Crisis-proof services: Why trade in services did not suffer during the 2008-09 collapse
Andrea Ariu24 December 2013
The Global Crisis saw a sudden and synchronised fall in exports worldwide. One quirk in this Great Trade Collapse was the surprisingly robust performance of service exports. This column investigates the differences using Belgian firm-level data, finding that most of the differences stem from business-service exports. These services fell less mainly due to demand-side factors as their demand reacted to the macro fluctuations more like consumables than durables.
Following the failure of Lehman Brothers in September 2008, international trade in goods collapsed by 30%. This dramatic collapse was highly synchronised across countries and mostly concentrated in the category of durable goods (Baldwin 2009). Surprisingly, international trade in services barely reacted to the crisis. Many service industries continued to grow at a brisk pace, with the only exception being transport services which experienced a modest decline (Borchert and Mattoo 2009, Francois and Woerz 2009).
International trade is traditionally thought of as goods crossing borders. Trade in services, however, is becoming increasingly important for high-income countries. This column, using Belgian firm-level data from 1995-2005, argues that trade in goods and services differ deeply in key aspects such as firm participation rates, size and frequency of shipments, entry and exit rates in foreign markets and in growth strategies.
International trade is traditionally thought of as goods crossing borders. Trade in services, however, is becoming increasingly important for high-income countries and its role is likely to grow substantially over the next years (Francois and Hoekman 2010).
Trade in services and goods differ along several critical dimensions (WTO 2010).
Services trade, the IT revolution, and occupational tasks
Giordano Mion, Andrea Ariu25 February 2012
Services trade has increased dramatically in the last 20 years. This column examines data from Belgium and suggests that the change in IT use does not translate into higher services exports. It argues instead that offshoring is a key factor contributing to the rise of services trade.
Lowering trade costs in services markets: The final frontier?
Sébastien Miroudot, Jehan Sauvage, Ben Shepherd17 January 2011
Trade in the services sector is a central theme of the Doha trade negotiations. This column argues that restrictive policies can make trade costs in the services sector up to three times higher than in the goods sector. Such high costs, it claims, are holding back the growth of trade in services.
Nearly two-thirds of all economic activity in the G20 – and over three-quarters in France, the US, and the UK – is made up of services. So it is striking that while goods exports account for nearly 20% of the G20’s combined GDP, the corresponding figure for services is less than 5%. Although services trade was growing rapidly prior to the full onset of the global financial crisis – by 19% in 2007, according to the WTO – it still represents a surprisingly modest share of the international economy.
Trade in services under the Euro-Mediterranean partnership: An alternative to migration?
Bernard Hoekman, Çağlar Özden02 January 2011
High unemployment among the young and low skilled is fuelling anti-immigration sentiments across the OECD. This column argues that, in Western Europe, demographic trends are such that demand for many workers will exceed supply. It proposes a framework that enables the temporary movement of services providers, a policy that could address Europe’s labour needs while placating public resistance.
Recently released data show that the US population has increased 9.7% since 2000, reaching almost 309 million (US 2010 Census). While low by US standards, this growth rate far exceeds European rates. Europe is facing a demographic dilemma. Low fertility rates and increased life expectancy mean that labour forces are shrinking as dependency ratios are rising.
International trade in services: A portrait of importers and exporters
Holger Breinlich, Chiara Criscuolo02 July 2010
Services trade accounts for a large and growing share of international trade - but we know very little about the firms carrying out this trade. Using firm-level data from the UK between 2000 and 2005, this column paints a detailed picture of importers and exporters of services, and discusses some of the resulting implications for economic policy.
Trade in services has been the fastest growing component of international trade since the early 1990s, with average annual growth rates of close to 10% and a total cross-border export value of $2,800 billion in 2006 (WTO 2008). Over the same period, the composition of services trade has shifted dramatically in favour of high-skill intensive categories such as business services, provoking heated debate about the consequences of services offshoring.
Goods trade has collapsed; services trade hasn’t. The likely reasons are that demand for many traded services is less cyclical and their production is less dependent on finance. As services trade seems inherently less affected by crises, services should play a more prominent role in developing countries’ diversification strategies.
The gloom and doom about goods trade has obscured the quiet resilience of services trade. Services account for over one-fifth of global cross-border trade; for countries such as India and the US, it is close to one-third of all exports. Data on cross-border trade from the US reveals that since mid-2008, trade in goods declined drastically but trade in some services held up remarkably well.1 More aggregate data available for other OECD countries also suggests that services trade suffered less from the crisis than goods trade.
Summer Programme on the WTO, International Trade and Development 2010
28 June - 9 July 2010, Geneva
The fourth Summer Programme on the WTO, International Trade and Development will take place from June 28 to July 9, 2010 in Geneva. It will provide participants with a unique opportunity to enter into the analysis and atmosphere of multilateral trade. The programme, delivered with the Graduate Institute Centre for Trade and Economic Integration, combines economic, legal and political analysis of international trade and development.
Lectures and discussions will shed light on the following questions: the reasons why countries open their economies to trade and the reasons why they protect domestic industries, the means and pathways they use to either open or protect, what these considerations mean for the multilateral trading system and their implications for economic development.
- Professionals keen to improve their knowledge on current major issues in international trade
- Students at MA level
Deadline for Applications
April 1, 2010
Programme on the WTO, International Trade and Development 2010
Procurement that pays: Foreign outsourcing, innovation, and profit dynamics
Holger Görg, Aoife Hanley07 September 2009
This column examines the impact of offshore outsourcing on firms’ profits and innovation. Using data on 2,000 Irish firms, it shows that the purchase of foreign inputs raises both profits and innovation. Offshore outsourcing seems to improve competitiveness and bode well for an economy’s long-term economic health.
Outsourcing is an emotive issue. It is an issue on which elections are fought. Consider US President Barack Obama’s fixation on outsourcing in the run up to the November election and the subsequent changes to the US tax system designed to retain US jobs. Business Week (2009) summarised American fears of outsourcing: “US voters have always responded to the fear that the best American jobs could flee overseas…Nobody ever lost a popularity contest by calling outsourcing or offshoring bad names”.
How many jobs are onshorable? Re-interpreting the Blinder numbers in the light of new trade theory
Richard Baldwin15 June 2009
According to Alan Blinder, constant improvements in global communications will bring much more offshoring of “impersonal services’’, with an estimated 30 million to 40 million US jobs potentially offshorable. This column warns against taking these numbers at face value and recalls that the US is actually a net insourcer. With the advance of communication technologies, the US should see lots more service jobs “offshored” and lots more “onshored”.