Services have become the most dynamic component of international trade and will continue to expand in the coming decades, if international cooperation is enhanced to support this expansion, according to the latest World Trade Report released by the World Trade Organization (WTO) on Wednesday.
The report, launched during the WTO Public Forum in Geneva, underlines that trade in services, ranging from distribution to financial services, can help countries boost economic growth, enhance domestic firms’ competitiveness and promote inclusiveness.
On average, services today account for about half of GDP worldwide, and for developed economies, the ratio has been around three quarters of GDP, with a rapidly increasing proportion in developing economies, the report says.
Though services account for more than two thirds of jobs in developing countries and four fifths of employment in developed ones, they are, as WTO Director-General Roberto Azevedo puts it, often “overlooked in discussions on global trade, and the extent of their contributions to global trade is not always fully appreciated.”
According to the report, services trade has grown 5.4 percent per year since 2005, while trade in goods has grown at 4.6 percent on average. Trade in computer services and research and development have recorded the most rapid annual growth over the past decade.
According to the WTO Global Trade Model, a new quantitative trade model used by the WTO to make projections about global trade, the share of services in global trade could increase by 50 percent by 2040, thanks to lower trade costs, reduced need for face-to-face interaction due to digitalization, and hopefully lower policy barriers to services trade.
The report finds that if developing countries are able to adopt digital technologies, their share in world services trade could increase by about 15 percent by 2040.
Meanwhile, despite their decline by nine percent between 2000 and 2017, barriers to trade in services remain much higher than those in goods trade, largely due to limited possibilities to supply certain services across the border and the regulatory intensity of many service sectors.
For services trade to be a powerful engine of economic growth, development and poverty reduction, the report suggests that international cooperation will need to be intensified and new pathways will need to be found to advance global trade cooperation and make services a central element of trade policy.
A cargo ship loaded with containers departs from the Colombo International Container Terminal in Colombo on March 29, 2019. [Cover Image: AFP]
