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Preferential treatment for services and service suppliers

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Increasing LDCs' participation in services trade is a shared objective of the international community, recognized in the General Agreement on trade in Services (GATS). In 2011, WTO members adopted a decision to provide preferential treatment to LDC services and services suppliers, also known as the “” (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 April 2024, the WTO had received 25 notifications (with the European Union counting for one) indicating sectors and modes of supply in which preferential treatment was being or would be provided.

What happens when countries graduate?

Upon graduation, countries no longer benefit from the services waiver. There are currently no smooth transition provisions in place for the services waiver, 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."

Countries that graduate from the LDC category are not required to undertake new GATS commitments after graduation.