all income groups. Initially concentrated in high-income economies, these measures are now being adopted more rapidly by middle-income countries.
• Consumption abroad (mode 2): No major cross-cutting shift is highlighted beyond the broader trend analysis, but it remains one of the four key channels tracked.
• Commercial presence via foreign direct investment (mode 3): Lower-middle income economies have either liberalized or maintained their policies to attract more foreign direct investments. By contrast, high-income economies have substantially expanded investment screening, driven largely by geopolitical concerns.
• Temporary movement of people (mode 4): Middle-income economies have generally eased quotas and labor market tests for foreign workers in services sectors, whereas high-income economies have significantly increased restrictions.
   

Converging to a New Equilibrium

These shifts over time have also altered the broader global pattern of convergence and divergence in services trade policy. Beginning in the 1990s, high-income economies led the liberalization of key backbone services such as telecommunications, finance, and distribution. Over time - especially between 2008 and 2016 - many LMICs followed a similar path, resulting in policy convergence towards greater openness in these sectors. However, convergence was not universal: in more regulated sectors like transport and professional services, reforms were driven mainly by high-income economies, resulting in policy divergence rather than alignment.

The more recent picture, with LMICs liberalizing across a wide range of services and high-income countries stabilizing their policies or introducing new restrictions, is producing new form of global convergence in services trade policy, though not necessarily toward greater openness. For LMICs, liberalization continues to create opportunities for diversification, competitiveness, and deeper participation in global value chains. Meanwhile, new restrictions in advanced economies highlight growing concerns about security, privacy, and investment.
 

Why this Matters: Better Data, Better Policy

These shifts toward a new policy equilibrium come into focus only with data that track services trade policies consistently over time. The expanded coverage and historical depth of the STPD and STRI make it possible to benchmark across countries and sectors, track reform efforts, and quantify how services trade policy stances are evolving. In a field where regulations are complex and often opaque, comparable, publicly available information allows policymakers and researchers to benchmark policies, monitor reform efforts, and better understand the implications of changing services trade regimes in an increasingly interconnected global economy.