Economic research and trade policy analysis
Introduction
Over the last 50 years the remarkable opening and integration of the world economy in combination with the rapid pace of technological change has contributed to raise the living standards of billions of people around the world including some of the poorest. But this process of globalization has necessarily been accompanied by economic change churn and displacement as labour together with other factors of production shifted from declining industries to expanding ones.
Making Globalization More Inclusive
Policies aimed at helping workers adjust to the impact of trade or technological changes can provide a helping hand to the workforce and increase the benefits of open trade and new technologies. This publication contributes to the discussion on how governments can help make international trade more inclusive and ensure that the benefits of open trade are spread more widely.
Why services trade matters
This section examines the role of trade in services in helping countries to achieve rapid and inclusive growth. Section C.1 discusses and attempts to quantify how services trade benefits the economy and promotes growth. Section C.2 discusses the role trade in services plays in enhancing domestic firms’ competitiveness not only in the services sector but also in manufacturing. Section C.3 considers how services trade promotes inclusiveness in a number of areas such as skills gender and location of economic activity. Section C.4 concludes.
What role for international cooperation on services trade policy?
Trade in services continues to evolve. Technology and regulatory reforms are driving a fundamental transformation creating new demand while simultaneously helping to reduce trade costs and opening further opportunities to trade services. Under the impetus of global value chains demographic trends rising per capita incomes in emerging markets and environmental concerns demand for foreign-supplied services is on the rise. The evolving avenues actors and composition of services trade increase its potential to contribute to inclusive economic growth and development but also present a number of challenges that need to be addressed to fulfil this potential.
Technical notes
WTO members are frequently referred to as “countries” although some members are not countries in the usual sense of the word but are officially “customs territories”. The definition of geographical and other groupings in this report does not imply an expression of opinion by the WTO Secretariat concerning the status of any country or territory the delimitation of its frontiers nor the rights and obligations of any WTO member in respect of WTO agreements. The colours boundaries denominations and classifications in the maps of the publication do not imply on the part of the WTO any judgement on the legal or other status of any territory or any endorsement or acceptance of any boundary.
Introduction
Services have become the most dynamic sector of world trade – but in ways that are not always recognized or understood. Just as services have come to dominate many national economies they are playing a bigger role in the global economy as well. Many factors are driving this – including consumption liberalization and investment – but the game-changer is technology. Services that were once difficult to trade because they could only be delivered in person are becoming far easier to trade because they can be delivered digitally. The 2019 World Trade Report explores this globalization of services – why it is happening how it is impacting economies and where new policy approaches are needed.
Conclusions
Over the last few decades services have become the backbone of the global economy and the most dynamic component of international trade. Services are increasingly easier to trade thanks in large part to digitalization. From online education to virtual law firms technology is penetrating all services sectors transforming services traditionally delivered face-to-face into remotely tradable services. Trade long dominated by the exchange of goods increasingly involves services transforming the global economy in the process.
Services trade in the future
This section attempts to provide some guidance as to how services trade patterns will change. Using a novel approach this section begins by showing recent trends in trade costs related to services and identifying the factors affecting these costs. Then major future trends in technology demography income and climate change are examined with a view to explaining how these trends can affect the choice of which services countries trade and with whom they trade as well as how they trade. Finally the potential impact of these trends on trade in services is quantified using the WTO Global Trade Model.
Foreword
Services are often largely overlooked in discussions on global trade yet they account for the majority of trade in many developed economies and are growing rapidly in many developing economies as well. This is perhaps because services are less tangible and the issues surrounding services trade are often more complex. This report therefore sets out to demystify trade in services. It aims to shed new light on this essential part of global trade provide a detailed picture of trade in services today and consider how it might evolve in the coming years particularly as new technologies make some services increasingly tradeable.
Acknowledgements and Disclaimer
The World Trade Report 2019 was prepared under the general responsibility of Xiaozhun Yi WTO Deputy Director-General and Robert Koopman Director of the WTO Economic Research and Statistics Division. The Report was coordinated by Emmanuelle Ganne and Stela Rubínová (Economic Research and Statistics Division) and by Antonia Carzaniga (Trade in Services and Investment Division). The lead authors of the Report are Barbara d’Andrea Andreas Maurer Roberta Piermartini and Robert Teh (Economic Research and Statistics Division) and Antonia Carzaniga. Other authors are Marc Auboin Eddy Bekkers John Hancock Kathryn Lundquist José-Antonio Monteiro Coleman Nee Victor Stolzenburg Ankai Xu and Qing Ye (Economic Research and Statistics Division); Pamela Apaza Markus Jelitto Joscelyn Magdeleine Juan Marchetti Martin Roy and Lee Tuthill (Trade in Services and Investment Division); and Rainer Lanz (Development Division).
Services trade in numbers
This section presents the importance of trade in services in the global economy by using an experimental dataset developed by the WTO called Trade in Services by Modes of Supply (TISMOS). This dataset captures services supplied through the four modes of supply categorized in the WTO General Agreement on Trade in Services (GATS); traditional services trade statistics cover only three of the GATS modes of supply. This section also discusses the participation of developing economies including least-developed countries (LDCs) the importance of micro small and medium-sized enterprises (MSMEs) and the role of women in services trade. Finally the section explores the content of services value-added in international global value chains.
World Trade Report 2019
Services have become the most dynamic component of global trade with an increasingly important role in the global economy and in everyday life. Yet the extent of services’ contribution to global trade is not always fully understood. The World Trade Report 2019 attempts to remedy this by examining how trade in services is evolving and why services trade matters.
Multiproduct Firms, Tariff Liberalization, and Product Churning in Vietnamese Manufacturing
Multiproduct firms are the dominant players in international production and trade (Bernard Jensen and Schott 2010; Goldberg et al. 2010a). Moreover these firms are active in alternating their combination of product varieties. In fact Bernard Jensen and Schott (2010) have documented a frequent change in the product mix in the United States (US) where almost 50% of multiproduct firms change their product mix every 5 years. Indeed firms’ adjustment in product scope constitutes one important layer of firm heterogeneity (Nocke and Yeaple 2006).
Industry Wages and Tariffs ofthe Rest of the World
There is widespread evidence that countries use trade policy to protect their workers. Sector-level tariffs typically correlate positively with sector wages and employment. This chapter examines the mirror question of how tariffs of other countries of the world affect industry wages at home. To answer this question we rely on an industry-level analysis of wages in a sample of developing and developed countries spanning from 1976 to 2004. The effect of trade policy is identified through differential exposure of trade policy changes abroad for workers in different industries.
Responses to Trade Opening: Evidence and Lessons from Asia
Over the last 3 decades several developing countries have liberalized their trade regimes. This may have happened either due partially to conditionalities imposed by international organizations such as the International Monetary Fund in response to emergency requests for loans in the context of a country’s accession to the World Trade Organization or as a result of the signature of a preferential trade agreement. In many cases the reforms may have stemmed from a country’s own disappointment with its growth performance during its import substitution phase. While movement toward free trade is expected to expand the size of the overall economic pie such changes always produce both losers and winners. In fact it is this creation of winners and losers along with “individualspecific uncertainty” (Fernandez and Rodrik 1991) about who benefits and who loses from reforms that has led to the delays in trade reforms appropriately called “status quo bias.”
Foreword
Over the last decade attitudes toward globalization have shifted in a number of developed countries contributing to rising trade tensions. A growing public perception holds that the integration of goods services labor and capital markets only benefits a happy few while leaving many people behind. This change in attitudes has been an important factor in the transformation of the political landscape with the election in several countries of politicians who question the effects of international cooperation and who have adopted fewer cooperative approaches to trade and migration.