Trade Forum Features

Trade in services

30 April 2014
ITC News
ITC Executive Director Arancha González discusses the importance of the global services industry and the efforts required to make it an even greater supplier of employment and economic growth.

Services matter more in international trade than meets the eye. They account for close to half of world exports when the full value of services inputs are properly accounted for in the final output of goods.

To be truly competitive, even in traditional sectors such as manufacturing and agriculture, countries must have a properly functioning domestic services sector. The majority of services firms are small and medium-sized enterprises (SMEs). The so-called servicification of the economy provides an enormous number of untapped opportunities for SMEs that trade in services across the developing world. This is particularly relevant for landlocked and small island economies whose geographic remoteness would matter less in services outsourcing activities, which do not involve the physical transport of goods across borders.

Despite the obvious potential the services sector offers for economic growth and development, not all developing countries are benefiting from services exports and the emergence of services value chains. Least developed countries (LDCs) in particular have plenty of catching up to do as they account for only 0.6% of global services exports, even lower than their 1% share of merchandise exports. More can and must be done to identify promising services sectors for LDCs.

ITC’s reinvigorated Trade in Services programme directly responds to these challenges. ITC helps developing countries and LDCs create a business environment conducive to value added services exports while also working with services exporters to increase their international competitiveness.

This issue discusses the effects of servicification and demonstrates how some developing countries and their trade promotion organizations have taken advantage of the opportunities it presents. Colombia’s trade promotion organization, for instance, has successfully promoted the country’s IT outsourcing sector through trade fairs and business matchmaking activities. The Association of Southeast Asian Nations has intensified its efforts on services liberalization by working to strengthen regional value chains in manufacturing. The Barbados Coalition of Service Industries is pushing for services-friendly legislative reforms while at the same time taking action to build the capacity of its SME members.

These are measures we can all learn from. Developing-country governments, the business community, donors and international agencies including ITC must work together to leverage the opportunities the new services-based economy offers.