Developing comprehensive data on service sector

Bangladesh as well as other least developed countries (LDCs) have gained some preferential treatment on service trade at the Nairobi Ministerial Conference of the World Trade Organisation (WTO) in December last year.   These include: extension of existing waiver by four years (until 2030), special priority to address regulatory barriers in the market and technical assistance for capacity building to gain from the benefits available.
To put it simply, developed as well as developing countries are now legally in a position to provide preferential market access to the service suppliers and providers of poor countries.  The most used term 'waiver' actually permits WTO members to discriminate in favour of LDC services and services suppliers by way of deviation from the Most-Favoured Nation (MFN) principal of the multilateral trade body. Thus, although a deviation, extending waiver to the LDCs in services does not constitute violation of WTO legal system.  
Although the agreed preferential treatment is hailed by many, in reality, the Nairobi decisions on service trade require more works to make the declared preferential treatments effective. The LDCs require to work on strengthening their understanding to demystify the complexities of service trade. Availability of sufficient data on trade in services is instrumental for understanding the ground realities as well as for pursuing negotiations.
SOME BASICS: Unlike merchandise trade, trade in services is rather complex in nature, and LDCs including Bangladesh still have some inadequacies in capacities to understand many of the complexities.  
Generally, trade in services is non-tangible commercial activities where service provider or supplier and consumer make transactions through four types of modes. While trade in goods requires physical or tangible products like textile or electronic products, trade in services depends on activities of a professional or worker like an architect or construction worker. Again, goods need to be moved across the border while services could be supplied both from origin and by presence in another territory.
In fact, the General Agreements on Trade in Services (GATS) of WTO defines four modes of service supply. These are: cross-border trade (Mode-1); consumption abroad (Mode-2); commercial presence (Mode-3); and presence of natural persons (Mode-4). Thus, preferential treatment or market access varies on changes in modes of service supply.
WAIVER PROVISIONS: The decision to provide waiver to the LDCs on trade in services by the developed and developing countries (who are in a position to do so) was finalised in 2011, after eight years of negotiations. In fact, in 2003, members of the WTO first agreed to consider modalities for preferential treatment in service trade to the poor countries. In 2005, Hong Kong Ministerial Conference asked the member countries to consider a compromise for the LDCs with GATS principle which is actually in-built in the agreement. Negotiators of the LDCs, however, had to work hard and finally, in Geneva Ministerial Conference in December 2011, the WTO trade ministers 'agreed to a mechanism in the form of a waiver of the GATS MFN provision, Article II.1, in order to provide preferential treatment to LDC services and services suppliers.'
The decision allows developed and developing countries to 'grant preferences to services and service providers of LDCs - not only WTO Members, but all LDCs.' For instance, under the waiver mechanism, any developed country can waive the Economic Needs Test (ENT) for LDCs service suppliers of restaurant and hotel services. So, a Bangladeshi can set up a restaurant business in Australia under lax conditions, as per the terms of the waiver. The waiver facility was fixed for 15 years but no members had used it in the first two years of the decision due to complexities. So, the Bali meeting in 2013 asked the members to operationalise the service waiver. LDCs were asked to submit a joint request in areas they wanted waiver to supply their services. Supplying or providing a service to another country is similar to export of goods to other countries. Following the Bali decision, LDCs submitted a joint proposal in July, 2014. Some 25 developed and developing countries, at a high-level meeting in February, 2015, indicated to provide some waiver against the request of the LDCs.  They were asked to make formal notification by July, 2015.
Later in Nairobi, some more decisions were taken to make the waiver facility effective and fruitful.
NON-BINDING OBLIGATIONS: Despite all these efforts, the non-binding obligation to grant preferential treatment makes the whole thing a 'best endeavour' package for the LDCs.   To put it simply, developed and developing countries are still not legally bound to provide preferential treatment for LDCs services suppliers. Only if they provide such treatment, then they have to fulfil the criteria set in the ministerial declarations.
Under the waiver, there are two types of preferences. Primarily, it is the market access preferences for LDCs that are automatically allowed, which means, preference giving country can provide the treatment to the LDC service provider or supplier on its own. Under this provision, LDCs can get market access in six categories of services, as listed in GATS Article XVI. Then there is the non-market access preferences that are not automatically covered.  These require approval of the Council for Trade in Services (CTS). For instance, reduced licence fees for LDCs or relaxed vehicle registration for cross-border road transport services etc will require prior authorisation from the WTO Council for Trade in Services.
Thus, LDCs including Bangladesh need to work hard to utilise the services waiver. They need to negotiate strongly to mitigate the regulatory barriers as well as avail sufficient technical assistance. These two things are included in the Nairobi Ministerial declaration.   
DATA DEIFICIT: More than 50 per cent of Bangladesh economy is now occupied by the service sector. Thus, importance of the service sector as well as trade in services for the country is undeniable.  But, unlike merchandise trade statistics, data on service trade is insufficient and to a large extent misleading.
Data of trade in services is mostly available from the Balance of Payment (BoP) statistics, prepared by the central bank. According to Bangladesh Bank, there is a growing deficit in services trade with the rest of the world. In FY10, deficit in services trade was $1.23 billion while in FY15, it stood at $4.62 billion.  
But the BoP statistics usually capture 'trade in commercial services' which cover modes one and two, and also mode four partially but not mode three or commercial presence. Thus there is no accurate data or information on Foreign Affiliates Trade in Services (FATS) in Bangladesh. FATS statistics usually 'measure the commercial presence abroad of service suppliers through affiliates in foreign markets.' Commercial presence 'covers services supplied by a services supplier of one country by establishing a presence in the foreign market through opening an office in the territory of another country.'
Last month, at a workshop held in Dhaka on the outcome of the Nairobi Ministerial Conference, Markus Jelitto, a counsellor of Trade in Services Division at the WTO, pointed out this problem. In his presentation, he also showed that about 55 per cent of global trade in services is supplied by the commercial presence or (Mode 3) and measured by FATS.  Jelitto also showed that in Bangladesh no statistics on FATS is available and so, FDI statistics is considered a proxy indictor that does not reflect a full picture.
Again a good number of foreigners, mostly Indian, are now working in Bangladesh and sending remittances to their countries.  They are actually working under the Mode 4 or temporary movement of natural persons like Bangladeshi professionals and workers doing in other countries. While, the data on inward remittance is available, data on outward remittance is incomplete.    
As trade in services is growing over the years ushering in newer opportunities on the multilateral front, country's policymakers and businesses need to emphasise more on examining the dynamics of the trade in services. Bangladesh also needs to focus on developing comprehensive data on service sector as well as trade in services. Without comprehensive data, it will be difficult to firm up country's position, let alone reap benefits of the service waiver.
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