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Economic and Social Policies, International Relations, PUBLICATIONS

Economic significance of trade in services: Background to negotiations on a Trade in Services Agreement (TiSA)

Written by Wilhelm Schöllmann

Fifty-one members of the World Trade Organization (WTO): Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, Hong Kong, Iceland, Israel, Japan, Liechtenstein, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, South Korea, Switzerland, Turkey and the United States, together with the European Union and its 28 Member States – have been trying to find a way to break the deadlock in the Doha Round on liberalising trade in services since March 2013. These countries together represent over two thirds of global trade in services.

Economic significance of trade in services

© Sondem/ Fotolia

The services sector accounts for more than 70% of GDP in the EU and in other developed economies, as well as for a substantial share of GDP in emerging economies. The sector is also the largest employer in the EU and other advanced economies. Yet the proportion of services trade in total international trade lags well behind its importance in overall economic activity.

Reasons for the low share of services in overall trade include lower tradability of (some) services, under-reporting of the importance of services for overall trade in the balance of payments, and barriers to trade in services.

Policy-makers intervene in the services trade to enhance consumer protection, counter market failures and secure a beneficial equity position. At the same time, government-imposed barriers to trade can reduce the efficiency and range of services provided. As services are instrumental in ensuring the smooth running of the economy, and play an increasing role in facilitating international trade in goods, restrictions imposed on the services trade may lower the international competitiveness of an economy.

Calculating equivalent tariffs for non-tariff measures and compiling indices on the restrictiveness of the services trade help to enable comparison of non-tariff measures across countries and serve as a reference point for governments and negotiators when considering renegotiating the framework governing international trade in services.

Read the complete In-depth analysis here

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