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Azevêdo Underlines Growing Importance Of Services In Global Trade

Ladies and gentlemen,

Good morning. At the outset, let me thank the Coalition of Services Industries for the kind invitation. It’s a great pleasure to be with you today.

The CSI is an important and constant partner of the World Trade Organization.

You played an essential role in putting services on the multilateral trade agenda back in the 1980s – so you helped to ensure that they became part of the WTO architecture. And I am glad to strengthen that partnership today.

In these ways, and more, services are the heart of our lives and livelihoods.

They generate more than two-thirds of global GDP. And attract almost two-thirds of global FDI.

For the great majority of countries, the services sector accounts for the greatest share of domestic production and employment. In the US, for example, the sector generates more than 75 percent of employment.

And I think that the importance of services will only increase.

Automation, digitization and new business models are revolutionising the global economy.

Productivity gains from new technologies are driving shifts in employment patterns. They are reducing the demand for labour in sectors such as agriculture or manufacturing. At the same time, the proportion of jobs in services keeps on increasing.

World Bank data comparing 40 countries – both developed and developing – shows that between 1970 and 2012, agriculture employment fell by half. In the same period, the percentage of services employment almost doubled. In fact, according to ILO estimates, the global number of services jobs increased by an average of 3 percent each year between 2000 and 2016.

And we see this dynamism in trade as well. World commercial services exports were $4.8 trillion in 2016. That’s just over 23 percent of total world trade.

However, that is not the whole picture. A more sophisticated analysis which looks only at value added shows that trade in services accounts for almost 50 percent of world trade today. This is a greater share than either manufacturing or agriculture – sectors which are more traditionally associated with trade.

This closer analysis also highlights how services are enablers of the global value chains that define global trade today. Without services crossing borders, it would be impossible to coordinate production stages in different countries. Think of logistics, communications or financial services such as trade finance and e-payments. Today, efficient services are a key determinant of export performance. 

Yet, despite all of this, trade in services is sometimes regarded as a side issue, or something that is only of interest to certain countries.

In fact, to listen to the trade debate today, services is rarely mentioned.

This simply doesn’t reflect the economic reality.

Services are gaining more and more traction. And everyone has an interest here.

In 2016, the US exported over 732 billion dollars of services, with a services trade surplus of over 250 billion dollars.

Services are a key part of trade policies everywhere – with developing countries playing an important part.

In 2016, the share of developing countries in trade in commercial services reached 30.5 percent. This represents a growth of some 25 percent since 2006.

This is positive news. Boosting services in developing countries helps to improve their overall competitiveness and integration into the global system.

But this requires a number of factors to be in place.

Work to improve physical infrastructure, for example, is crucial for moving goods, services and people. Digital infrastructure is also vital. Growth in this area provides opportunities for developing countries to take advantage of digital trade and diversify their exports, from professional services, education, e-payments, or even some health services.

Getting the right regulatory framework in place is vital as well. And I think that the multilateral trading system and the WTO have an important role to play here.

The WTO is the only organization dealing with trade rules at the global level.

The multilateral trading system helps to ensure that trade can flow as freely as possible – providing transparency, predictability and certainty.

These rules provide a stable architecture for trade in services, underpinned by principles such as transparency, predictability and non-discrimination.

At the same time, it allows governments a great deal of flexibility in determining their commitments.

And, if there are disagreements, our Dispute Settlement System helps to solve them in an impartial and transparent way.

Clearly these rules must reflect the reality of today’s economy. So we need to keep updating and reforming the system where we can. Of course, this is not an easy task. Conversations in a number of fronts across the world have struggled to advance.

This also includes the WTO. For a long time, the organization was not seen as a place where you could do business. However, we are changing all that.

At our Ministerial Conferences in Bali and Nairobi WTO members delivered some of the greatest trade reforms in a generation – including:

  • the Trade Facilitation Agreement,
  • the decision to abolish agricultural export subsidies, and
  • a deal to eliminate tariffs on a range of IT products, trade in which is worth 1.3 trillion dollars annually.

These breakthroughs have given our debates a new momentum. Members are now considering how we can advance in a wide range of areas.

Our next Ministerial Conference is in Buenos Aires this coming December, and it can be another opportunity for progress.

A range of issues are on the table – including services.

Some discussions here have focused on what we call “Domestic Regulation”. This includes disciplines on licensing procedures, qualification requirements and technical standards. Members are discussing how licensing and qualification processes can be simplified, and made more transparent and predictable.

A coalition of almost 50 WTO members is working hard to expand the level of support to this agenda.

Also in the area of services, a proposal for an Agreement on Trade Facilitation in Services was put forward, seeking to mirror the approach of the Trade Facilitation Agreement.

And members have been talking about a number of other issues which are of great importance to the services industry.

On e-commerce, for example, discussions are very dynamic and we have several ideas on the table.  I don’t have to tell you how services figures prominently in those discussions.

Of course members are also interested in advancing some traditional issues in Buenos Aires. This includes agriculture in areas like domestic support and food security. They are also seeking outcomes that limit subsidies that lead to overfishing. 

Trade in services, data and information is surging across digital platforms – and steps here could help boost the industry.

The issue of investment facilitation has also received increased attention by many WTO members.

Here, talks have focused on the links between trade, investment and development. The aim would be to further strengthen the WTO’s contribution to facilitating investment flows by providing a more transparent, efficient and predictable environment.

Another issue that members have been discussing are ways to help small and medium sized enterprises to trade.

We all know the importance of these companies in the economic landscape, especially in services – including here in the US.

Conversations are ongoing – with good engagement in all areas. However, engagement does not necessarily mean convergence. At present there is no easy or obvious solution on any of these fronts, so we must keep on working.

The WTO architecture is flexible enough to allow for different types of agreements and for arrangements in different configurations. There is plenty of scope for creativity. I think it’s important to keep this in mind. And this is particularly true in services, where the structure of the GATS allows for very flexible approaches – both in terms of the commitments and of the number of participants.

Buenos Aires is a very important milestone for the organization and for global trade. We should seek to deliver everything we can by December. But that will not be the end of the road.

I hope that we will leave Buenos Aires with members committed to strengthening the trading system, and with a clear path forward for our future work.

It is important that you are part of this debate as well.

The role of business in communicating your priorities to governments is more important than ever.

At the WTO, we have strengthened our institutional dialogue with the private sector, bringing together a range of stakeholders to discuss trade-related issues. There has been an overwhelming response. We are seeing huge appetite to engage on those issues.

A major opportunity for engagement will be at the business summit in Buenos Aires, which will take place alongside our Ministerial Conference.

This is the first time this has ever been done – reflecting the step-change in business engagement that we are seeing. I congratulate the Argentine government on the initiative. This event will provide an opportunity for organizations like yours to articulate your specific interests. Further details will be announced soon. I encourage you to be in touch with the organizers.

A key part of this conversation is making trade more inclusive – and therefore helping small and medium-sized companies to trade.

We have been hearing great ideas from the private sector, so together with the ICC we have launched an initiative called “Small Business Champions” to capture and deliver the best ideas. Companies and private sector organizations have already started putting forward their proposals on how they can encourage and support SMEs to do business across borders. The first proposal accepted was from Google – and more are coming in.

I encourage you to participate. There is more information on our website – and CSI have kindly distributed brochures to participants today.

In closing, I think we have some interesting opportunities ahead of us. I hope we will keep up this dialogue, and that the WTO can continue to rely on your support.

I look forward to working with all of you to build a stronger trading system – which supports the services industry and continues to promote growth, development, and job creation everywhere.

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Publication  World Trade Organization [5F]
Core Series Globelex ,GPETR
Topic codes

98IGO , 151WTO

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