PRESS RELEASE 
 
PRESS/411 
30 June 2005 
 
(05-2804) 
WORLD TRADE REPORT 
Standards, “offshoring” and ai r transport focus of 2005 WTR 
The application of technical standards by national governments can have both constructive and 
detrimental effects on international trade, accord ing to the World Trade Organization’s 2005 World 
Trade Report.   
The report, written by economists in the WTO Secretariat, points out that such norms can deliver 
important benefits in terms of information for consumers, environmental protection and compatibility among related goods and services. But the report, which was released today, draws 
attention to the fact that technical standards can also be used as protectionist measures and can 
result in higher operating costs for developing country producers.  
The third in an annual series initiated by Director-General Supachai Panitchpakdi, the 2005 WTR 
also includes analytical essays on offshoring services (a particular aspect of outsourcing), air transport services and the use of quantitative economic analysis in dispute settlement. The report 
also touches on recent and selected medium-term developments in global merchandise and 
services trade.  
Offshoring services are not new, the report states, and are in fact no different from other forms of 
trade driven by comparative advantage. Moreover , the authors argue, the impact of offshoring 
services on production, employment and trade is less severe than suggested by some press 
reports and public commentary.   
 The report also discusses the role of the General Agreement on Trade in Services (GATS) in 
providing mutually beneficial opportunities for tr ade among countries via offshoring activities. It 
concludes that greater conceptual clarity between particular modes of supply (mode 1 — cross-border transactions, and mode 2 — consumption abroad), together with greater precision in the 
nomenclature used to describe service activities , could enhance the contribution of the GATS to 
more open trade. The report notes that the importan ce of these issues is not confined strictly to 
offshoring services. 
 
In looking at trade in air transport services, the report traces the growing importance of air transport for international trade. Technological changes, combined with an evolving policy 
environment, have changed the face of the industry. It has become more competitive and more 
efficient. Different models have been adopted to meet new competition and growing demand for 
air transport services. Air carriers have chosen between a hub-and-spoke model and a point-to-
point approach to service provision. 
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 Competitive pressures have also led to a new generation of bilateral “open skies” agreements 
among governments, resulting in liberalization of service between countries. The GATS has 
exerted limited influence on competitive developments in the sector, and only covers a narrow range of relevant services — repair and maintenance services, the marketing and selling of air 
transport services, and computer reservation serv ices. Differing views pe rsist as to whether a 
multilateral approach would be more effective than existing arrangements in delivering mutually beneficial liberalization. 
 
Quantitative economic analysis has been used wi th increasing frequency in dispute settlement. 
Two main areas of dispute settlement where quantitative analysis has proven relevant have been 
in considering the effects of particular policy meas ures on trade flows and the effect of imports on 
similar domestic products or their producers. The first of these questions — how policy interventions impact on trade flows — has arisen most often in relation to arbitration decisions 
following a violation (Article 22.6 of the Disput e Settlement Understanding). The set of issues 
relating to “like products” arise in procedures aimed at determining the existence of a WTO violation or in trade remedy cases. 
 
The report stresses that quantitative analysis cannot offer definitive answers to questions of legal compliance, but rather may serve as an aid to under standing the impact of policy actions. Reliance 
on quantitative economic analysis is likely to grow in the future, as cases become increasingly 
“fact-intensive.”  
The report also reviews recent trends in global trade, highlighting that real merchandise trade 
grew by 9 percent in 2004, the strongest performa nce since 2001. Trade in services expanded by 
16 per cent, measured in nominal terms. This ra pid growth in trade was driven largely by the 
surprisingly strong global economic performance last year, say the report’s authors. Higher oil and 
commodity prices and a recovery in trade in of fice and telecom equipment helped developing 
countries see their share in world merchandise trade rise to 31 per cent, the highest since 1950. 
 
 
END