Global Services Trade Still Suffers from Slowdown

Global exports of commercial services, which now constitute more than two thirds of global trade, grew by a relatively anemic 2 percent in 2013 to US$4.42 trillion, according to preliminary estimates by the United Nations Commission on Trade and Development and the World Trade Organization.

Developing economies led the world by percentage increase, while the developed economies of the west saw a slight decrease, according to UNCTAD?s annual report on services trade. The term services covers a wide range of products, from the exchange of financial assets to transport, telecommunications and computer services, construction, financial services, wholesale and retail distribution and much more.

While much of the world sees global trade in terms of the shipment of components like electronics, cars and steel, the share of services has grown steadily, now standing at 77 percent of US total trade - and 78 percent of American employment - making it the world leader. The ratio of services trade to total trade is as low as 54 percent for middle-income countries and 47 percent for low-income ones. Even in the low-income group, however, trade in services is considered to be generally a core economic activity, according to a study by the WTO.

The global services trade has come off sharply in the wake of the global credit crunch that struck world financial markets in 2007 and 2008. There was a significant decline in the eurozone, where services trade fell by 3 percent. The North American countries managed to achieve better results with a 4 percent increase.

Developing economies now hold 30 percent of the global services market, up sharply from 2000, when their share stood at 23 percent. However, growth remains constrained by protectionism. While inability to liberalize trade in agriculture gets a good deal of the blame for the paralysis of the Doha Round of trade liberalization talks, which have been stalled since they were introduced in 2001, trade in services is also a big factor. The legal, medical, accounting and other professions in the United States, for instance, protect their franchises through examination processes that are slanted to keep professionals from other nations out. Thus a fully trained Filipino doctor, for instance, often must go to the United States to work as a nurse if he or she wants to practice in that country while awaiting passage of the board exams.

World Trade Organization Director General Pascal Lamy, in a press conference earlier this week, urged progress on the stalled Doha round, saying protectionist pressures are building in the protracted global slowdown and could become overwhelming. However, at this point it looks extremely unlikely that any progress will be made as developed nations led by the United States and the Eurozone and developing nations led by China and India have adopted intractable and opposing positions.

Source: UNCTAD / WTO

Because of the intangible nature of much of the services trade, which can?t be priced precisely, it is difficult to make exact estimates of the total global bill. World and regional trade estimates are aggregated from individual reporters' balance-of-payments statistics taken from the International Monetary Fund, Eurostat, the UN Statistical Division, the Organization for Economic Coopertion and Development and other international organizations. Figures are supplemented with estimates for missing data, as well as statistics from national sources.