4.10 Structure of service exports
See Table 4.10 hereCommentary
About the data
Definitions
Data sources
Services are the fastest-growing component of world trade. As the markets for services have expanded, so have foreign direct investment (FDI) flows to services, which now account for close to one-fifth of all trade and three-fifths of all FDI. Most of the FDI in services has flowed between OECD countries, but developing countries’ share of this investment has been increasing.
Although services statistics have many deficiencies, it is clear that trade in services has grown faster than trade in merchandise in the past decade. During 1980–95 service trade grew an average 8 percent a year, compared with 6 percent for merchandise trade (in nominal terms). The rapid growth boosted commercial services’ share in global trade from 16 percent in 1980 to 18 percent in 1995. The most dynamic trade is in such private services as financial, brokerage, and leasing services. Growing at an average annual rate of 9.5 percent, trade in these services rose from 37 percent of commercial services trade in 1980 to 45 percent in 1993.
International trade in services is not a new phenomenon: transport, travel, tourism, and insurance have long been important traded activities. What is new is the rapid expansion of international service transactions in the past decade or so. There are also new modes of supply, such as transmitting services over electronic networks. Many services considered nontradable only a few years ago are now actively traded. Seamless, around-the-clock, around-the-globe financial services, for example, have become standard.
Rapid advances in telecommunications and information technology have been a central force in the internationalization of services. Also important have been the deregulation of service industries and liberalization of foreign trade and investment regimes. For developing countries taking advantage of the more liberal trade and investment regimes, the internationalization of services offers opportunities for expanding into new exports and attracting more FDI. It should also broaden the range of producer services and technical capabilities that developing countries can provide by importing the new technologies.
By making more activities in industrial countries contestable and thus more subject to competition and by revealing new complementarities, technological progress has created important new opportunities for long-distance service exports from developing countries.
• Services refer to economic output of intangible commodities that may be produced, transferred, and consumed at the same time. International transactions in services are defined by the IMF’s Balance of Payments Manual (1993), but definitions may nevertheless vary among reporting economies.
• Transport covers all transport services (sea, air, land, internal waterway, space, and pipeline) performed by residents of one economy for those of another and involving the carriage of passengers, the movement of goods (freight), rental of carriers with crew, and related support and auxiliary services. Excluded are freight insurance, which is included in insurance services; goods procured in ports by nonresident carriers and repairs of transport equipment, which are included in goods; repairs of railway facilities, harbors, and airfield facilities, which are included in construction services; and rental of carriers without crew, which is included in other services.
• Travel covers goods and services acquired from an economy by travelers for their own use during visits of less than one year in that economy for either business or personal purposes.
• Communications, computer, information, and other services cover international telecommunications and postal and courier services; computer data; news-related service transactions between residents and nonresidents; construction services; royalties and license fees; miscellaneous business, professional, and technical services; personal, cultural, and recreational services; and government services not included elsewhere.
• Insurance and financial services cover various types of insurance provided to nonresidents by resident insurance enterprises and vice versa, and financial intermediary and auxiliary services (except those of insurance enterprises and pension funds) exchanged between residents and nonresidents.
Data on exports and imports of services come from the balance of payments data files of the International Monetary Fund (IMF). The IMF publishes balance of payments data in the International Financial Statistics and in the Balance of Payments Statistics Yearbook. The feature text was adapted from the World Bank’s Global Economic Prospects and the Developing Countries 1995.