International Trade in Services: Evolving Issues for Developing Countries WTO/ESCAP/ARTNeT Advanced Regional Seminar on Multilateral Negotiations in Services for Asian and Pacific Economies Kolkata, 19-21 September 2006 Prabir De, RIS, New Delhi
Growing importance of services sector Services have become the single largest sector in many developing countries 45% of GDP in low-income countries 55% of GDP in middle-income countries 70% of GDP in high income countries Services sector contributes 2/3rd of world production 1/3rd of global employment 1/5th of global trade Demand for services is highly income elastic Efficient services sector is crucial for the economy as well as competitiveness
Rising trend in global trade in services Growth in trade in services is uneven. Global trade in services has grown up spectacularly during 1981 to 2004. US$ 825 billion in 1980 US$ 4.36 trillion in 2004 Growth of trade in services > Growth in goods 1980s: 8% goods / 10% services 1990s: 9% goods / 13% services 2001-2004: 15% goods / 17% services Asymmetry exists between developed and developing countries in services trade U S $ b illio n 5000 4500 4000 3500 3000 2500 2000 1500 1000 500 0 860 607 253 1981 1991 2001 2002 2003 2004 Developed Developing World
Global distribution of services trade Global distribution of trade in goods and services is very much lopsided. Developed countries shares (2004)- 65% in trade in goods 73% in trade in services Developing countries shares (2004) - 35% in trade in goods 27% in trade in services Developed countries (2004) Net importers in trade in goods ( deficit US$ 514 billion) Net exporters in trade in services ( surplus US$ 94 billion) Developing countries (2004) Net exporters in trade in goods ( surplus US$ 191 billion) Net importers in trade in services ( deficit US$ 55 billion)
Trade balance 1981 1991 2001 2002 2003 2004 (US$ billion) Trade in Goods Developed -90.57-101.06-330.49-316.32-401.44-513.97 Developing* 31.26-16.56 93.56 136.45 175.20 190.88 Trade in Services Developed 17.70 25.75 56.00 63.00 70.94 93.61 Developing* -64.09-56.33-39.14-44.80-46.40-55.13 *Including LDCs
Developing countries moving up.. Trade in goods and services in developing countries grew at higher rate than that of developed countries Exception: 2001-2004 Developing countries share in trade in services grown up only since 2001 but static thereafter 29% in 1981 / 22% in 1991 / 27% in 2004 Annual Average Growth Rate (%) 2001-2004 Trade in Goods 1991-2004 Exports Trade in Services 2001-2004 1991-2004 Developed 12.75 9.35 18.12 10.18 Developing 19.07 18.45 15.44 15.97 Imports Developed 13.18 10.19 18.90 9.80 Developing 18.26 16.34 8.48 11.80
witnessing widening gap in global services exports Services exports to total trade in developing countries is declining - 17% in in 1991 15% in 2004 Higher growth rates in exports in goods than exports in services in developing countries. Higher services exports in developed countries 18% percent in 1981 21% in 2004. The gap between developed and developing countries is widening in services exports % 25.00 20.00 15.00 10.00 5.00 0.00 1981 1983 1985 Developed Developing 1987 1989 1991 1993 1995 y = 0.1302x + 18.57 R 2 = 0.6048 y = -0.0533x + 17.738 R 2 = 0.2536 1997 1999 2001 2003
Structure of services exports from developing countries Developing countries are quite successful in exports of Transport Tourism
Exports of transport services Largest exporter Korea US$ 22 billion exports Over 50% country s total services exports About 1 percent of global services exports. Performance of Latin American countries are worse 51% (Argentina) and 48% (Brazil) share in country s total services exports in 1981 => 20% (Brazil) and 22% (Argentina) in 2004 Share of Transport Services in World Total Services Exports (%) Country 2004 Korea 1.023 China,P.R.: Hong Kong 0.792 Singapore 0.746 China, P.R.: Mainland 0.550 China, P.R.: Taiwan 0.241
Exports of travel services Tourism is the main component Largest exporter - China Exports of US$ 26 billion in 2004 (just US$ 2 billion in 1991!) Over 40% country s total services exports About 1% of global services exports. Travel services exports contribute over 70% in South Africa, 77% in Mexico. Indonesia and Singapore seen deceleration in exports of travel services Share of Travel Services in World Total Services Exports (%) Country 2004 China, P.R.: Mainland 1.174 Turkey 0.725 Mexico 0.490 Thailand 0.458 China,P.R.: Hong Kong 0.410
Exports of communication services Exports of communication services are dominated by developed countries. As opposed to transport and travel services, which rely mostly on mature technologies, communication services are among the most hightechnology intensive economic activities. Major exporters from developing countries are not many, and most of them hold negligible shares of the world export market India the only billion exporter! Share of Communication Services in World Total Services Exports (%) Country 2004 India 0.072 China,P.R.: Hong Kong 0.039 Indonesia 0.038 Philippines 0.022 Russia 0.021
Exports of construction services Presence of developing countries in international markets for construction services is scare. China, Russia and Turkey are three largest exporters of construction services (2004). US$ 1.58 billion (Russia) US$ 1.48 billion (China) US$ 0.74 billion (Turkey) Share of Construction Services in World Total Services Exports (%) Country 2004 Russia 0.072 China, P.R.: Mainland 0.067 Turkey 0.034 Indonesia 0.021 Egypt 0.019
Exports of financial services The developing countries share in global exports of financial services is less and stagnated during 1991 to 2004 Hong Kong, Singapore, Korea and Taiwan have achieved over US$ 1 billion exports of financial services in 2004 Share of Financial Services in World Total Services Exports (%) Country 2004 China, P.R.:Hong Kong 0.226 Singapore 0.120 China, P.R.: Taiwan 0.070 Korea 0.052 Mexico 0.039
Exports of computer and information services Computer and information services are one the fastest growing sectors in developing countries Except India and China, none has yet crossed billion mark in exports of computer and information services India has achieved US$ 11 billion of exports of computer and information services in 2003 ~ 50% of country s total exports of services China has witnessed almost 50% jump in exports of computer and information services in 2004, (exports US$ 1.64 billion in 2004) Share of Computer and Information Services in World Services Exports (%) Country 2004 India 0.482 China, P.R.: Mainland 0.075 Singapore 0.020 Malaysia 0.016 Russia 0.012
Exports of personal, cultural and recreational services Exports of personal, cultural and recreational (PCR) services have been growing quite steadily in developing countries During 2001 to 2004, PCR services have grown over 18% per annum in developing countries, touching almost the world average. Malaysia and Turkey are the top two largest exporters, both achieved over US$ 1 billion exports in PCR services in 2004. Share of Personal, Cultural and Recreational Services in World Services Exports (%) Country 2004 Malaysia 0.076 Turkey 0.065 Mexico 0.016 China,P.R.: Hong Kong 0.013 Romania 0.010
Export competitiveness of services exports Category of Services Sector Countries with RCA>1 Labour and resource intensive Labour and resource intensive Labour intensive Skill and technology intensive Skill and technology intensive Skill and technology intensive Miscelleneous Transport Travel Construction Communicati ons Computer and information services Financial services Personal, cultural and recreational services Argentina, China Hong Kong, Egypt, India, Korea, Kuwait, Romania, Russia, Singapore, Thailand, Turkey, Ukraine Argentina, China Mainland, Egypt, India, Malaysia, Mexico, Philippines, South Africa, Thailand, Turkey China Mainland, Egypt, Malaysia Romania, Russia, Thailand, Turkey, Ukraine Argentina, Brazil, Egypt, India, Indonesia, Philippines, Romania, Turkey, Ukraine Argentina, India, Romania China Hong Kong, India, Singapore Argentina, Egypt, Mexico, Romania, Turkey
Important Issues Growing asymmetry between developed and developing countries in global services exports Developing countries are relatively specialised in transport and travel services Developing countries have comparative advantage in one or many services trade sectors Not every developing country is successful services exporter To gain higher market access, developing countries need to take steps to specialize in services sector Will enhance their domestic services market Will strengthen export capacity Available statistical information is particularly scant and inadequate (Developing countries governments are unaware about true potentials!)
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