The Least Developed Countries' Services Waiver and the Volatility of Least Developed Countries' Services Exports

Abstract

Members of the World Trade Organization (WTO) adopted in 2011 a Decision ("LDC Services Waiver") that allows any WTO Member to offer preferential treatment to the services and service suppliers of least developed countries (LDCs). The present analysis investigates whether the LDC Services Waiver Decision has been instrumental in dampening the volatility of LDCs' commercial services exports. The analysis covers the treatment group of 43 LDCs and two control groups, over the period from 2004 to 2019, with the treatment period (i.e., period of operationalisation of the Waiver) being 2014-2019. Based primarily on the random-effects Mundlak estimator, the empirical exercise supports the hypothesis that the LDC Services Waiver has helped dampen the volatility of total commercial services exports, notably that of modern commercial services. Thus, meaningful preferences to LDCs under the Services Waiver, provide significant benefits to LDCs, including in terms of services exports stability.