Navigating New-Generation Barriers in Global Services Trade

Services trade is expanding at approximately 5%, providing a stabilizing force for the global economy as goods trade slows from 4.6% growth in 2025 to 1.9% in 2026. According to the World Trade Organization (WTO), regulatory frictions in data, AI, and climate make services trade costs roughly twice as high as those for goods.

Technological advances are driving this shift. Digitally delivered services allow businesses to maintain growth despite geopolitical pressures and supply chain disruptions that hamper physical trade.

Why is services trade outperforming goods trade?

Services offer greater economic resilience because they are less susceptible to the physical supply-chain disruptions currently slowing goods trade. While goods trade growth is projected to drop to 1.9% by 2026, services continue a steady 5% expansion.

View this post on Instagram about Generation Barriers, Global Services Trade

From Instagram — related to Generation Barriers, Global Services Trade

This growth is fueled by new business models enabled by technology. However, the WTO notes that domestic regulations create significant friction, making it more expensive to trade services than physical products.

Did You Know? The World Trade Organization (WTO) estimates that the costs associated with trading services are roughly twice as high as the costs for trading goods due to domestic regulatory frictions.

What are the “new-generation” barriers to services trade?

New barriers are often non-discriminatory on paper but force companies to duplicate processes or use non-interoperable systems to meet local requirements. These differ from traditional barriers like quotas or foreign equity restrictions.

Four primary categories of these barriers have emerged. First, data governance lacks interoperability in digital ID systems and e-signatures, hindering remote contracting. Second, AI regulation creates divergent rules on liability and data use, which can act as de facto market access barriers.

Third, climate-related compliance involves varying green taxonomies and disclosure frameworks, leading to duplicated reporting. Finally, geoeconomic and security measures, such as investment screening and sanctions, create uncertainty for firms managing risk.

Expert Insight: Samantha Carter notes that while regulations often serve legitimate goals like financial stability and consumer protection, the lack of coordination transforms these rules into market fragments. The stakes involve a trade-off between national security or climate objectives and the ability of firms to scale internationally.

How are current trade agreements addressing these frictions?

Current progress is fragmented. The WTO’s Services Domestic Regulation focuses on procedural fairness and transparency rather than the actual substance of domestic rules.

Advancing development through services trade

Some regional agreements have made strides in digital trade. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Digital Economy Partnership Agreement, and the African Continental Free Trade Area Protocol on Digital Trade include provisions for AI, digital ID, and data flows.

Other areas lag behind. The Agreement on Climate Change, Trade and Sustainability focuses on principles and cooperation, but firms still face divergent transition frameworks and disclosure requirements in practice.

What could happen next to unlock services growth?

Global growth may depend on moving from fragmentation to cooperation. A possible next step is the design of interoperable technical interfaces and digital standards, even where underlying regulations differ.

Governments could implement outcomes-based mutual recognition and equivalence frameworks for supervisory effectiveness. The use of cross-border regulatory sandboxes may also allow firms to test services across jurisdictions.

Further progress is likely to require the adoption of common reference frameworks and better measurement tools. The gradual adoption of CPC 3.0, which classifies modern services like cloud computing and AI, could reduce ambiguity in future trade negotiations.

Frequently Asked Questions

What is the difference between traditional and new-generation trade barriers?
Traditional barriers include visible restrictions like quotas and foreign equity limits. New-generation barriers are regulatory differences in areas like AI, data, and climate that appear non-discriminatory but force firms to duplicate processes.

Which agreements currently address digital trade provisions?
Provisions on AI, digital ID, and data flows are found in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the Digital Economy Partnership Agreement, and the African Continental Free Trade Area Protocol on Digital Trade.

How does AI regulation act as a trade barrier?
Differences in liability and data use rules can force a company to redesign an AI-enabled service for every market it enters, limiting its ability to scale the solution globally.

Do you believe international standards can effectively balance national security with the need for global services growth?