Barriers to services trade rising, compounds COVID-19 economic shock – says OECD

• Lifting restrictions will be critical to strong recovery
• At $6.1trn, global services trade accounts for one-quarter of world exports in 2019

The pace of new barriers to services trade is accelerating across all major sectors, latest research from the OECD shows.

According to the OECD, the global regulatory environment for services trade became more restrictive in 2020, with new barriers compounding the shock of the COVID-19 pandemic on exporters, the new report said.

Meanwhile, global services trade fell by 24 per cent in the third quarter of 2020 (Q3 2020) compared to a year ago, a small uptick from the 30 per cent year-on-year decline registered in the second quarter.

The General Agreement on Trade in Services (GATS), a treaty of the World Trade Organisation (WTO) defines trade in services as the supply of a service through any of four modes of supply: cross border, consumption abroad, commercial presence, and the presence of natural persons. Trade in services include payments and receipts for service-related activities such as: financial services, transport services, law, accountancy, management consultancy, and tourism.

In 2019, the global services trade exports were valued at $6.1 trillion, representing one-quarter of the value of total exports including goods, and 7 per cent of world GDP. In 2018, services accounted for an average share of 22.4 per cent of the world’s trade in goods and services. This could be compared with a share of 19.6 per cent some eight years earlier, confirming that services were a growing part of world trade.

The OECD Services Trade Restrictiveness Index (STRI): Policy and trends up to 2021, shows an increasing pace in the erection of new barriers to services trade across all major sectors.

New restrictions are affecting services traded through a range of commercial establishments, in sectors including: computer services, commercial banking and broadcasting, the OECD report said.

While the overall trend was toward greater restrictiveness, governments around the world did lower barriers to cross-border digital trade in 2020, as part of the overarching policy response to the COVID-19 pandemic. More facilitation measures for digital trade were issued than in previous years, helping remote working and online business operations.

Angel Gurría, OECD secretary-general said: “We have experienced a major shift in trade during the pandemic. Transport and travel have collapsed, but digitally-delivered trade and enabling services such as telecommunications have contributed to the resilience of our economies. Lifting restrictions to trade in services will be critical as governments seek to put the global economy on the road to a strong, inclusive and sustainable recovery”.

The new report, which covers services trade regulations in 48 countries, representing more than 80 per cent of global services exports, identified top performers in terms of regulatory best practices, including: Czech Republic, Latvia, the Netherlands, Japan, Lithuania and the United Kingdom. It also highlights recent reform efforts in Brazil, China, Iceland, Indonesia and Kazakhstan.

Though no African example was cited in the report, but the Covid-19 effect on services trade restrictions was no less on the continent.

The OECD research indicates that, national and collective action to ease barriers to services trade can reduce trade costs for firms that provide services across borders. On average across sectors and countries, services trade costs could decline by more than 15 per cent after 3-5 years if countries could close half of the regulatory gaps with best performers.

An ambitious services trade agenda, including new services market access commitments in comprehensive trade and investment agreements, can drive such gains, the report said.