The Hindu Business Line : WTO debunks myth of services exports ascendancy

THE World Trade Organisation (WTO) has debunked the widely held view that international trade in services has outstripped world trade in goods in recent years as a report released by the global trade monitoring body has detected distinct shifts in services and agricultural trade patterns.

The WTO report released in Geneva has taken due note changing international trade patterns in two significant areas over the past two decades (1985-2003) with growth in services trade no longer clearly outstripping growth in goods, while agricultural trade has moved away from commodities towards processed products.

The report challenges a "general perception that world commercial services trade is growing faster than trade in goods. Indeed trade in commercial services expanded faster than goods trade in the second half of the 1980s, but thereafter the record is mixed."

Stating that broadly services and merchandise trade growth have evolved in a roughly similar way since 1990, the WTO said that for 1990-2003, trade in commercial services and goods both grew by about 6 per cent per year on average, and therefore services' share of international trade remained at about 20 per cent over the period.

"Overall, there is no indication that services categories in general have increased their share in international trade" the report said adding that the detailed picture is, however, more varied "with some categories of goods and services growing faster than the overall rate and others growing slower."

The faster growing sectors are industrial products (i.e., manufactures) on the goods side (rising from 50.2 per cent of world exports in 1985 to 58.2 per cent in 2002) and a category of services that includes computer and information services, financial services, insurance, telecommunications and personal, cultural and recreational services (the report calls these "other" services, i.e., not transport or travel) — up from 6.3 per cent of world exports in 1985 to 9.4 per cent in 2002.

Sectors growing slower than the overall average include transport on the services side (down from 5.5 per cent of world exports in 1985 to 4.5 per cent in 2002) and agricultural goods (down from 11.3 per cent to 7.2 per cent in the period) and mining products (down from 18.3 per cent to 9.7 per cent) among goods.

Mining products (including fuels) stand somewhat apart from other categories of both goods and services, with their share of world trade rising and falling the most because of swings in oil prices throughout 1985-2002.

As for agricultural products, while their total share of world trade has declined, the trend towards more trade in processed goods could be observed across regions, countries and agricultural products throughout the 1990-2002 period. The WTO Secretariat estimates that processed products approached 48 per cent of agricultural trade by 1001-02. The question of how far trade policy might be responsible for these observed trends is a matter for further research, the report noted.

Assessing the prospects for 2004, the report titled "Recent Trends in International Trade Policy Developments" observed that the accelerated growth momentum in the world economy over the second half of 2003 is projected to continue this year too. Global GDP growth is expected to reach 3.7 per cent in 2004, up from 2.5 per cent in 2003. "Stronger global economic activity will lead to faster growth of world trade. In the OECD countries, for instance, exports of goods and services expanded by 9 per cent in the second half of 2003. Overall, global trade is expected to expand by some 7.5 per cent in 2004, more than twice as fast as projected GDP growth." But this is predicated on some fall in world oil prices in 2004, though in the first few months of 2004 oil prices remained stronger than most forecasters had expected.

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