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WTO's New Agreement: Domestic Services Regulations



  Mar 28, 2024

WTO's New Agreement: Domestic Services Regulations



The World Trade Organization (WTO) recently integrated a new plurilateral agreement(all members did not sign and some did) into its framework, aimed at simplifying domestic regulations on services. This agreement, endorsed by 72 countries including major economies like the United States, the European Union, China, and Japan, is expected to significantly ease the process of trade in services by reducing administrative costs for service providers. This includes making licensing and qualification requirements, along with related procedures and technical standards, more straightforward.

Key Points of the Agreement:

Universal Benefits:
Although initially opposed by countries like India and South Africa due to concerns about its compatibility with the multilateral framework of the WTO, the agreement now extends its benefits to all WTO members, including those who did not sign it. This means countries like India can enjoy relaxed rules without needing to agree to new obligations.
Impact on Trade Costs:
By streamlining procedures and lowering regulatory barriers, the agreement is poised to decrease global trade costs by an estimated $127 billion annually. This makes international service trade more accessible and cost-effective.

Examples of Impacts:

For Service Providers:
A company looking to offer IT services globally might find it easier to enter foreign markets due to simplified licensing processes and recognition of qualifications across borders, reducing the time and expense involved in expanding their operations.
For Member Countries:
A country like India, even without being a signatory, benefits from the commitments of other countries to ease their service regulations. This could lead to more foreign service providers entering the Indian market and an increase in the variety and quality of services available.
Additional Commitments:
The agreement also entails additional commitments by signatory countries to further liberalize their service sectors. These commitments are shared with all WTO members on a Most Favored Nation (MFN) basis, ensuring that the benefits are distributed universally.
Concerns and Clarifications:
Despite the positive outlook, there were concerns about the potential for the new rules to be misinterpreted or misused, particularly in relation to other pending agreements within the WTO. However, clarifications have been made to distinguish this services agreement from unrelated proposals, ensuring a clear understanding of its scope and benefits.
In essence, this agreement represents a significant effort to make global trade in services more efficient and less costly, highlighting the WTO's role in facilitating international cooperation and economic integration.


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