International trade in services - an overview

Data extracted in May-June 2017

Planned article update: June 2019

Highlights

In 2016, the United Kingdom had the highest value of services exports in the EU (€301 billion), while the highest value of imports was recorded in Germany (€277 billion).

During the period 2010-2016, the fastest growth for trade in services among EU countries was recorded in Ireland.

Extra-EU trade in services, EU-28, 2010-2016
(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 revision of the Balance of Payments and International Investment Position Manual (BPM6).

Following the introduction of this new manual, the value of international trade in services grew as a result of the revised 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 gross 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.

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. 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).

International trade in services by mode of supply

Box 3.1 — International trade in services by mode 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).

Balance of payments statistics reflect international transactions of services that are delivered via three of these four modes of supply identified in the GATS (the first, second and fourth); as such, the information presented in this chapter (Globalisation patterns in EU trade and investment - International trade in services for the EU) excludes services that are provided via the commercial presence of foreign affiliates (mode 3); in 2013, this mode of supply was estimated to have the highest share among all modes.

Having grown at a rapid pace post-crisis, EU-28 trade in services stagnated in 2016

In the aftermath of the global financial and economic crisis, the value of EU-28 exports and imports of services (from non-member countries, hereafter referred to as extra-EU trade) grew during the period 2010-2015. The fastest annual growth rate for extra-EU exports — and the only year a double-digit growth rate was recorded — was in 2012 (up 11.3 %); note these data are based on a series in nominal prices. The highest growth rates for extra-EU imports were registered during 2014 (up 10.8 %) and 2015 (13.9 %).

There was a marked change to developments according to provisional data for 2016, as extra-EU imports of services into the EU-28 stagnated (0.6 % growth compared with the year before), while there was a modest contraction in the value of extra-EU exports (-1.4 %). The value of EU-28 exports (EUR 820 billion) was considerably higher in 2016 than the value of imports (EUR 690 billion), resulting in a trade surplus for services of EUR 130 billion (see Figure 1). From an initial level of EUR 108 billion in 2010, the EU-28’s trade surplus for services grew during three consecutive years to peak at EUR 178 billion in 2013. Thereafter, with the value of services imports growing at a faster pace than the value of services exports, the trade surplus was reduced somewhat thereafter.

Figure 1: Extra-EU trade in services, EU-28, 2010-2016
(billion EUR)
Source: Eurostat (bop_its6_det)

Trade in services agreement

Box 3.2 — 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 2016, the United Kingdom had the highest value of services exports (EUR 301 billion), while the highest value of imports was recorded in Germany (EUR 277 billion)

In 2016, the United Kingdom recorded the highest share (16.3 %) of the EU’s exports of services; note these figures for individual EU Member States are based on world trade flows, in other words, the sum of intra- and extra-EU trade. Germany (13.8 %) and France (11.6 %) were the only other EU Member States to record double-digit shares. In relation to the size of their respective economies, Ireland (7.2 %) and Luxembourg (4.6 %) accounted for relatively large shares of the EU total (see Figure 2).

Germany had the highest share (17.1 %) of EU imports of services, followed by France (13.2 %), while the United Kingdom (11.3 %) and Ireland (10.8 %) 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 (4.0 %).

Figure 2: EU trade in services, 2016
(% of total)
Source: Eurostat (bop_its6_det)

During the period 2010-2016, the fastest growth for trade in services was recorded in Ireland

Figure 3 presents the average rate of change for international trade in services over the period 2010-2016; note that these growth rates are based on nominal prices. EU-28 exports to non-member countries rose on average by 6.3 % per annum during the period under consideration, while the average growth rate for imports was slightly faster, at 7.0 % per annum.

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 (2012-2016 data), Lithuania and Luxembourg. By contrast, Greece was the only Member State to record a reduction in its value of trade in services, with exports falling, on average, by 1.9 % per annum and imports by 7.2 % per annum.

Figure 3: Average rate of change for trade in services, 2010-2016
(% per annum)
Source: Eurostat (bop_its6_det)

In 2016, 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 183 billion in 2016), which equated to more than one fifth (22.3 %) of the EU’s exports to non-member countries (see Figure 4). The next highest shares were recorded for Germany (15.4 %; EUR 126 billion), France (11.7 %; EUR 96 billion), Ireland (7.9 %; EUR 65 billion) and the Netherlands (6.9 %; EUR 56 billion).

… while Ireland had the highest value of extra-EU imports of services

By contrast, Ireland had the highest value of imports of services from non-member countries (EUR 121 billion); this equated to 17.6 % of the EU’s imports from non-member countries. 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. Germany (17.0 %; EUR 117 billion), the United Kingdom (13.6 %; EUR 94 billion), France (11.6 %; EUR 80 billion) and the Netherlands (10.8 %; EUR 74 billion) had the next highest shares of extra-EU services imports in 2016.

Figure 4: Extra-EU trade in services, 2016
(% of EU total)
Source: Eurostat (bop_its6_tot)

In 2016, 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 128 billion in 2016), which equated to 12.4 % of the EU total. France and the United Kingdom (both 11.4 %: EUR 118 billion) were the only other EU Member States to account for a double-digit share of intra-EU exports of services in 2016.

Germany was also the largest importer of services from other EU Member States, with imports valued at EUR 159 billion in 2016, some 16.9 % of the EU total. The next highest shares were recorded in France (14.0 %; EUR 133 billion) and the United Kingdom (9.3 %; EUR 88 billion).

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 2016 was equal to almost three quarters (74.3 %) of the EU total, whereas the cumulative share of the seven EU Member States with the highest values of intra-EU services exports was considerably lower, at 62.9 %. 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 trade in services, 2016
(% 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 2016, the highest share of trade in services with other Member States was recorded by Slovakia (81.6 %), while in excess of three quarters of all trade in services in Romania, Slovenia and Austria was also with other EU partners. By contrast, a majority of the trade in services that was conducted by the United Kingdom (57.4 %) and Ireland (60.8 %) was with extra-EU partners and this share peaked in Malta (62.0 %).

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Balance of payments - International transactions (BPM6)


Balance of payments - International transactions (BPM6)
International trade in services, geographical breakdown (BPM6)