World Trade Report 2019: the Future of Services Trade

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World Trade Report 2019: the Future of Services Trade WORLD TRADE REPORT 2019 The future of services trade What is the World The World Trade Report is an Trade Report? annual publication that aims to deepen understanding about trends in trade, trade policy issues and the multilateral trading system. What is the 2019 The 2019 World Trade Report Report about? examines how trade in services is likely to evolve in response to some major trends, such as demographic changes and the impact of digital technologies. Find out more Website: www.wto.org General enquiries: [email protected] Tel: +41 (0)22 739 51 11 CONTENTS Contents Acknowledgements and Disclaimer 3 Foreword by the WTO Director-General 4 Key facts and findings 6 Executive summary 7 A. Introduction 12 1. Globalization of services 14 2. Digitalized services: the non-tradable becomes hyper-tradable 14 3. The evolution of trade: from agriculture to manufacturing to services 15 4. More complex services trade requires more coherent policies 17 5. Why it matters 17 6. Structure of the report 18 B. Services trade in numbers 20 1. Trends in trade in services 22 2. Global trade in services through all modes of supply is worth US$ 13.3 trillion 22 3. Who trades services? 31 4. What is the role of services in global value chains? 44 C. Why services trade matters 50 1. The gains from services trade 52 2. Services trade boosts firms’ competitiveness 65 3. How services trade affects employment and inclusiveness 69 4. Concluding observations 80 D. Services trade in the future 82 1. Trade costs 84 2. Major trends that will affect trade in services 100 3. Quantifying services trade in the future 122 4. Concluding observations 134 E. What role for international cooperation on services trade policy? 152 1. Introduction 154 2. Why governments cooperate on services trade policy 154 3. How countries collaborate in the services sphere 165 4. Prospects for future cooperation 184 5. Concluding observations 193 F. Conclusions 198 Opinion pieces Alan Beattie, “The case of the missing services” 23 Sonja Grater, Ali Parry and Wilma Viviers, “MSMEs and services trade: A pathway to inclusive growth in developing economies?” 42 Matteo Fiorini and Bernard Hoekman, “Services trade policy and the United Nations Sustainable Development Goals (SDGs)” 66 Rupa Chanda, “Ensuring inclusive services trade: role of complementary domestic policies” 78 Richard Baldwin, “Digital technology and telemigration” 126 Natallie Rochester, “The potential of trade in services for developing countries” 166 Jane Drake-Brockman, “Why regulatory cooperation matters for business” 188 1 WORLD TRADE REPORT 2019 Bibliography 200 Technical notes 213 Abbreviations and symbols 218 List of figures, tables and boxes 219 WTO members 225 Previous World Trade Reports 226 2 ACKNOWLEDGEMENTS Acknowledgements The World Trade Report 2019 was prepared under South Africa), Bernard Hoekman (European University the general responsibility of Xiaozhun Yi, WTO Institute, Florence, and Center for Economic Policy Deputy Director-General, and Robert Koopman, Research, London), Ali Parry (North-West University, Director of the WTO Economic Research and South Africa), Natallie Rochester (Mango Tales Ltd., Statistics Division. The Report was coordinated by Jamaica) and Wilma Viviers (North-West University, Emmanuelle Ganne and Stela Rubínová (Economic South Africa). Research inputs were provided by Ali Research and Statistics Division) and by Antonia Abdul Raheem, Laura Baiker, Adam Jakubik, Florian Carzaniga (Trade in Services and Investment Knauth, Antonella Liberatore, Osama Nawab and Division). The lead authors of the Report are Barbara Steen Wettstein. d’Andrea, Andreas Maurer, Roberta Piermartini and Robert Teh (Economic Research and Statistics Xiaolin Chai and Marie-Isabelle Pellan from the Division), and Antonia Carzaniga. Other authors are Trade in Services and Investment Division and Marc Auboin, Eddy Bekkers, John Hancock, Kathryn Marc Bacchetta from the Economic Research and Lundquist, José-Antonio Monteiro, Coleman Nee, Statistics Division provided useful comments on Victor Stolzenburg, Ankai Xu and Qing Ye (Economic drafts. David Tinline from the Office of the Director- Research and Statistics Division); Pamela Apaza, General provided valuable advice and guidance. Markus Jelitto, Joscelyn Magdeleine, Juan Marchetti, Martin Roy and Lee Tuthill (Trade in Services and The following individuals from outside the WTO Investment Division); and Rainer Lanz (Development Secretariat also provided useful comments on early Division). drafts of the Report: Rolf Adlung, Ali Alsamawi, Andrea Ariu, Richard Baldwin, Sebastian Benz, Dan Other written contributions were provided by Ege Ciuriak, Jane Drake-Brockman, Matthias Helble, Akbas, Besart Avdiu, Christophe Degain, Chiara Del Bernard Hoekman, Sébastien Miroudot, Hildegunn Giovane, Anesu Gamanya, Emmanuelle Ganne and Nordås, Jane Stacey and Sherry Stephenson. Stela Rubínová (Economic Research and Statistics Division), and Niccolò Consonni, Dale Honeck, Ester The text production of the Report was managed by Rubio and Ruosi Zhang (Trade in Services and Investment Emmanuelle Ganne, Stela Rubínová, Anne Lescure Division). and Diana Dent of the Economic Research and Statistics Division, and by Antonia Carzaniga of External contributions were received from Richard the Trade in Services and Investment Division. The Baldwin (Graduate Institute of International and production of the Report was managed by Anthony Development Studies, Geneva and Center for Martin and Helen Swain of the Information and Economic Policy Research, London), Alan Beattie External Relations Division. Helen Swain edited (Financial Times, London), Rupa Chanda (Indian the Report. Gratitude is also due to the translators Institute of Management, Bangalore), Jane Drake- in the Languages, Documentation and Information Brockman (Institute for International Trade, Adelaide), Management Division for the high quality of their Matteo Fiorini (European University Institute, work. Florence), Sonja Grater (North-West University, Disclaimer The World Trade Report and its contents are the sole responsibility of the WTO Secretariat, except for the opinion pieces, which are the sole responsibility of their authors. The Report does not reflect the opinions or views of members of the WTO. The authors of the Report also wish to exonerate those who have commented upon it from responsibility for any outstanding errors or omissions. 3 WORLD TRADE REPORT 2019 Foreword by the WTO Director-General Services are often largely overlooked in discussions cent of world services exports and 0.9 per cent of on global trade, yet they account for the majority of world services imports in 2017, although this does trade in many developed economies and are growing represent an increase since 2005. rapidly in many developing economies as well. This is perhaps because services are less tangible and One key message from the report is that services the issues surrounding services trade are often more trade is evolving fast. Digital technologies, complex. This report therefore sets out to demystify demographic changes, rising per capita incomes and trade in services. It aims to shed new light on this climate change will all act as disruptors, potentially essential part of global trade, provide a detailed reducing trade costs, creating shifts in demand, and picture of trade in services today and consider how creating new markets, for example in environmental it might evolve in the coming years, particularly as services. Digital technologies are likely to have a new technologies make some services increasingly particularly significant impact as they change the tradeable. ways that companies do business, allowing them to access a global marketplace and creating new The Report deepens our understanding in a number channels through which to deliver services which of ways, including through presenting new data. were once provided face-to-face. By looking more closely at services delivered by a company that has an office or subsidiary in a foreign Digital technologies can be a driver of inclusivity country, we have found that trade in services is in services trade, by dramatically cutting costs and significantly larger than previously thought. In fact, lowering barriers to entry. This is true for developing when this “commercial presence” is accounted for, countries, and it is true for smaller businesses. Micro, trade in services was actually worth US$ 13.3 trillion small and medium-sized enterprises (MSMEs) that in 2017 – therefore accounting for a share of overall offer services are on average two years younger when global trade 20 percentage points higher than they start exporting as compared to manufacturing traditionally estimated. On average services trade MSMEs. New technologies have facilitated this has grown 5.4 per cent per year since 2005, which faster access to international markets as MSMEs’ is faster than trade in goods, at 4.6 per cent on participation in services trade is frequently in average. Distribution services and financial services digitizable services, such as professional and are the most traded services globally, accounting for scientific activities. There is also a potential almost one-fifth of trade in services each, followed opportunity here to support women’s economic by telecommunications, audio-visual and computer empowerment, as services play a prominent role services, which together account for 13.2 per cent. in women’s employment. However, so far women Trade in other sectors, such as educational, health,
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