Published on The Trade Post

Survey of laws helps African countries remove hurdles to trade in services

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Woman working call center in Africa

Policymakers have traditionally focused on manufacturing-led development as the means to improve incomes and reduce poverty. But services are now taking center stage.

Services account for about half of the workforce in low and middle-income economies, up from about 40 percent in the 1990s. That increase has almost offset the decline in the share of workers in agriculture. The share of workers in manufacturing, meanwhile, has remained almost unchanged.

Services – ranging from transport and telecommunications to health and education – generate more than two-thirds of global GDP, create the largest number of jobs, and attract more than three-quarters of foreign direct investment.  They account for a predominant share of women’s employment and a large share of small firm activity.

Increasingly, services are delivered across borders, and trade in services is becoming a key path for development – think India’s IT sector. Nevertheless, many countries retain multiple restrictions on cross-border trade in services, investment, and consumer and labor mobility.

Before such barriers are removed, they must be identified. That is what the World Bank and World Trade Organization (WTO) have done in conjunction with the secretariat of the African Continental Free Trade Agreement (AfCFTA) and with the financial support of the  Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the European Union, and the International Trade Centre (ITC).

Identifying restrictions on trade in services is difficult because unlike tariffs on goods, they are embedded in domestic laws and regulations that pursue legitimate public policy objectives. For instance, to prevent money laundering, many countries may require financial institutions to comply with a set of reporting requirements. Such measures in themselves do not hinder trade in services. However, they would become a barrier if  applied only to foreign financial institutions on the mistaken assumption that the nationality of the service providers would be relevant for anti-money laundering controls.

The project to map restrictions on trade in services in all 54 AfCFTA signatories is the biggest undertaking of its kind in terms of the number of countries audited  and the depth of the information collected.  The exercise entailed examining all domestic laws and regulations in each country. The extent to which each law or regulation impedes trade can then be measured using the World Bank/WTO Services Trade Restrictiveness Index.

For the first time, African countries will be able to undertake a sector- and measure-specific dialogue with their stakeholders and examine whether there are less trade-distortive ways to pursue legitimate public policy objectives while promoting progressive trade liberalization. The project is part of the AfCFTA’s larger effort to reduce trade barriers among African countries and so spur economic growth.

At the beginning of AfCFTA trade in services negotiations in 2018, only a handful of countries had undertaken such an exercise; and for those that had, data were available for only a few sectors and only until 2012. This lack of data is precisely why most African countries do not appear in widely used indexes measuring the level of openness of trade in services and investment.

Services are services traded in many ways. International tourism – including travel to get schooling or medical care -- is the world’s third-largest export, accounting for about 30 percent of global trade in services  and contributing 10.4 percent of GDP and one in 10 jobs worldwide in 2019.

Services – typically professional services like financial consultancy or tele-medical advice – can also be transmitted digitally across borders. And services are traded when companies in one country invest in another and when workers move abroad to take temporary jobs.

Services also go into the making of goods and other services  – for example in the form of research and development, or design and marketing – and can add a lot to the final value of the product. In fact, more than a third of the value-addition of exported manufactures comes from the services that have gone into them.

Productivity growth in services in developing countries has outpaced that in high-income countries. In Sub-Saharan Africa, productivity growth has been higher in services than in manufacturing.  Furthermore, the share of services trade in total trade  in the region  has increased, accounting for approximately 17 percent in 2021.

The database of regulatory restrictions on services trade in Africa was released last November at the AfCFTA Summit in Niamey, Niger.


Roberto Echandi

Global Investment Policy Lead

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