Services trade is crucial to emerging growth prospects
Services trade receives far less focus than goods trade but exports of services outpaced goods shipments from 2000-16
Source: World Bank World Development Indicators
Outlook
Trade diversification is a key difference between emerging markets’ (EMs) growth prospects. Services trade is outgrowing merchandise trade, accounting for over 20% of global trade, up from 16% in 2011 and driven by ICT and business services outsourcing.
EMs account for over 20% of services exports, up from close to 10% in the early 1990s. However, while they account for over 20% of ICT and transport exports, and nearly one-third of tourism exports, they account for less than 10% of financial and insurance exports.
If EMs are to erode advanced countries’ dominance in services trade, national policymakers and international organisations will need to work to improve digital as well as physical infrastructure.
Impacts
- Technology transfer is key to EM growth prospects; China will resist giving way in the US ‘unlawful’ practices probe, which may take a year.
- An International Trade Centre paper in July highlighted EM services trade scope, recommending reducing costs and using regional initiatives.
- Over 55% of UK services exports are of finance, insurance, law or accountancy; the EU is the top recipient, a Brexit bone of contention.
- Beyond Brexit and White House calls for protectionism, trade liberalisation will maintain momentum, underpinning strong services growth.