Waiting on a waiver - what the WTO's new services initiative could mean for LDCs

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Workers sort, repack, and ship goods in Al Obaied Crop Market, North Kordofan, Sudan. Source - Salahaldeen Nadir/World BankThe World Trade Organization (WTO) Trade Facilitation Agreement (TFA) has been getting a great deal of attention since it was finalized at the 2013 Bali Ministerial Conference– and rightly so. As we’ve written before on this blog, trade facilitation is a powerful driver of increased competitiveness and trade performance in developing countries.
 
But last month, the spotlight at the WTO was on another important decision from Bali—how to maximize the impact of a waiver to support exports of services from Least Developed Countries (LDCs).

At a meeting on February 5, around 30 WTO Members, covering most major export markets for LDCs, set out in concrete terms what preferences they could provide. The preferences cover a wide range of services and modes of supply, as well as regulatory issues that LDCs have identified in a “collective request” to other WTO Members. 

If these commitments are translated into formal changes in rules, they would provide additional legal certainty to LDCs’ service providers wanting to enter new markets or grow their exports. Specific measures like increased duration of visas for service providers or reduced fees could give LDCs a competitive boost.
 
As important as the granting of preferences could be, LDC exporters will need to be competitive in a global market against the worlds’ leading service providers.  They will also need to be able to meet requirements like educational qualifications, quality standards, and other regulatory conditions in their target markets.
 
Recent work and experience from the World Bank Group suggests a number of priorities in addressing these requirements.
 
A first priority must be to identify barriers to services trade and assess the full range of constraints on the competitiveness of LDCs’ services sectors. The issues covered in the LDC collective request at the WTO are a start, but a great deal more needs to be done.
 
A range of tools developed by the Bank Group can play a role here. The recently released Services Competitiveness Toolkit, for instance, provides a framework for analyzing competitiveness issues and identifying export potential. The Regulatory Assessment on Services Trade and Investment (RASTI) toolkit complements this by providing guidance on how to assess and reform the regulatory environment for services. It has already been used in a number of LDCs – including Cambodia, Zambia, and Liberia – to pave the way for reform.
 
The Bank Group also maintains a global Services Trade Restrictions Database (STRD), which covers applied services trade policies and regulations in over 100 economies, including 15 LDCs and their main export destinations in Africa, Asia, Europe and the Americas.
 
Of course, identifying constraints and pathways to reform is only one step – bringing about lasting change to address them is an even greater challenge.
 
Bridging analysis and implementation, we have found that Services Knowledge Platforms (SKP) can be a useful way of driving reform and integration at both country and regional levels. These SKPs bring together policymakers, the private sector, and other stakeholders to identify and reduce restrictions to trade.
 
For example, in Eastern and Southern Africa, the World Bank helped develop an SKP to support intra-regional trade in accounting, engineering, and legal services. Countries in the region are now in the process of drafting a mutual recognition agreement in order to increase capacity and ease the movement of professionals in the region.  
 
Beyond this, LDCs are likely to require significant assistance to address a range of supply-side constraints. Some of the priorities for longer-term reforms include:

  • Building the capacity of services sector institutions, including regulatory bodies
  • Improving transparency of services regulations at the national and regional level (including through SKPs, but also tools like Trade Information Portals)
  • Upgrading information and communications technologies and other essential infrastructure
  • Increasing domestic skills in export-oriented services
  • Easing wider business climate constraints that prevent domestic and foreign investment in the services sector

 
Addressing these priorities will help boost services exports. However, services are also critical inputs for goods exports, and help determine overall economic competitiveness.
 
The next step in the waiver process in Geneva will be a meeting of the Council for Trade in Services at the WTO on March 19. Members have set the target of notifying preferences formally by July 31.
 
This momentum is encouraging. It will need to be coupled with a long-term effort to ensure that LDCs can take advantage of the preferences offered. The World Bank Group will continue to be actively engaged in this process, helping LDCs maximize the competitiveness of their services sectors to take full advantage of the waiver.

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