Members discuss digital and remittance services, MC13 follow-up in Services Week

WTO members explored the cost of cross-border remittance services and the impact of the COVID-19 crisis on ICT and digitally delivered services at two events on 25 and 27 March organized under the Committee on Trade in Financial Services and the Council for Trade in Services respectively. At a Council meeting on 27 March, they followed up on outcomes of the 13th Ministerial Conference (MC13) and previous ministerial conferences and reviewed the participation of least-developed countries (LDCs) in services trade among other issues.


Follow-up to outcomes of ministerial conferences

At the 13th Ministerial Conference (MC13) in February 2024, ministers reaffirmed the importance of work on trade in services. They also took note of the “WTO Response to the COVID-19 Pandemic and Preparedness for Future Pandemics” and encouraged relevant WTO bodies to continue their work in this area. In addition, they reaffirmed their commitment to work towards necessary reform of the organization and reiterated their support for putting the services waiver into practice for LDCs.

Ministers also encouraged WTO bodies to continue work on supporting resilience and disaster preparedness when confronting global and domestic crises, including disasters caused by natural hazards. Furthermore, the MC13 Ministerial Declaration mandates members to continue re-invigorating work under the E-commerce Work Programme, with a particular focus on its development dimension.

Pandemic response: ICT and digitally delivered services in relation to COVID-19

WTO members discussed the impact of the COVID-19 crisis on trade in information and communication technology (ICT) — encompassing telecom and computer services — and digitally delivered services in an experience-sharing session on 27 March. This is part of the WTO response to pandemics work that ministers mandated at the 12th Ministerial Conference (MC12) in 2022.

Discussions underscored that ICT services and digitally delivered services played a crucial role during the pandemic. Because they are traded products and enablers of digital trade, ICT services helped support economic activity and served as an essential communication channel during social distancing. While services sectors that rely on physical proximity between suppliers and consumers were heavily affected by the crisis, services delivered digitally expanded, enabled by ICT networks and applications.

ICT services have experienced the fastest export growth of all services sectors since 2005, with an average annual growth rate of 10 per cent. During the pandemic, global exports of telecommunication, computer and information services grew 39 per cent between 2019 and 2022, outpacing the growth rate of exports in other services sectors. This growth was largely driven by computer services, with exports growing fastest in developing economies and especially LDCs, albeit from a very low base.

Data show that while services trade fell significantly during the pandemic, services that were delivered digitally registered the fastest-growing rate of all international trade segments.

While the pandemic led to increased digitally delivered services, it also exposed technology inequalities globally and domestically. Some speakers emphasized the importance of strengthening ICT infrastructure, including investments in reliable connectivity and universal access. This is particularly essential for LDCs, where access to the Internet is persistently lower. The session underscored the significance of electronic payments in expanding the remit of financial services and supporting public services, while emphasizing the need for robust financial sectors to ensure the resilience of economies to shocks.

The role of ICT services in enabling applications that helped to fight COVID-19 was also underscored, for instance with the introduction of contact tracing, and vaccination and treatment systems. ICT services were also essential in digitising several government services, improving efficiency and facilitating service delivery, notably for micro, small and medium-sized enterprises (MSMEs). The experience of MSMEs showed that the use of digital technologies during the pandemic led to shifts in business models, with an upsurge in small businesses establishing or increasing their online presence. But MSMEs also faced challenges, including related to cybercrime, connectivity (particularly in rural areas), digital literacy and skill shortages.

Presentations were made by the WTO Secretariat, the United Nations Conference on Trade and Development (UNCTAD) and the World Bank, in addition to China, India, the Russian Federation, the United Kingdom and the United States. Other delegations also shared their experiences.

WTO reform

Members continued to engage on various proposals aimed at improving the functioning of the Council in line with the Ministerial Conferences outcomes. They also welcomed a presentation from the WTO Secretariat on the use of eAgenda, which will be first employed for the forthcoming meeting.

Participation of LDCs in services trade

Members continued discussing the proposals set out in a communication by the WTO’s LDC Group submitted in December on implementing the mandate in paragraph 8 of the MC12 Outcome Document with regard to the LDC Services Waiver, which seeks to boost the participation of LDCs in services trade. Members welcomed the reaffirmation of this commitment in the MC13 Declaration and reiterated their continued support for putting the waiver into practice

A total of 51 members have notified preferences for LDC services and service suppliers under the Services Waiver. The waiver was formalized by a decision adopted at the 2011 Ministerial Conference.

A total of 35 WTO members are classified as LDCs. More information on the waiver can be found here.

Pandemic response, challenges when confronting crises and work on trade in services

As a follow-up to paragraph 18 of the MC13 Declaration stressing the importance of work on trade in services, members expressed their commitment to re-invigorate the work in the Council and its subsidiary bodies. Various topics for further deliberations, thematic seminars and experience-sharing sessions were proposed, including on digital transformation, the environment, inclusivity and development in relation to trade in services.

A proposal was made to hold a thematic seminar to explore the role of trade in services and the General Agreement on Trade in Services (GATS) in tackling challenges during crises and to put into effect paragraph 21 of the MC13 Declaration.

As part of the pandemic response exchanges, India introduced a new submission as a follow-up to MC13, calling for continuing  work to address the lessons learned and challenges that members faced during the COVID-19 pandemic. It also calls for exploring possibilities for measures regarding cross-border telemedicine services and for building a pool of health professionals to respond effectively to pandemics and natural disasters.

While some members noted the importance of discussing these topics, others questioned the relevance of the GATS to some of the issues raised. However, they expressed their openness for further experience-sharing sessions on other services sectors of interest to members.

Cost of remittance services

The cost of cross-border remittance services was the focus of a seminar held under the Committee on Trade in Financial Services on 25 March.

With the cost of remittance services currently representing on average 6.2 per cent of USD 200 sent and peaking at 8 per cent on average in Africa, participants emphasized the need to facilitate these transactions, in line with Goal 10.c of the United Nations SDGs. This goal calls for reducing to less than 3 per cent the transaction costs of migrant remittances and eliminating remittance corridors with costs higher than 5 per cent by 2030.

Remittance flows into low- and middle-income economies amounted to USD 669 billion last year and are expected to grow in the coming years. The seminar underscored that remittances are a crucial source of finance for developing economies, supporting household consumption, housing, education and healthcare, and providing capital for small business development. Participants reviewed opportunities to further reduce the costs of remittances and looked at remittance services from the perspective of the GATS and trade in financial services.

Several factors contribute to the high cost of remittances, speakers emphasized. These include lack of competition in many markets, the small size of many bilateral corridors, limited digitalization of payments infrastructure and low levels of financial inclusion and financial literacy. Other challenges include the lack of transparency and regulation of the remittance industry, margins applied to currency conversions, lack of payment system interoperability and the absence of banking correspondents.

In her opening remarks, WTO Deputy Director-General Johanna Hill said: “The opening of markets and competition between different operators for the benefit of economic development are at the heart of the GATS objectives. Improving the regulatory climate for trade in services, especially financial services, can facilitate the flow of remittances.”

She added: “The digitalization of trade, primarily trade in services, can be key to further fostering the remittances flows. … At the WTO, we believe that the international cooperation and policy coordination in all areas of economic interaction between jurisdictions are the antidote to fragmentation and its deleterious effects. In that sense, this seminar is an important initiative.”

WTO members decided to organize the seminar in December 2023 following a proposal from India, the Philippines and South Africa. The Committee on Trade in Financial Services is one of the Services Council’s subsidiary bodies.

The event’s programme is available here.

Exemptions to MFN principle

The Services Council concluded its fifth review of nearly 600 exemptions in members’ services schedules from the WTO’s Most-Favoured-Nation principle, under which members are normally prevented from discriminating between WTO members. The purpose of the review was to examine whether the conditions creating the need for the exemptions still prevail.

The list of members’ exemptions can be found here. The latest review took place in 2016. The discussion to determine the date of a next review will take place in 2028.

Services trade concerns

In the Council, members discussed four previously addressed specific trade concerns involving cybersecurity measures and 5G-related measures, among other services-related topics.

Japan and the United States, supported by several other members, reiterated concerns about the cybersecurity measures of China and Viet Nam. China recalled its concerns about Australia’s 5G measures and repeated concerns with certain measures of the United States. China also reiterated its concerns regarding India’s measures in relation to mobile applications.

Many members took the floor to condemn the war in Ukraine and Russia’s actions. The Russian delegate responded by saying that the WTO was not the proper venue for a discussion of this nature.

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