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International trade in services - an overview

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Data extracted in June 2022.

Planned article update: July 2023.

Highlights

In 2021, Germany had the highest value of services exports (€328 billion) and services imports (€327 billion) among the EU Member States, followed by Ireland.

Between 2011 and 2021, the fastest growth for trade in services among EU Member States was recorded in Ireland and Lithuania; they each recorded double-digit annual increases for both exports and imports.

Extra-EU trade in services, EU, 2011–2021
(€ billion)
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 relatively dynamic growth in recent decades, in contrast to more subdued growth for international trade in goods. Trade in services appears also to have 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.

  • 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 the time series of statistics on the EU’s international trade in services starts from 2010.

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. Example 1: somebody decides to spend a night in a hotel. Example 2: someone calls a tradesman to redecorate their house. Example 3: someone takes their car to a garage 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 analysed by mode 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 2011, EU international trade in services flows have increased substantially, with the EU's surplus valued at €133 billion in 2021

In the aftermath of the global financial and economic crisis, the value of EU exports and imports of services to and from non-member countries (also referred to as extra-EU trade) grew strongly during the period from 2011 to 2015. The pace at which the value of exports and imports grew slowed in 2016, before accelerating once more up until 2019. The impact of the COVID-19 crisis in 2020 led to a substantial fall in both the value of EU exports (down 15.1 %) and imports (down 14.1 %); note these data are based on a series in nominal prices. There was an immediate rebound in 2021 for EU exports, which almost returned to pre-pandemic levels. However, a different pattern was observed for EU imports as they rose at a modest pace in 2021.

During the whole of the period shown in Figure 1 (2011–2021), the highest annual growth rates for extra-EU exports were in 2015 (up 13.1 %) and 2021 (up 12.8 %), the only years that double-digit growth rates were recorded. The highest growth rates for extra-EU imports were registered during 2014 (up 11.4 %), 2015 (up 21.0 %) and 2019 (up 18.9 %).

The value of exports of services (€1 027 billion) was considerably higher in 2021 than the value of imports (€894 billion), resulting in an EU trade surplus for services of €133 billion (see Figure 1). From an initial level of €99 billion in 2011, the EU’s trade surplus for services grew in consecutive years to peak at €122 billion in 2013 and then fell back to €74 billion by 2016 as the value of imports of services grew at a faster pace than the value of exports. The trade surplus subsequently widened (once again) to reach a peak of €134 billion in 2018, before a rapid acceleration in the value of imports led to it falling to €50 billion in 2019; it contracted further in 2020 to €33 billion as both exports and imports of services were impacted by the COVID-19 crisis. With a rapid rebound in the value of exports and modest growth in the value of imports in 2021, the EU’s trade surplus for services widened to €133 billion (close to its highest level during the period under consideration).

Figure 1: Extra-EU trade in services, EU, 2011–2021
(€ billion)
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 Organization (WTO) members (one of which is the 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. 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 and at the time of writing (July 2022) they had yet to restart; there is no formal deadline for ending the negotiations.

Trade in services: variations by EU Member State

In 2021, Germany had the highest value of services exports (€328 billion) and services imports (€327 billion) among the EU Member States, followed by Ireland.

In 2021, Germany recorded the highest share (16.5 %) of exports of services among the 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. Ireland (14.3 %) and France (12.9 %) were the only other Member States to record double-digit shares. In relation to the size of their respective economies, along with Ireland, the Netherlands (8.2 %) and Luxembourg (5.9 %) accounted for relatively large shares of the total (see Figure 2).

In 2021, Germany had the highest share (18.6 %) of imports of services among the EU Member States, followed by Ireland (16.4 %) and France (12.4 %); they were the only Member States to record double-digit shares. Again there were relatively high shares – relative to the size of their economies – for the Netherlands (7.9 %) and Luxembourg (5.3 %).

Figure 2: EU trade in services, 2021
(% of total for all EU Member States)
Source: Eurostat (bop_its6_det)

During the period from 2011 to 2021, 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 2011 to 2021; note that these rates of change are based on nominal prices. EU exports to non-member countries rose on average by 5.3 % per year during the period under consideration, while the average growth rate for imports was slightly higher, at 5.8 % 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 imports and exports combined – being recorded in Ireland (2012–2021 data), Lithuania and Romania (2013–2021 data). By contrast, the Netherlands, Spain and Italy recorded the slowest increases for trade in services.

Figure 3: Average rate of change for trade in services, 2011–2021
(% per year)
Source: Eurostat (bop_its6_det)

In 2021, Ireland 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, Ireland had the highest value of extra-EU exports of services (€195 billion in 2021), which equated to almost one fifth (19.0 %) of the EU’s exports to non-member countries (see Figure 4). The next highest shares were recorded for Germany (18.8 %), France (14.0 %) and the Netherlands (7.8 %).

… while the value of Irish extra-EU imports of services was even higher

Ireland also had the highest value of imports of services from non-member countries: €247 billion (27.6 % of EU 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 disproportionate with the size and the financing of their domestic economy. Germany (17.6 %), France (11.0 %), the Netherlands (7.8 %) and Luxembourg (5.2 %) had the next highest shares of extra-EU services imports in 2021.

Figure 4: Extra-EU transactions in services by EU Member States, 2021
(% of EU total)
Source: Eurostat (bop_its6_tot)

In 2021, 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 (€134 billion in 2021), which equated to 13.9 % of the total for the 27 Member States. France (11.7 %) was the only other Member State to account for a double-digit share of intra-EU exports of services in 2021, although Ireland (9.4 %) and Luxembourg (7.3 %) had very high shares relative to the size of their economies.

Germany was also the largest importer of services from other EU Member States, with imports valued at €170 billion in 2021, some 19.3 % of the total for the 27 Member States. The next highest shares were recorded in France (13.6 %) and Belgium (8.6 %).

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 2021 was equal to almost three quarters (73.7 %) 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 63.9 %. 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 transactions in services by EU Member States, 2021
(% of EU total)
Source: Eurostat (bop_its6_tot)

A closer analysis of intra- and extra-EU trade flows reveals that 20 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 2021, the highest share of trade in services with other Member States was recorded by Slovakia (74.4 %), while in excess of 70.0 % of all trade in services in Austria, Slovenia and Romania was also with other EU partners. By contrast, a majority of the trade in services that was conducted by France, Sweden, Germany, Denmark, Greece and Cyprus was with extra-EU partners, while more than three quarters (76.9 %) of all trade in services in Ireland was with non-member countries. Note the United Kingdom is no longer an EU Member State – having left the EU at the end of January 2020 – and that Ireland has a high level of trade with the United Kingdom.

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