1. 1 SERVICES AND DEVELOPMENT February 2004 Trade in Services Division WTO 02.04

2. 2 INTERNATIONAL SERVICES TRADE: General Picture

3. 3 Services: Economic importance n Share in Production and Employment Between less than 30 and over 70 per cent, depending on resource structure and level of development of an economy n Share in Total World Trade Some 20 percent (BOP-basis), but more rapid expansion than merchandise trade

4. 4 Chart I: Structure of output (value added), 1990 and 2001 5 4 34 30 60 66 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 19902001 Source: World Bank, World Development Indicators 2003. Services Industry Agriculture

5. 5 Chart II: Structure of Output of Selected Countries, 2001) Source: World Bank, World Development Report 2003, Washington D.C.

6. 6 Chart III: World exports of goods and services (1980 - 2002) 0 50 100 150 200 250 300 350 400 450 198019821984198619881990199219941996199820002002 Source: WTO Statistics Division. (1980=100) 0 1500 3000 4500 6000 7500 9000 10500 12000 13500 Billion $ Exports of GoodsExports of Commercial Services GPD growth Growth

7. 7 INTERNATIONAL SERVICES TRADE: Implications for Development

8. 8 A Priori Expectations “The gains from liberalizing services may be substantially greater than those from liberalizing trade in goods, because current levels of protection are higher and because [there would be] spillover benefits from the required movement of capital and labour.” (World Bank, 2001). Infrastructural services such as telecommunications, finance and transport are crucial determinants of overall economic efficiency and growth.

9. 9 Services trade and development: Some estimates Lack of competition in maritime transport (cargo reservation, restrictions on port services, collective rate setting, etc.) can increase freight rates up to 25 % on certain routes. Economies that fully liberalized investment in telecom and financial services grew about 1.5 % faster over the past decade than others. Services liberalization in developing economies could provide as much as US$6 trillion in additional income between 2005 and 2015. Source: World Bank, 2001.

10. 10 Services trade and development: Necessary conditions n Appropriate sequencing of reforms [(re-)regulation/liberalization/privatization] Contestable markets (effective competition) to prevent private rent-seeking n Effective regulation, including prudential rules, to protect consumers and the public interest Note: The Preamble of GATS expressly recognizes “the right of Members to regulate and to introduce new regulations… to meet national policy objectives”.

11. 11 INTERNATIONAL SERVICES TRADE: Participation of Developing Economies

12. 12 Chart IV: Services exports by economic groups, 1990-2000 (per cent) 1980 Developed 77% Developing 23% 1990 Developed 79% Developing 21% 1995 Developed 74% Developing 26% 2002 Developed 74% Developing 26% Note: Developing countries include LDCs and transition economies.

13. 13 Chart V: Services exports of different economic groups, 1990-2000 (Average annual percentage change) 6.1 5.4 5.5 9.9 8.4 0 2 4 6 8 10 12 WorldDeveloped countries LDCsE-EuropeDeveloping countries (incl. LDCs, E-Europe) Source: WTO Statistics Division.

14. 14 Chart VI: Structure of commercial services exports of economic groups, 2001 (percentage share) 2221 25 31 28 37 47 50 38 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% WorldDeveloped countries Developing countries (incl. LDCs, E-Europe) Source: WTO Statistics Division. Other commercial services Travel Transport

15. 15 Chart VII: Selected exporters of commercial services (US$ million)

16. 16 INTERNATIONAL SERVICES TRADE: Sector- and Mode-Related Interests of Developing Economies

17. 17 Importance of individual sectors (in addition to travel & transport) Business Process Outsourcing(?) Software Development(?) Construction(?) Health(?)... (?) Imponderables: role of technical progress, changes in relative prices, policy intervention Health(?)

18. 18 Importance of individual modes Estimates: - Mode 1 = > 25 %- Mode 2 = < 15% - Mode 3 = < 60% - Mode 4 = < 5% (?) Situation may differ across sectors, depending on modes 2 or 4 being: –the main relevant modes –an alternative to other modes –a complement and facilitator of trade

19. 19 THE END