RESEARCH AND ANALYSIS: WORKING PAPERS
Services Domestic Regulation — Locking in Good Regulatory Practices
Services is the fastest-growing sector of today's global economy and trade in services is the most dynamic segment of world trade. However, its potential remains constrained by a variety of barriers: trade costs are estimated to be almost double those in goods, and more than 40% of trade costs are accounted for by regulation-related factors. Regulatory measures related to the permission to supply a service, i.e. those related to licensing and qualifications requirements and procedures, and technical standards, can particularly affect service suppliers' ability to trade. With a view to mitigating the unintended trade-restrictive effects of such measures, since 2017, a group of Members has been negotiating a set of regulatory disciplines in the context of the Joint Initiative on Services Domestic Regulation.
Since the launch of negotiations in the Joint Initiative at the margins of the 11th WTO Ministerial Conference, a number of delegations have approached the WTO Secretariat for assistance on assessing to what extent their domestic regulatory regimes are consistent with the disciplines on services domestic regulation that the Joint Initiative has developed (“SDR disciplines”), as well as to understand what potential benefits the implementation of such disciplines might bring to their economies. This Paper expands on the individual assistance provided to WTO Members and has the following three objectives: (i) to examine the prevalence of the SDR disciplines in regional and bilateral trade agreements; (ii) to evaluate to what extent Members have already implemented SDR-related measures in their national regulatory frameworks; and (iii) to analyze the potential linkages between the application of the SDR disciplines and economic performance.
Firstly, based on a sample of 74 agreements concluded by 151 Members, we show that the adoption of domestic regulatory disciplines in trade agreements is a fairly established practice, particularly among “new generation” agreements concluded after 2005. Almost 40% of the Members in our sample, across all income levels and regions, being participants of the Joint Initiative or not, have committed on average to at least half of the SDR disciplines. Secondly, we analyze the level of implementation of the SDR disciplines in national regulatory frameworks using a sample of 86 Members. Not only have Members signed on to the SDR disciplines in their trade agreements, but they have also undertaken substantive regulatory reforms that implement these measures at the national level. We find that more than half of the economies in our sample have implemented in their regulatory regimes at least two thirds of the SDR disciplines under study. Lastly, while our research does not claim to establish causal relationships, we provide initial insights on the potential linkages between the application of the SDR disciplines and various indicators of economic performance, including services value-added, share of services trade, participation in global value chains, and level of entrepreneurship.
No: ERSD-2021-14
Authors: Laura Baiker, Elena Bertola, Markus Jelitto
Manuscript date: September 2021
Key Words:
services domestic regulation, trade in services, trade agreements, economic performance
JEL classification numbers:
F13; F15; L8; K33
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This is a working paper, and hence it represents research in progress. The opinions expressed in this paper are those of its author. They are not intended to represent the positions or opinions of the WTO or its members and are without prejudice to members' rights and obligations under the WTO. Any errors are attributable to the author.
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