International trade in services - an overview

Data extracted in July 2019.

Planned article update: November 2021.

Highlights

In 2018, the United Kingdom had the highest value of services exports among the EU Member States (€320 billion), while Germany had the highest value of imports (€310 billion).

Between 2010 and 2018, the fastest growth for trade in services among EU Member States was recorded in Lithuania.

Extra-EU trade in services, EU-28, 2010-2018
(billion EUR)
Source: Eurostat (bop_its6_det)

Globalisation patterns in EU trade and investment is an online Eurostat publication presenting a summary of recent European Union (EU) statistics on economic aspects of globalisation, focusing on patterns of EU trade and investment.

International trade in services has witnessed dynamic growth in recent decades, in contrast to more sluggish growth for international trade in goods, while trade in services has also been more resilient to financial and economic shocks. Developments such as these are examined in more detail within this article.

The global value of international trade in goods remains approximately three times as high as that of services. Part of this imbalance may be due to the nature of some services, for example:

  • Their intangible nature means that the international trading of services is inherently subject to more constraints. While a tangible good may be produced, stored, moved and consumed at different places and times, the consumption of a non-transportable service requires the close physical proximity of service provider and consumer/customer.
  • Secondly, services may be regulated in a different manner to goods: for example, some professional services, such as accountancy, may be bound by distinct national legislation, which has the potential to restrict or prevent the supply of services across borders.
  • Thirdly, international trade in some services is restricted and largely supplied by the public sector (for example, within services such as health or education).
Full article

Statistics on international trade in services

Statistics on international trade in services

The international trade in services statistics presented in this chapter form part of the balance of payments and are also used within national accounts. From the 1990s onwards there was a rapid change in levels of cross-border activity and financial flows, coupled with increasingly mobile individuals. The implications of these changes, in part driven by globalisation, became a major focus for statisticians and formed the basis for a reassessment of the balance of payments, as set out in the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6).

Following the introduction of this sixth edition of the manual, the value of international trade in services was revised upwards as a result of the updated criteria for treating outsourced processing (so-called goods for processing). Under the new guidelines, inward and outward flows of processed goods that do not change ownership should no longer be recorded (with gross values of the goods for each flow) within the current account for goods, but instead should be measured in terms of the value of their processing fee within services. The introduction of this new manual and its associated methodological changes means that statistics on the European Union (EU’s) international trade in services are only available from 2010 onwards.

International trade in services by mode of supply

Box 1 — Services trade statistics by modes of supply

Trade in services differs from trade in goods in a number of ways. Services often require the physical proximity of a supplier and a customer, for example: if somebody decides to spend a night in a hotel; if they call a tradesman to redecorate their house; or if they have to take their car to the garage for it to be repaired.

The general agreement on trade in services (GATS) defines four different ways — modes of supply — that may be used to deliver services from a supplier to a client/customer. For example, legal services may be supplied by a lawyer to a client as follows:

  • the legal advice (service) is provided by phone or via e-mail (cross-border supply; mode 1);
  • the client from abroad visits the lawyer’s office (consumption abroad; mode 2);
  • the lawyer establishes an affiliate abroad to provide legal services to his foreign client (a commercial presence; mode 3);
  • the lawyer travels abroad to provide legal services directly to his/her client (the presence of a natural person; mode 4).

Services data broken down by modes of supply include international trade in services statistics (ITSS) covering modes 1, 2 and 4, as well as foreign affiliates statistics (FATS) covering mode 3. The information presented in this article is based on ITSS and therefore excludes services that are provided via the commercial presence of foreign affiliates (mode 3); in 2015, this mode of supply — commercial presence of foreign affiliates — was estimated to have the highest share among all modes.

Eurostat has explored, through a pilot project, the feasibility of estimating international trade in services by mode of supply. This project examined the application of a methodology detailed in the UN’s Manual on Statistics of International Trade in Services 2010 which provides a means for modelling the distribution of trade in services by mode of supply: for more information on modes of supply, see Box 1. Thereafter, statistics for international trade in services and those for foreign affiliates may be combined with the model to estimate shares of trade in services for modes 1, 2 and 4).

For further information, see the Eurostat website and an article on modes of supply.

Simplified description of how services are supplied, from country A to B (Based on GATS provisions)

Since 2010, EU international trade in services flows have increased substantially, with the EU's surplus valued at EUR&nbp;190 billion in 2018, 1.6 billion lower than in 2017

In the aftermath of the global financial and economic crisis, the value of EU-28 exports and imports of services to and from non-member countries (also referred to as extra-EU trade) grew strongly during the period from 2010 to 2015. Thereafter, the value of exports grew more moderately while the value of imports stagnated (a very slight decline). The highest annual growth rates for extra-EU exports were in 2012 (up 11.7 %) and 2015 (up 13.5 %), the only years double-digit growth rates were recorded; note these data are based on a series in nominal prices. The highest growth rates for extra-EU imports were registered during 2014 (up 10.7 %) and 2015 (22.1 %). There was a marked change to developments in 2016, as extra-EU exports and imports of services stagnated (down 0.2 % and 0.1 % respectively). Whereas the value of exports increased in 2017 (up 4.8 %), the value of imports contracted again (down 1.6 %). Provisional data for 2018 show modest growth in 2018, up 0.7 % for exports and 1.1 % for imports.

The value of EU-28 exports (EUR 919 billion) was considerably higher in 2018 than the value of imports (EUR 728 billion), resulting in a trade surplus for services of EUR 190 billion (see Figure 1). From an initial level of EUR 105 billion in 2010, the EU-28’s trade surplus for services grew during three consecutive years to peak at EUR 186 billion in 2013 and then fell back to EUR 138 billion by 2016 as the value of services imports grew at a faster pace than the value of services exports. An expansion in the value of exports accompanied by a fall in the value of imports in 2017 pushed the EU-28 trade surplus to a new high of EUR 192 billion, which contracted only slightly in 2018.

Figure 1: Extra-EU trade in services, EU-28, 2010-2018
(billion EUR)
Source: Eurostat (bop_its6_det)

Trade in services agreement

Box 2 — Trade in Services Agreement

The Trade in Services Agreement (TiSA) is in the process of being negotiated by 23 World Trade Organisation (WTO) members (one of which is the European Union (EU)); together they account for an estimated 70 % of global trade in services. If additional WTO members join the process, it is hoped that any agreement may be extended into a broader multilateral trade deal.

The TiSA architecture is based on the WTO’s general agreement on trade in services (GATS) and all negotiated provisions are compatible with the GATS. TiSA aims to open-up markets and approve common rules in areas such as licensing, financial services, telecommunication services, e-commerce and maritime transport, as well as for professionals who wish to temporarily move abroad in order to provide services. It aims to remove discriminatory rules that act as barriers to entry, and by doing so foreign enterprises should thereafter have the freedom to establish offices and a business presence across a range of additional services in each of the geographical markets.

The talks started formally in March 2013, and by the end of 2013 most participants had indicated which of their service markets they were prepared to open and to what extent. After 21 different negotiation rounds, the talks were put on hold in November 2016; there is no formal deadline for ending the negotiations.

Trade in services: variations by Member State

In 2018, the United Kingdom had the highest value of services exports (EUR 320 billion), while the highest value of imports was recorded in Germany (EUR 310 billion)

In 2018, the United Kingdom recorded the highest share (15.1 %) of the exports of services by the 28 EU Member States; note these figures for individual Member States are based on world trade flows, in other words, the sum of intra- and extra-EU trade. Germany (13.7 %) and France (11.7 %) were the only other EU Member States to record double-digit shares. In relation to the size of their respective economies, Ireland (8.3 %) and the Netherlands (7.4 %) accounted for relatively large shares of the total (see Figure 2).

Germany had the highest share (17.2 %) of imports of services by the 28 EU Member States, followed by France (12.1 %). The United Kingdom (11.1 %) and Ireland (10.3 %) were the only other EU Member States to record double-digit shares; there was also a relatively high share — relative to the size of its economy — for Luxembourg (4.1 %).

Figure 2: EU trade in services, 2018
(% of total for all EU Member States)
Source: Eurostat (bop_its6_det)

During the period from 2010 to 2018, the highest growth rates for trade in services were recorded in Ireland and Lithuania

Figure 3 presents the average rate of change for international trade in services over the period from 2010 to 2018; note that these growth rates are based on nominal prices. EU-28 exports to non-member countries rose on average by 6.2 % per year during the period under consideration, while the average growth rate for imports was slightly lower, at 5.9 % per year.

The expansion in the value of trade in services (for both intra- and extra-EU partners) was considerably higher in some of the EU Member States, with the fastest growth rates — for both imports and exports — being recorded in Ireland (2012-2018 data), Lithuania and Romania. By contrast, Greece, Italy, Denmark and the Netherlands recorded the slowest increases for trade in services.

Figure 3: Average rate of change for trade in services, 2010-2018
(% per year)
Source: Eurostat (bop_its6_det)

In 2018, the United Kingdom had the highest value of extra-EU exports of services …

The structure of trade in services may be analysed in more detail, distinguishing between trade flows that are destined for non-member countries (extra-EU trade) on one hand and trade flows with other EU Member States (intra-EU trade) on the other. There are considerable differences between Member States as to the relative importance of intra- and extra-EU trade.

In absolute terms, the United Kingdom had the highest value of extra-EU exports of services (EUR 188 billion in 2018), which equated to more than one fifth (20.5 %) of EU exports to non-member countries (see Figure 4). The next highest shares were recorded for Germany (15.3 %), France (12.1 %), Ireland (10.3 %) and the Netherlands (5.8 %).

… while Germany and Ireland had the highest values of extra-EU imports of services

By contrast, Germany and Ireland had the highest values of imports of services from non-member countries: EUR 129 billion (17.7 % of EU imports from non-member countries) for Germany and EUR 119 billion (16.3 %) for Ireland. Offshore financial centres were the main origin for imports of services into the Irish economy; these centres are usually small countries/jurisdictions that provide financial services to non-residents on a scale that is incommensurate with the size and the financing of their domestic economy. The United Kingdom (13.8 %), France (10.9 %) and the Netherlands (9.7 %) had the next highest shares of extra-EU services imports in 2018.

Figure 4: Extra-EU transactions in services by EU Member States, 2018
(% of EU total)
Source: Eurostat (bop_its6_tot)

In 2018, the highest values of intra-EU imports and exports of services were recorded in Germany

A similar analysis for intra-EU trade is presented in Figure 5. It shows that Germany had the highest value of services exports to other EU Member States (EUR 150 billion in 2018), which equated to 12.4 % of the total for all 28 EU Member States. France and the United Kingdom (11.3 % and 10.9 %) were the only other Member States to account for a double-digit share of intra-EU exports of services in 2018.

Germany was also the largest importer of services from other EU Member States, with imports valued at EUR 181 billion in 2018, some 16.9 % of the total for the 28 Member States. The next highest shares were recorded in France (13.0 %) and the United Kingdom (9.2 %).

It is interesting to note that the cumulative share of the seven EU Member States with the highest values of extra-EU services exports in 2018 was equal to almost three quarters (74.0 %) of the EU total, whereas the cumulative share of the seven Member States with the highest values of intra-EU services exports was considerably lower, at 62.7 %. These figures suggest that extra-EU trade in services is more concentrated between principal trading nations, perhaps reflecting the increased presence of global enterprises in some of the EU’s main markets.

Figure 5: Intra-EU transactions in services by EU Member States, 2018
(% of EU total)
Source: Eurostat (bop_its6_tot)

A closer analysis of intra- and extra-EU trade flows reveals that 25 of the EU Member States reported that a majority of their total trade in services took place with other EU Member States (rather than with non-member countries). In 2018, the highest share of trade in services with other Member States was recorded by Romania (82.2 %), while in excess of three quarters of all trade in services in Slovakia, Slovenia and Austria was also with other EU partners. By contrast, a majority of the trade in services that was conducted by Greece (53.3 %), the United Kingdom (55.6 %) and Ireland (59.1 %) was with extra-EU partners.

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