The World Trade Organization has agreed to make it easier for service companies to trade with the rest of the world. ”It will be smoother, faster and less costly,” says Anna Stellinger, head of international and EU affairs.
Last Thursday, the negotiations on domestic regulation of services in the WTO finally came to a conclusion. The outcome was an agreement that spans 67 countries, which together account for around 90% of the world’s trade in services.
The Confederation of Swedish Enterprise welcomes this agreement because - if fully implemented - it could bring major benefits for service companies, in terms of lower costs for trade and reduced administration. In addition, the conclusion of the negotiations is evidence of the positive outcomes a functioning WTO can deliver.
The negotiations started in 2017 and were essentially about dismantling the unnecessary barriers to trade that arise when companies have to seek permission to provide their services in another country, for example in licensing, qualifications and meeting standards. These processes can be time-consuming, expensive and tricky, and often hit the smaller businesses hardest.
A big improvement
It is still up to each country to decide on its own approval procedures, which means that there will continue to be a patchwork of different rules. However, the WTO agreement is a significant step forward, as it specifies a set of overarching principles to ensure that each country simplifies and streamlines its respective processes.
Examples of these include that companies should only have to go to a single authority to apply for a permit, that companies should be provided with a timeline of the permit process immediately upon application, and that - if a permit is refused - companies should be given the opportunity to rework and resubmit their application. In addition, the agreement contains a clause stating that authorisation criteria must not discriminate between the sexes.
The potential upsides to this agreement are considerable. According to an OECD report, it has the potential to cut the costs relating to trade in services by around USD 150 billion annually. For SMEs in G20 countries, costs could be reduced by as much as 8-9%. Previous studies have also shown a positive correlation between increased volumes of trade in services and those countries that have already implemented similar principles.
– The fact that so many countries have now finally agreed to simplify cross-border trade for service companies is an incredibly important development. It will make trade smoother, faster and less costly. For a country like Sweden, with a large share of innovative service companies engaged in international trade, this can make a big difference, says Anna Stellinger, Head of International and EU Affairs at the Confederation of Swedish Enterprise.
Welcome news for the WTO
The conclusion of the negotiations is also extremely welcome news for the WTO, as it demonstrates the continuing importance of the World Trade Organization and that it is still possible to reach agreements in key areas.
It is also the first WTO agreement 24 years in the area of services. It is now up to the WTO to maintain the momentum and continue to update a rulebook that remains too far out of step with the reality of the trade in services today.WTOTrade