Exports of commercial services fall 30% in the world

Exports of commercial services fell 30% during the second quarter of 2020 in the world, at a year-on-year rate, reported the World Trade Organization (WTO).

Currently services account for more than two-thirds of world production and employment, but they do not account for more than 25% of total trade when measured by balance of payments data. However, this seemingly small percentage should not be underestimated.

The WTO indicated that growth in trade in nominal US dollars also declined significantly in 2020, more so in trade in commercial services than in trade in goods.

World merchandise exports fell 6% year-on-year in the first quarter and 21% in the second, that is, 14% year-on-year until the second quarter.

Meanwhile, commercial services exports fell 6% in the first quarter and 30% in the second quarter, that is, 18% since January.

According to the WTO, the balance of payments statistics do not reflect one of the modes of supply of services defined in the General Agreement on Trade in Services (GATS), namely: supply through commercial presence in another country (mode 3 ).

Furthermore, although services are increasingly traded in their own right, they also constitute crucial inputs for the production of goods and, consequently, when their contribution is calculated in terms of added value, services account for around 50% of the total. world trade.

New data

The magnitude of the decline in trade in services contrasts with previous global recessions, in which trade in services tended to be less volatile than trade in goods.

The drop in trade in commercial services, of an unusual magnitude, is probably related to social distancing measures and travel restrictions, which prevent the provision of services that require physical proximity to consumers.

From a WTO perspective, reduced spending on services, particularly in travel-related sectors, may also have left consumers with unused income that could be redirected towards purchasing goods.

This may partly explain the relatively small decline in merchandise trade in the first half of 2020.

Commercial services

The sharp drop in trade affected countries in all regions and at all levels of development, although some were more affected than others.

In Asia, in particular, trade fell less than in other regions. This can be partly explained by the proactive fiscal policies adopted in other regions, which have allowed consumers to maintain a relatively high level of consumption during the crisis.

This would tend to stimulate exports from Asian economies, as these are major producers of goods whose demand remained strong during the pandemic, such as electronics and medical supplies.

The pandemic boosted demand for certain types of services, particularly ICT services, whose exports registered a 0.1% increase in the second quarter.

Within ICT services, computer services exports registered a year-on-year increase of 3.6 percent.

Those services have been instrumental in enabling teleworking, without which the economic impact of Covid-19 would have been considerably worse.

World trade in commercial services, by sector, first quarter 2020 to second quarter 2020

Aviation sector

The decline of the sector has serious economic consequences, given its overall economic importance for many countries and regions.

According to the World Travel and Tourism Council, in 2019, the direct, indirect and induced effects of tourism contributed 8.9 trillion to global GDP (10.3%) and 330 million jobs (1 in 10).

For some economies, particularly the smaller ones, tourism accounts for not only the largest share of total exports, but also a significant part of GDP (e.g. 67% for Seychelles, 62% for Saint Kitts and Nevis, and 48% in the case of Vanuatu).

According to balance of payments statistics, in 2019, travel accounted for 24% of world exports of commercial services, and 48% of services exports from the Least Developed Countries.



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