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What is international trade in service?
The World Trade Organization has defined 12 broad areas of trade in services, including business services, communication services, construction and related engineering services, financial services, tourism and travel-related services, entertainment, cultural and sports services, transport services, health and social services, education services, distribution services, environmental services and other services. While in life, the modern world trades in services everywhere! For instance, trade in services permeates every industry and every sector, agriculture, ranching, construction, manufacturing and so on.
Let's see some examples in real life, for instances, spending money to send a box of epidemic prevention supplies to a friend overseas uses postal transport services; going to the cinema to watch an overseas imported film uses entertainment and cultural services; opening distance learning software to learn English from a foreign teacher uses educational services, etc.. Looking from this perspective, you may find it's really connected to your daily life maybe much more than the physical commodities.
Among all the countries exporting international trade in services, we couldn't ignore China, which presents a huge market opportunity for the global services industry, achieving an average annual growth rate of 9.6% from 2012 to 2019, when global service imports grew at an average annual rate of only 3.9%. China is the largest contributor to global service import growth at 16.8%. It is expected that in the next 15 years, China's service imports will exceed $10 trillion, injecting a steady stream of new momentum into the world economy.
Due to the excellent performance that China's service industry has brought to the benefits of the commerce globalization, the Global Trade in Services Summit of the 2020 China International Fair for Trade in Services(CIFTIS 2020) will be the indispensable connectivity platform for multicultural and diversified economy to develop altogether.
Why is it so promising in international trade?
First of all, let's still start with the CIFTIS, as we mentioned before, it could be a boosting accelerator for the economy recovery from countries that still suffer. As the first online and offline major international economic and trade event held in China since the outbreak of the pandemic, the fair attracted 18,000 enterprises and organizations from 148 countries and regions, 100,000 registered exhibitors to participate.
And this happens for a reason. According to statistics, 60 percent of the total output of the world economy comes from the service industry, and service exports, which account for 20 percent of total global exports, contribute nearly half of the added value of global foreign trade. The World Trade Report released by WTO at the end of last year pointed out that trade in services has become the most dynamic component of international trade.
Besides, WTO Deputy Director-General also said that services would be an important area for future economic recovery and that the world needed more than ever to create an enabling environment for trade in services through international cooperation. Under the new situation where traditional trade is transformed into digital trade, the industrial value chain relies more on research and development and innovation, and the investment in intangible assets is increasing, trade is not only about trade in goods, but also about technology, finance, data, intellectual property rights, etc. Trade in services and digital trade are becoming the new engines of global trade.
Realistic and urgent demand from international trade stakeholders
Let's take a look at some facts from global economy researches:
Currently, global trading powers, including the United States, the European Union, Japan and China, are competing to shape the future of the digital economy and digital trade. Among the more than 40 multilateral and bilateral regional agreements published by the WTO, 32 agreements have dedicated separate chapters to digital trade or e-commerce, of which 13 involve U.S.-led and 7 EU-led agreements, while other agreements are basically signed between countries or regions that have already signed agreements with the U.S. and Europe, especially in new types of trade agreements, such as CPTPP and TISA, to protect intellectual property rights, cross-border trade, and to promote the development of the digital economy. The free flow of data and the protection of data privacy are key concerns, and countries are playing a new game of big power rule dominance.
Globally, in the era of the services economy, the world needs to work together to create a platform for promoting cooperation in services trade. At present, the value added of the world's service industry accounts for 68% of GDP, and the service industry accounts for more than 50% of world employment. The tertiary industry accounts for half of the stock of international direct investment. In 2019, cross-border trade in services will reach $6.1 trillion, accounting for 24.5% of total global trade.
Developed countries are highly competitive in global trade and investment in services and have a clear advantage in developing services trade cooperation. This year's global pandemic has led to disruptions in the movement of people, which has had a greater impact on services and services trade. As developed countries have become more dependent on services and trade in services, the impact of the pandemic on economic growth and employment in developed countries has also become more urgent.
According to the report International Trade in Services 2020 - Quarter 1 from United Nations Conference on Trade and Development, global trade in services has dropped heavily, the demand awaits to be recovered and met.
Apparently, as it has shown above from the report, services growth from Asia and Oceania has the most outstanding capacity to be able to meet the service demand from the developed countries.
The boosting on digital services trade platforms
It's not recent news that digital services trade platforms are taking a crucial role in people's lives. We've talked about the Speculated Future Of E Commerce in our previous article before, you have every reason to notice the boosting due to the catalyzing of COVID-19.
Innovation, especially digital technology innovation, is an important force driving the development of trade in services. High-tech modern trade in services is the most dynamic part of the development of world trade in services, and digital trade in services is the new growth point of global trade in services. Digital technology not only drives global industrial change, but also drives the increasing digitization rate of global trade in services. It is estimated that more than half of the global trade in services has been digitized and more than 12% of cross-border physical trade has also been realized through digital platforms. Sharing the global digital dividend is a common desire of all countries in the world. In particular, under the pandemic, the accelerated development of the global digital economy and digital trade will profoundly change the future development pattern of the world industry and trade.
According to an ITC survey, 82% of the 2,200 global small and medium-sized enterprises (SMEs) have successfully expanded their export markets through e-commerce platforms. From the united organizations and governments' perspective, OECD, WTO and IMF have already made their efforts to popularize how to measure digital trade by editing a handbook to cause attention to the majority.
The current trend of digitization, networking and intelligentization has led to the accelerated evolution of the digitization of trade in services, especially during the global pandemic, telemedicine, online education, shared platforms, collaborative office, cross-border e-commerce and other services are widely used.
The heavy dependency from developed countries
In the case of developing countries, changes in the structure of trade in services are basically consistent with changes in the structure of world trade in services, but overall their trade in services still relies mainly on traditional services such as tourism and transport, while new services trade with bright prospects is mainly occupied by developed countries. At present, the service industries in which developing countries have certain advantages are still some labor-intensive projects (such as export of labor services, engineering contracting and some tourism services), while developed countries have maintained obvious advantages in new knowledge-intensive service industries such as finance, information, technology, advertising and consulting. As there is a huge difference in the level of science and technology between developing and developed countries, this imbalance is aggravated by the high degree of informatization and intellectualization of trade in services, and developed countries are undoubtedly the biggest beneficiaries of the liberalization of trade in services.
Among developing countries, trade in services grew fastest in developing countries and regions in Asia, slowest in sub-Saharan Africa and intermediate in Latin America and the Middle East and the Mediterranean (see table 10). This growth pattern is closely related to the per capita income levels of the various country groups, i.e. the highest growth is observed in high-income countries and the lowest growth in LDCs. In terms of specific countries and regions, financial services in Hong Kong, and Singapore; construction services in the Republic of Korea; computer software services in India; transport services in Hong Kong, and Panama; and tourism services in some countries and regions, such as Egypt, are prominent.
