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| Trade in services: New horizon for globalization |
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April-June 2007 |
In 2004, services represented 69% of world GDP, and 72% of total workforce of OECD countries. In contrast, the share of services in international trade is astonishingly low: it is only one fifth of world trade, and about 23% for OECD countries. Of course, many services are hardly tradable because their delivery requires face to face relationships. But, the persistence of political barriers to trade also plays a major role in explaining this relatively low contribution to world trade. Since 1995, the GATS (General Agreement on Trade in Services) lays the framework for the multilateral negotiations in services. In parallel, liberalization progresses also within the European Union. To eliminate trade barriers in service sectors, countries must reform the domestic regulations (including those controlling migrations). That explains why negotiating free trade is particularly difficult and controversial, as proved recently by the sharp opposition to the European directive on services (i.e. the so-called “Bolkestein directive”). Agnès Bénassy-Quéré, Cyrille Schwellnus & Deniz Ünal-Kesenci (2006) and Deniz Ünal-Kesenci (2006) present the key issues of multilateral and regional trade negotiations. Similarly, an analysis of the expected consequences of the directive on services is given by Cyrille Schwellnus (2006). To shed light on these topics that are at the top of the agenda of trade negotiators, one need reliable data and accurate economic analyses.
In order to picture the pattern of world trade in services, Isabelle Bensidoun and Deniz Ünal-Kesenci (Ünal-Kesenci, 2006; Bensidoun and Ünal-Kesenci, 2007) gathered several database. Working with data on trade in services is not easy. Balance of payments data is hardly compatible with data recording supply of services by affiliates on foreign markets (FATS), which is available for some OECD countries. Moreover, bilateral trade flows are scarce and they are not harmonized. Isabelle Bensidoun and Deniz Ünal-Kesenci had to deal with these issues to provide an original study based on relevant data. They show that, even if trade in services has not grown significantly faster than trade in goods, its structure has deeply changed during the last decades. The share of transport activities has fallen dramatically, while trade in some specific services (such as insurance and finance, or information technology) has risen sharply. Moreover this analysis shows clearly that the USA and the European Union are the two main exporters of services. The EU is relatively specialized in insurance, finance and computer and information services, while the USA has a strong advantage in cultural and recreational services and royalties and license fees. Even if some other countries, like India or Israel have a growing market share in some service industries, the leading position of the EU and the USA explains why they consider trade negotiations in services as a key issue. Finally, these studies point out that trade in services that is reported in current accounts of balances of payments represents only a minor share of total trade. Indeed, considering the countries for which FATS data are available, they show that the largest part of countries exports is actually direct sales by foreign affiliates.
A first step to evaluate the impact of trade liberalization in services consists in estimating empirically the effect of domestic regulations on countries’ exports. Cyrille Schwellnus (2007) uses previously unexploited data to perform a panel estimation of a gravity equation that partly controls for unobserved country heterogeneity. His estimates of the elasticities of services trade with respects to domestic regulations are approximately 1/2 of the ones proposed in previous literature. Even with such relatively small elasticities, the consequence on multilateral trade of removing domestic regulations is still rather large. However, it is also shown that these elasticities decrease with the level of domestic regulation. In other words, any further progress in deregulation should have less impact on trade flows than previous ones.
Following a different but complementary strategy, Yvan Decreux and Lionel Fontagné (2006) rely on a Computable General Equilibrium assessment to evaluate the impact of freer trade in services. They use the MIRAGE model, to simulate the consequences of the implementation of trade facilitation that are contemplated by trade negotiators of the Doha round. As usual in this kind of exercise, the consequences on world welfare of liberalizing trade in goods are relatively modest. But when services are introduced in the picture, a very interesting outcome appears. With a 50% reduction of the obstacles to trade in services, welfare gain doubles for the world economy. For the European Union, an ambitious liberalization of services would translate into large increases in exports of services: a 15% increase of exports of business services, a 10% increase for transport, and 8% for financial and insurance services. Besides these direct analyzes of trade in services, Thierry Mayer, Anne-Célia Disdier, Silvio Taï and Lionel Fontagné (2006) show that liberalizing trade in some kinds of services may also have an indirect positive consequence on manufacturing trade. They test whether bilateral trade of cultural goods and services contributes to ease cultural differences between trade partners and thus fosters trade of more traditional goods. They conclude that a 10% increase in bilateral trade of cultural goods and services should increase trade in other goods up to 4.25%.
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BÉNASSY-QUÉRÉ, A., SCHWELLNUS, C. & ÜNAL-KESENCI, D. (2006), Echanges internationaux : services compris, La Lettre du CEPII N° 255, April.
BENSIDOUN, I. & ÜNAL- KESENCI, D. (2007), Mondialisation des services: de la mesure à l’analyse, CEPII Working Paper, forthcoming.
DECREUX, Y. & FONTAGNÉ, L., (2006), A Quantitative Assessment of the Outcome of the Doha Development, CEPII Working Paper N° 2006-10.
MAYER, T., DISDIER, A.-C., TAI, S. & FONTAGNÉ, L. (2007), Etude sur les échanges internationaux de produits culturels français : situation et perspectives, Rapport pour le ministère de la culture.
Schwellnus, C. (2006), La directive services : une analyse économique, La Lettre du CEPII N° 252, January.
SCHWELLNUS, C. (2007), The Effect of Domestic Regulation on Services Trade Revisited, CEPII Working Paper N°2007-08.
ÜNAL- KESENCI, D. (2006), Services: nouveau champ de la mondialisation, in L’économie mondiale 2007, Repères, La Découverte. |
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