WTO members continue review of LDC services waiver, e-commerce work programme

The 1 July meeting of the Council on Trade in Services addressed the WTO work programme on e-commerce and the operationalization of a waiver from WTO rules that allows members to offer more favourable market access for service providers from least developed countries (LDCs). Members also reviewed services-related notifications submitted by a number of WTO members and addressed several services-related trade concerns. They also discussed issues related to services domestic regulation and the role of maritime transport in the post-COVID-19 recovery in separate meetings of the Council’s subsidiary bodies.

 

Operationalization of the LDC Services Waiver

The Council chair, Ambassador Ángel Villalobos Rodríguez of Mexico, reported on the 2-3 June webinar organized by the Council on “Least developed country services export performance and facilitating implementation of preferences notified under the LDC Services Waiver”.  WTO Director-General, Dr Ngozi Okonjo-Iweala, Chad’s Minister of Trade Ali Djadda Kampard and Uganda’s Commissioner for External Trade Emmanuel Mutahunga gave welcome remarks at the webinar.

The chair said he believed the webinar offered plenty of food for thought.  A number of members welcomed the event and said they found the discussions constructive, with some calling for further efforts to ensure more effective operationalization of the waiver. Several members noted the sharp drop in LDC services exports during the COVID-19 pandemic due to their dependence on the travel and tourism sector, while others cited the need for improved data on LDC trade in services.

The LDC Services Waiver allows governments that so wish to grant more favourable treatment for LDC services than what is given to all other members. Adopted at the 2011 Ministerial Conference, the waiver exempts members from their obligation to grant services and service suppliers from all WTO members the same access to their markets, also known as the “Most-Favoured Nation” obligation.

The purpose of the waiver is to enhance the participation of the world’s poorest countries in world services trade. A total of 36 WTO members are classified as LDCs. To date, 51 members have granted preferences in favour of LDCs.

E-commerce Work Programme

Members continued their information-sharing exercise related to electronic commerce, particularly in the context of the COVID-19 pandemic.

Chad, on behalf of the LDC Group, noted some services-specific challenges for LDCs in the utilization of e-commerce, particularly related to online payment services.

The Republic of Korea and China reported on the sharp increase in online retail sales during the COVID-19 pandemic.

A couple of members reiterated the need for strengthening the work programme in order to fully understand the implications of e-commerce on matters such as competition, transfer of technology, data storage, and the impact of automation on traditional jobs and low-income workers.

A few members also reiterated their well-known and divergent positions regarding the WTO’s e-commerce moratorium. At previous Ministerial Conferences, members have agreed not to impose customs duties on electronic transmissions. The current extension of the moratorium runs until the 12th Ministerial Conference (MC12) scheduled for late 2021.

Services trade concerns

Members raised five specific trade concerns previously addressed at the Council for Trade in Services. Japan and the United States reiterated concerns about cybersecurity measures of both China and Viet Nam; China sought further clarifications about Australia’s 5G measures and raised concerns regarding services trade measures of India. The US repeated its concerns and sought clarifications about Russia’s software pre-installation mandate.

In regard to a previous concern, China noted the revoking of relevant executive orders by the United States on prohibited transactions with Tik Tok WeChat, and other Chinese applications, which China said was a positive step in the right direction.

The United States raised a new concern regarding requirements for the localization of customer services in Saudi Arabia. The US said the decision, due to enter into force on 31 July, will impose significant difficulties and costs for many companies with major investments in Saudi Arabia and hinder the ability of these companies to serve their customers in the Kingdom. The European Union echoed the US concerns. Saudi Arabia responded that the decision fully conforms with the Kingdom’s WTO commitments and will not change existing market access regulations and requirements.

Negotiations on domestic regulation for services

Five delegations expressed concerns, at a meeting of the Working Party on Domestic Regulation on 30 June, with the talks on domestic regulation for services taking place between a group of 63 WTO members, otherwise known as the “Joint initiative on Services Domestic Regulation”. The working party is one of the Council for Trade in Services’ subsidiary bodies.

The concerned members mentioned a risk of undermining the consensus-based nature of the multilateral trading system and amending or diluting existing rules of the WTO General Agreement on Trade in Services (GATS). Disregarding existing multilateral mandates could have negative consequences on other negotiations like agriculture or development, including by pushing them into the background, they said. As difficult as these negotiations may be, they remain critical for the multilateral trading system. This leaves members with only two options:  either remaining outside the  domestic regulation talks  or discussing issues inconsistent with their levels of economic development and priorities.

While each member has the right to add additional commitments to its schedule (pursuant to GATS Article XVIII), it cannot dilute or amend any GATS provisions and these new commitments should not concern matters that fall under Part II of the GATS entitled “General Obligations and Disciplines.”

Re-emphasizing the open and transparent nature of the talks, the chair of the joint initiative, Mr Jaime Coghi of Costa Rica, reiterated that the group remains available to engage with any interested member. An outcome on services domestic regulation will benefit services suppliers from all members — developed and developing countries alike — and will facilitate trade with markets of members currently covering over 70 per cent of world services trade, he said. In line with the objectives of the disciplines developed under the initiative, many developing countries are already engaged in domestic regulatory reforms to cut red tape in services regulations, recognizing the economic benefits that this would bring to their own services markets.

Some participants in the initiative explained that they have launched the process to reach an outcome in services domestic regulation, recognizing that progress at the multilateral level was not feasible because of the opposition of some members. They reiterated that the multilateral mandate from GATS Article VI:4 remains intact and that the disciplines under discussion in the initiative will improve participating members’ existing commitments under the GATS, creating new rights for all members.

The chair of the working party, Ms Verónica Bogarín Closs of Paraguay, noted that “previous failures to finalize work in the WTO have led to doubts as to what the Working Party on Domestic Regulation would be able to achieve.”  She encouraged delegations that see scope for developing disciplines in the working party at this stage to engage with other members and identify areas where multilateral disciplines might be viable.

Implementation of commitments under the GATS

Members examined the implementation of GATS commitments at a meeting of the Committee on Specific Commitments on 29 June. This exercise started in 2020 based on a proposal from the United States.  The proposal seeks to review members’ “conditional” commitments, under which the entry into force, implementation or updates of specific commitments is conditional upon national legislative actions or policy reviews. Members are undertaking the review on a voluntary basis, with a view to improving the transparency and legal certainty of their specific commitments. The Committee on Specific Commitments is a subsidiary body of the Council for Trade in Services.

Role of maritime transport in post-pandemic recovery

Maritime transport accounts for over 80 per cent of world trade in volume. It has played a critical role in keeping trade flows open and supply chains intact during the COVID-19 pandemic. A swift and equitable post-crisis recovery will need to consider policies that facilitate maritime transport and allow economies to reap the full benefits of maritime trade growth. This was the focus of a webinar co-organized by the WTO’s Trade in Services and Investment Division and the International Chamber of Shipping on 29 June as part of the “Simply Services” series . Under discussion was a recent quantitative study entitled “Protectionism in Maritime Economies”

Experts from national maritime authorities, international organizations, as well as from the shipping industry and the trade community shed light on the evolution of the maritime transport sector before, during and after the pandemic. They also stressed how maritime transport can support economic recovery and pointed to the role of the world trading system in facilitating maritime transport and strengthening supply chains.