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Harnessing Services Trade for Sustainable Growth
The services sector has been the main source of economic growth in recent decades. Logistics finance and information technologies are essential to the functioning of modern economies while business services healthcare and entertainment are among the world’s fastest growing sectors. This publication – co-published by the WTO and the World Bank – underlines the contribution that trade and investment in services can make to economic growth and development. It highlights in particular the importance of re-energizing international cooperation on services trade and encourages reflection on how best to mobilize assistance for developing and least-developed economies in implementing services sector reforms so that they can reap the gains from expanded trade and investment in services.
Acknowledgements / Disclaimer
This publication is the result of a joint effort of the World Bank and the WTO. The publication was co-authored and coordinated by Martin Roy of the WTO and Pierre Sauvé of the World Bank under the supervision of Deputy Director-General Anabel Gonzalez and Xiaolin Chai Director of the Trade in Services and Investment Division at the WTO and Mona Haddad Global Director of Trade Investment and Competitiveness and Sebastien Dessus Practice Manager Trade and Regional Integration at the World Bank. The publication was edited by Ross McRae and Anthony Martin of the WTO.
Executive summary
This co-publication by the World Bank and the WTO is motivated by a shared view that the structural changes associated with a more service-centric world economy and the central contribution that expanded trade and investment in services can make to economic growth and development warrant greater policy attention and revived international cooperation. An important aim of the publication and a key reason for its joint nature is to recall the benefits of advancing the negotiating agenda on trade in services and the opportunity costs of not doing so. Accordingly the publication aims to foster reflection on how best to mobilize additional support – and better assistance – for developing and least-developed economies in implementing services sector reforms and reaping the development gains from expanded trade and investment in services.
Conclusion
The composition of global trade in services has changed markedly in recent years a period that has seen developing economies register significant export gains in the services sector despite the severe impact of the COVID-19 pandemic. Such gains cover a host of non-traditional high-value adding services that can be more readily supplied today through digital means.
Foreword
Services have emerged as the driving force that is shaping the economic landscape of countries at all levels of development. They account for the largest share of global economic activity by generating more than two-thirds of GDP employ the most workers and are the source of most new job creation especially for female and young workers. At the same time services trade has turned into a key element in growth strategies becoming the most dynamic component of global trade in recent times and creating higher value-added jobs.
International Trade in Travel and Tourism Services
In this paper we investigate tourism-related policy approaches that WTO member countries adopted in the early weeks of the COVID-19 crisis. We highlight the need for stakeholders to coordinate their responses in order to mitigate the negative crisis effects and better prepare the sector for the future. In doing so we explore the economic impact of potential tourism scenarios underlining both the demand and supply side effects of the crisis.
The evolution of services trade policy since the great recession
Are changes in services markets provoking reform restrictions or inertia? To address this question we draw upon a new World Bank-WTO Services Trade Policy Database (STPD) to analyse the services trade policies of 68 economies in 23 subsectors across five broad areas—financial services telecommunications distribution transportation and professional services respectively.
Applied Services Trade Policy
Better information on how services policies vary across economies and sectors over time would improve the empirical analysis of their impact. This paper describes the Services Trade Policy Database (STPD) a joint initiative by the World Bank and the WTO Secretariat which builds on a database developed by the World Bank nearly ten years ago and draws on a recent OECD database.
Why services trade matters
This section examines the role of trade in services in helping countries to achieve rapid and inclusive growth. Section C.1 discusses and attempts to quantify how services trade benefits the economy and promotes growth. Section C.2 discusses the role trade in services plays in enhancing domestic firms’ competitiveness not only in the services sector but also in manufacturing. Section C.3 considers how services trade promotes inclusiveness in a number of areas such as skills gender and location of economic activity. Section C.4 concludes.
What role for international cooperation on services trade policy?
Trade in services continues to evolve. Technology and regulatory reforms are driving a fundamental transformation creating new demand while simultaneously helping to reduce trade costs and opening further opportunities to trade services. Under the impetus of global value chains demographic trends rising per capita incomes in emerging markets and environmental concerns demand for foreign-supplied services is on the rise. The evolving avenues actors and composition of services trade increase its potential to contribute to inclusive economic growth and development but also present a number of challenges that need to be addressed to fulfil this potential.
Technical notes
WTO members are frequently referred to as “countries” although some members are not countries in the usual sense of the word but are officially “customs territories”. The definition of geographical and other groupings in this report does not imply an expression of opinion by the WTO Secretariat concerning the status of any country or territory the delimitation of its frontiers nor the rights and obligations of any WTO member in respect of WTO agreements. The colours boundaries denominations and classifications in the maps of the publication do not imply on the part of the WTO any judgement on the legal or other status of any territory or any endorsement or acceptance of any boundary.
Introduction
Services have become the most dynamic sector of world trade – but in ways that are not always recognized or understood. Just as services have come to dominate many national economies they are playing a bigger role in the global economy as well. Many factors are driving this – including consumption liberalization and investment – but the game-changer is technology. Services that were once difficult to trade because they could only be delivered in person are becoming far easier to trade because they can be delivered digitally. The 2019 World Trade Report explores this globalization of services – why it is happening how it is impacting economies and where new policy approaches are needed.
Conclusions
Over the last few decades services have become the backbone of the global economy and the most dynamic component of international trade. Services are increasingly easier to trade thanks in large part to digitalization. From online education to virtual law firms technology is penetrating all services sectors transforming services traditionally delivered face-to-face into remotely tradable services. Trade long dominated by the exchange of goods increasingly involves services transforming the global economy in the process.
Services trade in the future
This section attempts to provide some guidance as to how services trade patterns will change. Using a novel approach this section begins by showing recent trends in trade costs related to services and identifying the factors affecting these costs. Then major future trends in technology demography income and climate change are examined with a view to explaining how these trends can affect the choice of which services countries trade and with whom they trade as well as how they trade. Finally the potential impact of these trends on trade in services is quantified using the WTO Global Trade Model.
Foreword
Services are often largely overlooked in discussions on global trade yet they account for the majority of trade in many developed economies and are growing rapidly in many developing economies as well. This is perhaps because services are less tangible and the issues surrounding services trade are often more complex. This report therefore sets out to demystify trade in services. It aims to shed new light on this essential part of global trade provide a detailed picture of trade in services today and consider how it might evolve in the coming years particularly as new technologies make some services increasingly tradeable.
Acknowledgements and Disclaimer
The World Trade Report 2019 was prepared under the general responsibility of Xiaozhun Yi WTO Deputy Director-General and Robert Koopman Director of the WTO Economic Research and Statistics Division. The Report was coordinated by Emmanuelle Ganne and Stela Rubínová (Economic Research and Statistics Division) and by Antonia Carzaniga (Trade in Services and Investment Division). The lead authors of the Report are Barbara d’Andrea Andreas Maurer Roberta Piermartini and Robert Teh (Economic Research and Statistics Division) and Antonia Carzaniga. Other authors are Marc Auboin Eddy Bekkers John Hancock Kathryn Lundquist José-Antonio Monteiro Coleman Nee Victor Stolzenburg Ankai Xu and Qing Ye (Economic Research and Statistics Division); Pamela Apaza Markus Jelitto Joscelyn Magdeleine Juan Marchetti Martin Roy and Lee Tuthill (Trade in Services and Investment Division); and Rainer Lanz (Development Division).
Services trade in numbers
This section presents the importance of trade in services in the global economy by using an experimental dataset developed by the WTO called Trade in Services by Modes of Supply (TISMOS). This dataset captures services supplied through the four modes of supply categorized in the WTO General Agreement on Trade in Services (GATS); traditional services trade statistics cover only three of the GATS modes of supply. This section also discusses the participation of developing economies including least-developed countries (LDCs) the importance of micro small and medium-sized enterprises (MSMEs) and the role of women in services trade. Finally the section explores the content of services value-added in international global value chains.
World Trade Report 2019
Services have become the most dynamic component of global trade with an increasingly important role in the global economy and in everyday life. Yet the extent of services’ contribution to global trade is not always fully understood. The World Trade Report 2019 attempts to remedy this by examining how trade in services is evolving and why services trade matters.
Services Trade Policy, WTO Commitments, and their Role in Economic Development and Trade Integration
Services have long been perceived as playing a secondary role in world trade. In particular the role of services trade policies and multilateral services commitments often tends to be downplayed. However in value added terms services account for about 50% of world trade and are significant in exports of countries of all levels of development.