Coalition of services industries: 2023 Global Services Summit

DRIVING INCLUSIVITY, SUSTAINABILITY AND GROWTH THROUGH SERVICES TRADE

Excellencies, ladies and gentlemen,

1. I am honoured and delighted to be here at the 2023 Global Services Summit together with so many distinguished representatives from government, the wider policy community, and the private sector.
2. Let me start by thanking Christine Bliss and her team at the Coalition of Services Industries for inviting me to join you today – and more importantly, for their consistent support for the multilateral trading system and for a strong and effective WTO.
3. It’s especially exciting to be at this summit because it is now clearer than ever that future of trade is services, and digital. The future of trade also must be green and inclusive – and services trade can help with both of those objectives.
4. ervices are an increasingly central part of both domestic economic activity and cross-border trade and investment.
5. CSI members are at the heart of this story. The kinds of services you provide – telecommunications, express delivery and logistics, retail and wholesale services, banking, and insurance, to name a few – are vital not only in their own right, but also for competitiveness in the manufacturing and agriculture sectors.
6. To make global trade more resilient to the kinds of shocks we have experienced over the past three years, we need supply chains to be deeper, deconcentrated, and diversified across more countries and regions – at the WTO we’re calling this ‘re-globalization’. And we can’t get there without wider access to high-quality services.
7. A new report published last week by the WTO and the World Bank puts some numbers on the table about services and services trade:
   • Services account for 67% of GDP (2021) worldwide – twice as much as industry and agriculture put together – and 50% of jobs.
   • In upper-middle and high-income countries, the services share of GDP is 75%.
   • Even in low-income countries, this share is now up to 42%, despite the major role agriculture retains in output and employment.
   • Trade in commercial services accounted for 22% of the $31.4 trillion in world goods and services trade last year. But this understates the real picture: once you factor in the services embodied in goods exports, services account for 50 per cent of global trade in value-added terms.
8. Trade in services has emerged as a driver of growth and economic opportunity. This is especially true for services delivered across borders via digital networks.
   • For the past fifteen years, services trade has been the most dynamic component of world trade.
   • Services trade used to mean tourism and transport. This has been changing for about a generation now, with the emergence of supply chain related services, business process outsourcing, and things like medical and wellness tourism.
   • More recently, the accelerating pace of technological change has made many more services tradable. The same tech you use to work from home makes it possible for white-collar offices to effectively extend across borders.
   • Intermediate services – that is, those that serve as inputs for other goods and services – are increasingly important factors for efficiency both within economies and in cross-border production networks.
     • The economist Richard Baldwin foresees that trade in such services could even become a source of disinflationary pressures, as increased imports of bookkeeping, graphic design, software engineering and other intermediate services reduce production costs in a manner akin to what we saw with goods supply chains during recent decades.
     • For all the benefits that earlier supply chain revolution delivered for consumers and businesses, too many governments dropped the ball on active labour market policies to help dislocated workers. That’s a mistake they should not repeat.
9. Services trade has been propelled forward by the emergence of new export sectors as well as domestic policy reforms aimed at making services markets more competitive.
   • Between 2005 and 2022, global exports of digitally-delivered services – everything from streaming video games to consulting services provided via Zoom – grew by an annual average of 8.1%, compared to 5.6% for goods.
   • The pandemic dealt a severe blow to travel, tourism, and other services involving face-to-face interaction. But services trade boomed online, registering double-digit growth in both 2020 and 2021.
   • Last year, exports of digitally-delivered services were worth $3.8 trillion, and their share of total goods and services trade has been rising rapidly.
   • WTO statisticians estimate that in 2022, US computer services exports were 27% higher than in 2019. Ukrainian computer services registered 76% growth over that period, albeit from a much lower base.  For Bangladesh, the figure was 124% [1].
10. These last figures point to something else about services trade, namely its potential as a force for economic development.
    • The mental model many of us still have for how poor countries get richer – a model in which manufacturing is the path to export-oriented growth and job creation, while services equal low-wage, low-productivity, non-tradable activities – is outdated.
    • Recent evidence, as documented by World Bank economists, suggests that services are increasingly tradable, storable, technologically intensive, and subject to growing economies of scale.
    • Services-related job opportunities have greatly expanded, and cross-sectoral productivity gaps have narrowed.
    • In sum, services trade can help drive the kinds of productivity gains we have typically associated with manufacturing.
    • As our new report puts it, and I quote, “Services are today seen as central determinants of productivity, competitiveness and rising living standards. The ability to supply, access and export efficient, affordable and innovative services has become central to the realization of development strategies.”
    • Some of this potential is already being realized. Since 2005, commercial services exports from least developed countries have grown by over 300%, and those from developing countries by more than 250%, compared to the nearly 170% increase for the world as a whole.
      • But there is a long way to go: developing economies still account for barely one-third of global services trade, and LDCs a mere 1%.
      • According to the International Telecommunications Union, one-third of the global population was not on the internet in 2022.
11. Services are also a powerful vehicle for socioeconomic inclusion, and for building greener economies.
12. Services are critically important for women, young people, and the micro, small, and medium-sized enterprises (MSMEs) that account for the lion’s share of employment just about everywhere.
    • The International Trade Centre estimates that nine out of ten services enterprises globally have fewer than 100 employees.
    • 59% of employed women worldwide worked in the services sector in 2021, compared to 45% of men. The share is lower in low- and lower-middle-income countries, but has been growing strongly.
    • For young workers and entrepreneurs, too, the services sector is an important source of jobs.
    • Among firms that export, the share of businesses owned by women and young people is significantly higher in services than in manufacturing. This matters because firms that export tend to grow faster, be more productive, and create more jobs.
13. Environmental services are necessary for the low-carbon transition, from building, operating, and maintaining renewable energy generation and transmission infrastructure, to advisory services related to cutting emissions from manufacturing, vehicles, or agriculture. Lowering barriers to trade in these services can help reduce the cost of decarbonization.
    • Countries are working to seize these opportunities. Gabon has made ecotourism and environmental services part of its strategy to diversify away from its reliance on exports of oil.
14. But despite the gains to be had in terms of growth, development, socioeconomic inclusion, and environmental sustainability, the fact is that there is a lot more we could do at the international level to boost services trade and enable all countries to seize the new opportunities.
15. At the WTO, multilateral services liberalization has lost momentum since the 1990s, or at least since the Doha Round. In the eyes of many members, services market opening remains tied to progress in other slow-moving areas, particularly agriculture. I understand that services liberalization is complex, and can be even tougher politically than tariff cuts. Each member has its own particular sensitivities. Access to other markets is attractive, but opening up sectors in return can run into resistance from professional associations and other domestic constituencies, both in developed and in developing countries. Nevertheless, we have recognized the dynamism of the services sector and been able to respond using the plurilateral instrument. Large groups of WTO members have made considerable advances on rulemaking related to services trade and investment.
16. Around 70 WTO members, together accounting for more than 92% of global services trade, have signed up to an Agreement on Services Domestic Regulation, a set of good regulatory practices that will lower business costs by making rules simpler and more transparent. OECD and WTO researchers put the savings at $150 billion each year, with important gains for financial, business, communications and transport services. The agreement also prohibits gender discrimination in requirements for authorizing services providers. As many of you probably know, we have hit a roadblock getting the new agreement written into participating members’ legal commitment schedules. Some of them are engaging with the delegations that have raised objections to try to overcome the obstacle. I am pushing them to succeed soon, because plurilaterals are a key part of the WTO’s future.
17. Just this past Thursday, 110 of the WTO’s 164 members concluded negotiations on the text of an agreement on investment facilitation. The prospective deal will encourage foreign direct investment in all economic sectors – services and goods – by making governments’ investment-related measures more transparent and predictable, by cutting red tape in investment-related administrative procedures, and by ensuring developing countries receive the technical and capacity support they need to implement the new rules. The goal is to promote sustainable investment: the agreement contains anti-corruption measures and provisions to encourage responsible business conduct.  Participants are now reaching out to other WTO members to look at how to incorporate the new agreement into the WTO architecture, and are hoping to make headway in time for our Ministerial Conference in February in Abu Dhabi.
18. Let me add here that one important way the WTO has continued to deliver benefits for global services trade has to do with manufactured goods. By removing tariffs on what in 2021 was nearly $3 trillion worth of trade in products like servers, manufacturing equipment, computers, and mobile phones, our Information Technology Agreement has lowered the cost of delivering digital services at home and across borders. Some voices in industry like the ITA so much they have been calling for a new, third round of liberalization. Only WTO members can take that idea forward – so if this is something you want, you and other business groups need to push for it when you engage with governments.
19. And finally, I want to talk about the multiple tracks on which WTO members are currently addressing digital trade.
20. The longstanding moratorium against levying customs duties on cross-border electronic transmissions has provided stability and predictability to the global digital economy. But members face a key decision point between now and MC13, when the moratorium is set to expire unless members decide otherwise.
21. Supporters of making the moratorium permanent, such as Thailand and Nigeria, say it is yielding commercial benefits for businesses and consumers. Others, such as India and South Africa, fear that developing countries will suffer customs revenue losses as more and more physical products become digital – movies, books, things that can be 3D printed near the final customer, and so on.
22. Last June, when ministers agreed to extend the moratorium – an outcome loudly applauded by CSI and other business groups – they agreed to step up discussions to better understand its impact and scope. These discussions are underway. We are doing a study with IMF, the World Bank, the OECD and UNCTAD to look into the various arguments and establish some shared facts.
23. I want to thank CSI for responding to my call to look into the impacts of the moratorium. Work like your new report on how Indian MSMEs use imported digital services helps members weigh the options.
24. In line with the MC12 decision, members have reinvigorated a WTO Work Programme on the trade-related aspects of e-commerce. Members have been sharing experiences on issues like consumer protection, the digital divide, legal and regulatory frameworks as well as digital trade facilitation and the facilitation of e-transactions.
25. An especially exciting track of work is the ongoing negotiations among a group of nearly 90 WTO members, including the US, the EU, and China, to develop a set of basic global rules for digital trade. Whenever I talk to business groups – and I heard this again last month at the World Economic Forum’s ‘Summer Davos’ event in China – they talk about the importance of limiting regulatory fragmentation, both in the digital economy and offline. And they ask what the WTO is doing about it.
26. Well, the joint statement initiative on e-commerce is trying to do exactly this. There are tough issues here, and you know the sensitivities better than I do: sharp differences of perspective on data, who it belongs to, how it should flow, and how privacy should be protected. In addition to trying to establish some common ground on these issues in the months ahead, participants have resolved their differences on a series of practical issues like consumer protection, spam, e-signatures and e-authentication, e-contracts, transparency, cybersecurity, paperless trading, electronic transactions frameworks, and e-invoicing. Harvesting this progress[1] would make a material difference to companies engaged in digital trade – especially to smaller companies less able to navigate a thicket of different rules.
27. Getting all these processes to the finish line would go a long way towards ensuring the WTO rulebook better reflects commercial realities in services trade a quarter of the way through the 21^st century. Your advocacy and support can help us get there.
28. But there are additional steps governments can take at the multilateral level to bolster services trade.
29. For instance, on the market access side, they could, at the WTO, formally bind their existing levels of market openness, or bind their deepest commitments from preferential trade agreements, which countries typically implement on a non-discriminatory basis anyway. This would not require any new liberalization, but it would enhance market predictability and allow individual countries to send positive signals to investors about their business climate.
30. To close the gap between market opportunities and commercial reality we also have to address problems on the supply side. Many developing countries report challenges supplying competitive services to international markets, and with reforming their own services trade policies. Together with the World Bank, we are calling for increased Aid for Trade focused on services, to help fill data gaps, bolster regulatory frameworks and institutions, and to address specific supply-side constraints, especially with regard to participation in digital services trade.
    • We can create virtuous circles – for instance, well-regulated services trade could help developing countries narrow the digital divide I alluded to earlier, and lay the foundation for future services exports.
31. Countries also need to act at home. Developing countries need to invest in education to take advantage of the growth in services trade. All governments need to pay better attention to social policy, so that services workers have the support they need to thrive amid whatever dynamics the years ahead bring, whether it’s due to trade or to AI.
32. Let me conclude, ladies and gentlemen, by saying this is the future. Services are where jobs are going to be created. Services will help determine whether we succeed at building greener, more inclusive societies. The WTO can help foster the international cooperation needed to maximize the benefits from services trade. But we need your support, and your advocacy, for all sides to come together and do what is right – starting with the run-up to MC13.
33. I look forward to working with you.
34. Thank you.