Despite the postponement of the long-awaited WTO Twelfth Ministerial Conference (MC12), on 2 December, negotiations for an Agreement on Domestic Regulation in Services were concluded. This acts as a first step in showing that the WTO can still deliver and respond to modern business challenges.
What has been announced?
Negotiators reached an agreement on a Joint Statement Initiative (JSI) on Domestic Regulation in Services – a plurilateral agreement involving 67 WTO members (accounting for over 90% of global services trade). JSIs differ from multilateral agreements, seeking to reach consensus among like-minded partners. As the world’s second-largest services exporter, the UK has played a key role in driving consensus. It is important to note, however, that this agreement will also benefit all WTO members.
The agreement, which was launched at the 11th Ministerial Conference in Buenos Aires in 2017, will make the domestic processes regulating the authorization to supply a service clearer, more predictable and more transparent and will ensure they do not unnecessarily restrain trade. Key elements of the agreement include:
- Countries will be required to publish information about compliance requirements and authorisation procedures, and set timeframes for processing applications;
- The number of competent authorities deciding on authorisations will be streamlined;
- Authorisations must not discriminate on gender grounds (a first for a WTO agreement).
A leading business voice behind trade in service
Ahead of the G7, CBI hosted the B7, bringing together the business federations of the G7 countries to set out recommendations to G7 trade leaders. The B7 called on G7 leaders to put its political weight behind securing an agreement on the Joint Statement Initiative (JSI) on services domestic regulation in order to rebuild trust in the WTO and reduce barriers to trade in services.
What will this mean for business in practice?
Services already make up 55% of global trade, and are growing faster than goods. One recent report projected that the post-pandemic value of international trade in services would rise from $6.1trn in 2019 to $8.0trn by 2025, an increase of almost one third (31%) in the value of global trade flows over this period1. Nevertheless, while growing faster than trade in goods, trade in services faces more obstacles. The 2019 WTO World Trade Report found that the costs of trading services are almost twice as high as trade costs for goods, due to regulatory divergence and lack of transparency.
However, these new rules will make it easier for businesses of all sizes, particularly those in the financial services and tech sectors, to trade internationally, by reducing trade barriers most often experienced by services exporters.
The real impact on business:
- reduced costs for UK businesses (including compliance costs)
- increased predictability and transparency in technical standards, licensing and qualification requirements and procedures
- removal of unnecessary administrative processes that can act as barriers to market access
What happens next?
WTO members aim to bring the new rules into force in 2023.
However, the impact will be bigger than just this. The agreement could pave the way for enhanced provisions on services trade in more free trade agreements, as the UK has already been promoting in its agreements with Japan, the EU and Australia.
Finally, as the first successful WTO services negotiation in years, this agreement marks a first step in showing the WTO can deliver, and ultimately in driving a reformed and rejuvenated WTO. CBI is ramping up its efforts across WTO negotiations – check out more detail here and get in touch with Kristy.Sandino@cbi.org.uk to have your say in shaping CBI’s voice at the multilateral level.