From logistics to finance and IT, services have become the indispensable backbone of economies. They generate more than two-thirds of economic output and account for more than two-thirds of jobs in developing countries and four-fifths of jobs in developed countries, according to a report by the World Trade Organization (WTO), presented on Wednesday (09.10.2019) in Brussels.
«But services also play an increasingly important role in international trade. Global value chains for goods could not function without logistics and communications services. And thanks to digitalisation, services that once had to be delivered face-to-face, such as education, are now delivered remotely. However, services are often overlooked in discussions of global trade, and the extent of their contributions to global trade is not always fully appreciated. This report attempts to remedy this oversight. "Azevedo said in his opening remarks.
The report highlights that trade in services, from retail to financial services, can help countries boost economic growth., improve the competitiveness of domestic firms and promote inclusiveness. It illustrates how the share of services in international trade has continued to grow and how technology, climate change, rising incomes and demographic changes will impact trade in services in the future. It also suggests ways to maximize the potential of global trade in services in the years ahead.
On average, services account for about half of global GDP. For developed economies, they account for about three-quarters of GDP and their share is increasing rapidly in developing economies.
ETrade in services has grown by 5,4 percent annually since 2005, while trade in goods has grown by 4,6 percent on average, the report says. Trade in information technology services and research and development have seen the fastest annual growth over the past decade. According to the WTO World Trade Model, a new quantitative trade model used by the WTO to make projections on world trade, the share of services in world trade could increase by 50 per cent by 2040. This is due to lower trade costs and the reduced need for face-to-face interaction due to digitalisation. It also depends on the reduction of political barriers to trade in services.
Many developing economies are increasingly services-based and their share of global trade in services has increased by more than 10 percentage points. percentage points since 2005. However, services trade is concentrated in five developing economies: China; Hong Kong, China; India; the Republic of Korea and Singapore: they accounted for more than 50 percent of developing economies' services trade in 2017.
Report says trade in services can help women and micro, small and medium-sized enterprises (MSMEs) to play a more active role in global trade, particularly in developing economies, helping to reduce economic inequality. When MSMEs in developing countries begin exporting services, they are on average two years younger than manufacturing firms. Yet they export less than 5 percent of total sales. Services are the main source of employment for women. However, the service sectors that account for the majority of female employment have so far been among the least traded.
Despite a 9% decrease between 2000 and 2017, barriers to trade in services remain much higher than those in trade in goods. This is largely due to the limited possibilities for supplying certain services across the border and the regulatory intensity of many service sectors.
Technologies are key drivers of trade in services, enabling cross-border trade in services that have traditionally required face-to-face interaction. Digital technologies are also reducing the cost of business services. The report finds that if developing countries can adopt digital technologies, their share of global trade in services could increase by about 15 percent by 2040.
The report notes that policy barriers to trade in services, primarily regulatory measures, are much more complex than those for trade in goods. The report's authors note that for trade in services to be a powerful driver of economic growth, development and poverty reduction, international cooperation will need to be intensified and new avenues will need to be found to advance global trade cooperation and make services a central element of trade policy.
World Trade Report 2019 – Launch #WTOPublicForum #ServicesTrade https://t.co/4mVjrUCzKl
— WTO (@wto) October 9, 2019
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