Trade in services

Trade in services has generally been thought to account for just over 20 % of world trade. 1 However, over the last decade, there have been high growth rates in services trade in many countries: the WTO Secretariat estimates that overall exports of services traded on a commercial basis grew by an average of 13 % per annum on average between 2000 and 2008. 2 Hoekman and Mattoo cite IMF data suggesting that services imports tripled between 1994 and 2004. 3 In the 1970s to the early 1990s, as comparative advantage in the production of many manufactured goods has shifted to the newly industrializing countries (NICs), the developed industrial countries became increasingly concerned with enhancement of trading opportunities in services, particularly in areas such as fi nancial services, insurance, telecommunications, transportation, computing and professional services (e.g. architecture, engineering and law). Developing countries initially tended to resist liberalization, thinking that they were at a relative competitive disadvantage in these areas. In fact, as recent statistics show, some of the highest growth rates for services exports have been in developing countries, particularly in Asia. In the case of India, services now account for about one-third of all exports, about the same percentage as the USA. 4 According to Hoekman and Mattoo, ‘the business services exports of developing countries grew nearly fourfold in the decade from 1995 to 2005. The average annual growth rate of business services exports during this period was 15 percent for Brazil and China and 25 percent for India.’ 5 Very recent data from the WTO Secretariat suggest that these kinds of growth rates have been sustained through subsequent years, with some (seemingly short lived) reversal in the wake of the recent global fi nancial and economic crisis. 6 Moreover, an analysis of recent data by Borchert and Mattoo indicates that services trade has been more resilient than trade in goods through the recent crisis, perhaps, they conjecture, because services trade depends less on external trade fi nance than goods trade and, since services are typically consumed instantaneously, consumers are less likely to have an option to use something they have already purchased rather than replacing it (which they obviously do with durable goods like cars and shoes).