Realising the potential of services trade

At the World Trade Organisation’s (WTO) Public Forum earlier this month, trade in services took centre stage. On the first day, following the release of the WTO’s annual report, I moderated a high-level plenary on the future of international services trade.^[1] Its prominent place in the main hall and on the three-day agenda signalled the importance the WTO now attaches to services.

Trade in services is often overshadowed by trade in goods. Tariff disputes and tensions over goods dominate the news, while services receive much less attention. Yet, as the WTO’s annual report showed, services trade again grew faster than goods trade in 2025, expanding by 5.3%, compared with 4.6% for goods. This matters particularly for emerging markets and micro, small and medium-sized enterprises (MSMEs), for which services can offer a direct path to development and growth.

Trade in services also encompasses a wide range of economic activity. As the plenary debate showed, it includes logistics, healthcare, the movement of professionals and data flows. The last of these is increasingly important. Artificial intelligence (AI) is likely to increase the importance of services in the global economy, putting services trade at the heart of its spread. Some of the AI boom is physical—notably semiconductors and data centres—but much of its economic impact will come through services. The potential for AI-driven services trade is therefore considerable.

Not so fast

Given this potential, governments should be liberalising trade in services. Instead, barriers are increasing. The long-standing moratorium on customs duties on electronic transmissions failed to win an extension at the WTO’s 14th Ministerial Conference (MC14) in Yaoundé earlier this year. Reversing that outcome would help, but seems unlikely. That makes the second-best option, the Electronic Commerce Agreement (ECA), more important. Negotiations on the ECA were already advancing as the moratorium faltered.^[2] The Global Services Coalition and Asia Pacific Services Coalition have called the agreement “the defining 21st-century moment for the multilateral trading system and not a minute too soon for global economic development, MSME revival and jobs growth”.^[3]

The ECA establishes the first global set of rules for digital commerce. It covers issues ranging from facilitating electronic commerce and building trust to co-operation on cyber-security. The agreement is backed by the 27 EU member states, most of the 12 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and China.^[4] The potential gains are large. According to the WTO, if all 166 of its members implemented the ECA, global GDP would be $8.7trn higher in 2040 than otherwise.^[5] At a time when developed and emerging economies alike are searching for growth, that represents a substantial opportunity.^[6]

Yet the ECA has a problem: it is plurilateral. Rather than commanding the consensus of the WTO’s full membership, it has been negotiated by a subset of members.

Why the ECA is a litmus test for the WTO

Close to 70 WTO members are seeking a way to incorporate the ECA into the organisation’s legal framework, while encouraging others to join (and others are expressing strong support in joining). But two important holdouts, India and the United States, object for different reasons.

India has repeatedly blocked the ECA’s incorporation into the WTO’s legal framework. India’s stated objections are institutional. To date, India has not, on principle, shown any readiness in the WTO to support plurilateral progress on any new issues—especially given its outstanding concerns overunresolved multilateral negotiating mandates. India has also long resisted aspects of digital-trade liberalisation.^[7] While it has traditionally questioned renewal of the WTO moratorium on customs duties on electronic transmissions, it accepted a final, time-limited extension at MC13 pending its expiry at MC14.^[8] It then refrained at MC14 from opposition to another time-limited extension. With the failure to extend the moratorium at MC14, the ECA’s progress became more important, especially in relation to customs duties on electronic transmission. The ECA, for its part, contains a similar, indeed stronger prohibition. India has also questioned the legal basis for the WTO to act as depositary for the interim ECA agreement.^[9]

For the Trump administration, while the United States has, during previous efforts, expressed no opposition to incorporation of the ECA into the WTO framework, it has recently raised queries regarding specific procedural aspects of the proposed ECA interim arrangement. Like India, the United States questions the basis for the involvement of the WTO secretariat.

For many services industries, the agreement does not go far enough. It does not discipline data-localisation requirements nor govern the freedom of data flows across borders. Nor does it protect source code from forced disclosure. Industry stakeholders tend to be keen supporters of an ECA phase 2, to follow implementation of phase 1.

Yet, given the importance of digital trade and services to the global economy, the WTO must find a way to accommodate the ECA—and future plurilateral agreements. Plurilaterals offer one of the most promising ways to strengthen rules-based trade when consensus among WTO members is out of reach. There may be some room for progress. India has said it is willing “to identify appropriate pathways for plurilateral initiatives into the WTO legal framework”.^[10] Coming from a long-standing sceptic of such agreements, this brief statement at the recent BRICS summit in New Delhi is significant. It suggests that the dispute may increasingly be about how plurilateral agreements fit within the WTO, rather than whether they have a place there at all.

Urgency despite opposition

An admittedly unscientific show of hands at the Public Forum captured the challenge facing the WTO. An overwhelming majority of those in the room believed that services offer great potential for countries at all levels of development. Far fewer believed that the WTO would act with the urgency needed to remove the barriers holding services trade back.

Whatever the difficulties of WTO policymaking, a broad group of countries understands the gains from liberalising trade in services. The ECA, and potentially a second iteration,^[11] offers a chance to turn that understanding into action. A small minority of members should not be able to prevent others from moving ahead. The WTO must find a way to accommodate such agreements while leaving the door open for others to join.

Services have the potential. The WTO now needs a way to realise it.