SPEECHES — DG ROBERTO AZEVÊDO
Remarks by DG Azevêdo
Good morning everyone.
Welcome to the launch of this year's World Trade Report, our flagship research publication. It is great to have you here today.
The Public Forum is all about exchanging ideas, sharing knowledge, and hearing new perspectives. That makes it an ideal platform for this publication.
Every year our World Trade Report aims to shed light on how global trade is evolving by identifying a key issue in global trade and examining it in detail. The goal is to inform our debates and deliberations in Geneva and beyond.
This year the topic is the future of services trade. How it has changed since the establishment of the WTO in 1995. What its economic implications are. And how it is likely to evolve further in the years to come.
The report discusses how countries cooperate on services trade and trade policy and considers the prospects for futurecollaboration.
I want to thank the co-ordinators of this year’s report: Antonia Carzaniga, Emmanuelle Ganne and Stela Rubinova. I’d also like to thank colleagues from our Economic Research and Statistics Division and Trade in Services and Investment Division, for their important contributions. You've all done a great job.
From logistics, to finance, to informatics, services have become the indispensable backbone of our economies. Services generate more than two-thirds of economic output. They account for more than two-thirds of jobs in developing countries, and four-fifths of employment in developed ones.
But services also play an increasingly important role in international trade. Global value chains for merchandise could not function, for example, without logistics and communications services. And thanks to digitalization, services that once had to be delivered face-to-face, like education, now can be delivered remotely.
Yet services are often overlooked in discussions on global trade, and the extent of the contribution of services to global trade is not always fully appreciated.
This report attempts to remedy this oversight.
In a moment Emmanuelle will guide you through the report’s key findings.
But let me give you a flavour of how the report illustrates why services trade matters.
Services trade has grown 5.4 per cent per year on average since 2005, faster than trade in goods, at 4.6 per cent on average.
In many developed economies, services also account for the majority of trade.
Services make up a growing share of trade in many developing economies, including least-developed countries. Developing countries' share of global services trade has grown by more than 10 percentage points since 2005 — albeit unevenly across countries.
The report contains new trade data that captures ways of supplying services not covered in traditional statistics. In particular, this refers to what in WTO jargon is called Mode 3: that is, services delivered by a company that has a commercial presence, like an office or a subsidiary, in a foreign country. Once we take services traded through commercial presence into account, we find that services trade was worth US$ 13.3 trillion in 2017. This would put the share of services in global trade 20 percentage points higher than traditional estimates.
So, there is no doubt that services matter for global trade.
Services trade also matters for welfare and social inclusion.
The report shows that trade in services creates meaningful welfare gains for society through a more efficient allocation of resources, greater economies of scale, and an increase in the variety of services on offer. Services trade plays an instrumental role in improving firms' competitiveness, in both services and manufacturing sectors.
Services trade also matters for workers, in particular women, since services play a prominent role in women’s employment. Services exports support many jobs worldwide. And given the lower fixed costs of production, services — and services trade — can offer a more level playing field for micro, small and medium-sized enterprises (MSMEs).
But there is still tremendous untapped potential. Trade costs in services are about twice as high as those in goods. Policy barriers account for some of these costs, of course, despite years of far-reaching, often unilateral, reforms to open services markets.
So, what can we expect in the years to come? And how can this untapped potential be realized?
Service trade is changing really fast. Digital technologies are driving costs down and making it possible to deliver an increasing number of services remotely. Meanwhile, demographic shifts, rising per capita incomes and climate change are increasing demand for health, education, environmental and other services.
But expanding services trade further requires high quality institutions and regulation in importing countries. Reforms anchored in international cooperation could help reduce policy barriers to services trade.
To conclude, services are a vitally important part of global trade. Services trade can create meaningful welfare gains for society and drive inclusiveness. But seizing these opportunities will require policy action — it’s not going to happen by itself. And that policy action will have to happen at the domestic and international levels. Services will have to become a central element of trade policy. And this is what we should all be striving for.
I hope that this report will contribute to inform and advance discussions in this regard. In the same spirit, we recently launched a Services Trade Barometer — a twice-yearly indicator of the changing strength of global services trade.
There is much to discuss — and much to do. Unfortunately, I cannot stay for the debate this morning, but I look forward to receiving a full report of proceedings. And I know that we have a fantastic set of panellists here today to discuss all of these questions.
So thank you all for joining us. And I urge you all to read this report!