Preferential treatment for services and service suppliers

The main LDC-specific market access preferences in services are those granted under the decision adopted by WTO Members in 2011 known as the “services waiver” (Decision on preferential treatment to services and services suppliers of LDCs – WT/L/847 – adopted by the 8th Ministerial Conference of the WTO, 2011).  The decision allows WTO Members to grant to LDC services or service suppliers preferential treatment that would otherwise be inconsistent with Article II (most favoured nation treatment) of the GATS. In 2013, the Bali Ministerial Decision established steps to promote the operationalization of the decision. In 2014, the LDC group submitted the “LDC collective request”, identifying the sectors and modes of supply of particular interest to them (S/C/W/356). In 2015, the waiver period was extended to 2030, as part of the “Nairobi Package” (WT/MIN(15)/48).  As of October 2021, the WTO had received 24 notifications (from 23 countries and the European Union) indicating sectors and modes of supply where they were providing or intended to provide preferential treatment.

What happens when countries graduate?

Upon graduation, countries no longer benefit from the services waiver. There are currently no smooth transition provisions in place, something WTO members would need to agree on.

According to a 2020 study by the WTO and EIF, “The desired impacts of preferences granted under the services waiver has not yet been realized. In many cases, notified measures reflect the applied MFN regime.  Moreover, some notified measures reflect commitments found in preferential trade agreements that also reflect the applied regime.  And opportunities have been limited under Mode 4 (presence of natural persons), which has been the single most modal focus of the LDC Group.  In addition, a growing body of research suggests that weak domestic supply-side capacities constitute major constraints for LDCs to increase their participation in international services trade.  In view of these factors, in the present circumstances, graduating LDCs are unlikely to lose much in services preferences” after graduation.