WTO negotiations on services regulations conclude

Last Thursday, 67 member countries of the World Trade Organisation (WTO) concluded their negotiations on Services Domestic Regulations (SDR) aimed at making it easier for foreign service providers to access, understand and follow the procedures for getting authorisations or licenses for operating in the host country and be assured of legal certainty, predictability, regulatory quality and facilitation. It is the first WTO deal on services in over two decades.

Under the General Agreement on Trade in Services (GATS), the WTO member countries are allowed to determine the extent of market access they will grant in various service sectors and treat the foreign entities providing services differently from the domestic entities. Almost all governments require the foreign service providers to seek authorisations or licenses from designated authorities to operate in the host country.

Many service providers complained that the processes for applying and obtaining the licenses are not clear in many countries. They had no idea on how long it would take to get the license or the status of their application or why their applications were rejected. They were also unclear on qualification requirements and procedures, and technical standards affecting trade in services. The WTO World Trade Report 2019 said that a significant portion of the costs of trading services are attributable to regulatory divergence, as well as opaque regulations and cumbersome procedures.

At the sidelines of the 11th WTO Ministerial Conference in 2017, a group of WTO members established the Joint Initiative on SDR with the objective of developing disciplines to mitigate the unintended trade restrictive effects of measures relating to licensing requirements and procedures, qualification requirements and procedures, and technical standards. In September 2021, the participating members converged on a uniform set of regulatory disciplines, set out in a Reference Paper on SDR. Last week, the participants affirmed their intention to incorporate the disciplines in the Reference Paper as additional commitments into their GATS Schedules.

The SDR does not alter the commitments of member countries under GATS. It only deals with procedures. Under the SDR, besides other disciplines, the participating countries are required to consolidate relevant information on a single online dedicated portal, develop technical standards through open and transparent processes, base measures relating to authorization on objective and transparent criteria and ensure that procedures are impartial, adequate and do not unjustifiably prevent fulfillment of authorisation requirements. Many countries that are not parties to the negotiations are already implementing many of these disciplines.

A unique feature of the agreement is the provision on non-discrimination between men and women — the first of its kind to be included in a WTO negotiated text.

The WTO says the reduction in trade costs from implementing the new disciplines could amount to $150 billion annually globally, with particularly important gains for financial, business, communications and transport services. China, Russia, United States, United Kingdom, European Union and other countries that have signed up to the SDR, account for about 90% of the trade in services. India is not a party to this plurilateral agreement. The signatories have agreed to leave this pact open for other countries to join in and agreed to give to countries that are not parties to the agreement the same treatment as they give to parties to the agreement. India need not hesitate to join the agreement.