The least developed countries' Services Waiver, Aid for Trade for services and services exports

Abstract

AbstractIn 2011, Trade Ministers of the World Trade Organisation (WTO) adopted a Decision that allows WTO Members to accord preferential treatment to services and service suppliers originating in least‐developed countries (LDCs). In 2013, another Ministerial Decision was adopted to operationalise the 2011 Waiver Decision. This paper has examined whether the Waiver Decision had been effective in promoting LDCs' commercial modern and traditional services exports and whether Aid for Trade (AfT) flows in favour of the services sectors were instrumental in achieving this objective. The analysis has used 43 LDCs over the period 2005–2018 and the difference‐in‐difference framework along with the two‐step system generalised method of moments estimator. The control group includes 20 Low‐Income Countries (designated as such by the International Monetary Fund) from which LDCs (as defined by the United Nations) are excluded. The analysis has revealed that the Waiver Decision led to higher modern commercial services exports at the expense of traditional commercial services exports. Moreover, as LDCs improved their trading capacity over time (thanks to the cumulative AfT flows for services), the Waiver Decision induced greater modern commercial services exports, but exerted a mixed effect on LDCs' traditional services exports.