Beyond trade tensions, the Inter-American Development Bank maintains that services are the most dynamic component of the global economy. They account for 50% of global income and 70% of employment, according to the organization, according to data from the International Monetary Fund in 2017, and play an increasingly central role in international trade.
Exports of services account for almost a fifth of total global exports, largely due to the boost provided by technological advances, the organization said.
Global value chains for services
The development of the transport, ICT and IT sectors has led to the creation of global value chains (GVCs) for services. The liberalisation and reduction in telecommunications costs and the development of the Internet have made possible production processes in fragmented blocks, in stages and geographically dispersed.
These GVCs require connections between geographically separated production units. Connections that are generally carried out by services such as telecommunications and transport, generating added value in the final product.
Along with technological innovations, traditional transport and tourism sectors have been joined by other non-traditional services such as financial and business services, among others, which are becoming increasingly important, says the IDB.
In view of this, the organization highlights that although the Global Services Location Index ranks China, Malaysia and Indonesia in the first four positions out of a total of 55 countries, the index reflects a consolidation of Latin America as a global services hub. This contributes to improving its business environment: Brazil (5th position); Chile (9th position); Colombia (10th position); Mexico (13th position); Peru (27th position); Costa Rica (31st position); Argentina (36th position); Panama (41st position) and Uruguay (46th position).
What is the main obstacle?
Regulatory issues are the main challenge facing trade in services. Trade through commercial presence in the banking and communications sectors, for example, faces restrictions on foreign ownership and regulatory requirements that can be discretionary and discriminatory, the IDB notes.
The presence of foreign professionals is prevented by visa requirements and regulations on work permits, such as obstacles to the recognition of degrees and licenses, for example.
In view of this, Latin America faces the challenge of generating institutional capacities, spaces for dialogue and agreements aimed at regulatory coordination for what has been called Trade Facilitation 2.0, the IDB notes.
Challenge that is presented in the region, beyond the progress of the conversations that are manifested through the ministerial declarations arising from the XI Ministerial Conference of the WTO (Buenos Aires, 2017), as well as in the Meeting of Ministers of Trade of the G20 that took place in China (Shanghai, 2016).
Do you pay tariffs and taxes?
Services are not subject to tariffs or customs duties under the WTO's Global Agreement on Trade in Services (GATS). The IDB notes that the negotiations were conducted with a view to eliminating domestic measures (laws, rules, regulations) that discriminate against foreign services or service providers.
The issue of taxation of exports of services has been resolved, in many cases, through double taxation agreements that seek to avoid the application of similar taxes by two or more countries.
In the region, the Protocol of Amendment to avoid double taxation and prevent tax evasion with respect to income taxes between Argentina and Brazil, effective as of June 2018, put an end to double taxation with Brazil for service companies based in Argentina, the IDB describes.
Aduana News is the first Argentine customs newspaper to launch its digital version. With 20 years of experience, its publications and initiatives aim to provide the most relevant knowledge on customs issues in order to contribute to safe trade in the region.
