the relative resilience of services trade...
TRANSCRIPT
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2015/SOM3/CONF/010
The Relative Resilience of Services Trade Growth
Submitted by: World Bank
Regional Conference of Services CoalitionsCebu, Philippines7 September 2015
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The Relative Resilience of Services Trade Growth
Aaditya Mattoo
Cebu, Sept 2015
Based on Constantinescu, Mattoo and Ruta (2015), World Bank Policy Research Working
Paper No. 7158
Four points
• Global trade growth slowed down for both cyclical and structural factors
• But services trade growth has been relatively resilient
• Within services, transport follows goods trade, but other services do not
• The technological and structural factors driving services trade could sustain growth
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Trade rebounded after the Great Recession, but trade growth has been sluggish since then
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-10
-5
0
5
10
15
20
25
30Growth rates, percent
Level, 2001=100 (RHS)
Source: IMF World Economic Outlook
Post‐crisis growth rates of world trade are well below the pre‐crisis (1987‐2007) average of 7%, and slightly lower than the growth rate of world GDP
Structural change?
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Total imports (goods and services) as a share of GDP have been relatively flat, especially in China and the US, both pre‐ and post‐crisis:
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330United States
Euro Area
China
World
Turkey
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The relationship between world trade and income changed in the past four decades
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0
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1970‐1985 1986‐2000 2001‐2013
Average Growth Rates across Selected Periods
(percent)Import Volume
Real GDP
Source: IMF World Economic Outlook
In a historical perspective, the “long 1990s” (1986‐2000) were different compared to the preceding and subsequent periods
The association between trade and GDP became much stronger in the “long 1990s” and then reverted to earlier levels
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1.31
2.18
1.31
1970-1985 1986-2000 2001-2013
The responsiveness of world trade to GDP (the trade elasticity) was nearly twice as high in the long 1990s compared to the preceding and subsequent period
A 1% increase in world real GDP was associated with a 2.2% increase in the volume of world trade in the long 1990s and a 1.3% in the 2000s
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Within manufacturing, trade growth declined more in subsectors with greater vertical specialization
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In the long 1990s, trade in the most vertically specialized sub‐sectors saw much faster rates of growth than sub‐sectors where GVCs were less developed
In the 2000s, while trade growth fell across the board, the largest declines were in the sub‐sectors with higher degrees of vertical specialization
Declining trade in manufacturing parts and components (e.g. in China) also suggests changes in global value chains
China offers a good illustration of changing international production relationships: China initially specialized in assembly. As GVCs expanded, imports of parts and
components as a share of exports increased As the country moved up the value chain, foreign inputs were substituted for
domestic inputs and imports as a share of exports declined This does NOT mean that China is turning its back on globalization, as domestic
availability of inputs is often linked to growing FDI8
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1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
China’s Imports of Parts and Components as a Share of Exports ofManufactured Goods, 1992-2013 (percent)
Source: UN Comtrade databaseNote: BEC data on China in Comtrade only start in 1995.
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But services trade has been relatively resilient
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‐15
‐10
‐5
0
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World Import Volumes of Goods and Services
Goods: Growth rates Services: Growth rates
Goods (1993=100, RHS) Services (1993=100, RHS)
Source: IMF World Economic Outlook
It declined less during the crisis and has grown faster after the crisis
Services trade growth is not significantly different in the 2000s from the levels in the long 1990s
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1970-1985 1986-2000 2001-2014
Growth Rates by period (percent)
Goods Import Volume Services Import Volume Real GDP
Source: IMF World EconomicOutlook
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Services growth has also survived the post‐crisis slump
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0
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2001-2006 2007-2010 2011-2014
Growth Rates in the 2000s (percent)
Goods Import Volume Services Import Volume Real GDP
Source: IMF World EconomicOutlook
Within services, “other commercial services” are the main drivers of growth
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1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
World Services Imports and GDP (percent, 1980=100)
Services
Transport services
Travel services
Other commercial services
Current GDP
Source: World Trade Organization, IMF World Economic Outlook. Notes: Based on GDP and Trade in Services originally expressed in US dollars. Government services included in Services, but not plotted separately.
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While the share of transport and travel into total trade has declined, the share of other commercial services has increased
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1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Share of Services in Total World Imports (percent)
Services Transport Travel Other commercial services
Source: World Trade Organization. Note: Government services included in Services, but not plotted separately.
The share of services in trade has increased even more starkly in value‐added terms
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1980 1995 2008
Share of Total W
orld Gross Exports
Gross Exports of Goods and Services as a share of Total World Gross Exports
Goods Services
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1980 1995 2008
Share of Total W
orld Value Added
Exports
Value Added Exports of Goods and Services as a share of Total World Value
Added Exports
Goods Services
Driven in part by growing trade in “tasks”.
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What is driving the different trajectories of goods and services trade?
• In goods, the post war period saw growth in both inter‐industry trade (based on comparative advantage) and intra‐industry trade (based on economies of scale); post‐1990s, the ICT revolution spurred vertical specialization and the “second unbundling.”
• In services: the ICT revolution spurred all forms of trade: inter‐industry, intra‐industry and vertical specialization.
• In goods, there may be temporary saturation of growth options, but in services there remains vast scope for mutually beneficial trade–accentuated by digitization, liberalization, demographic shifts, and innovation.
Declining pace of goods trade liberalization may have played a role in the trade slowdown
Faster trade liberalization in the 1990s relative to the 2000s
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Average applied tariffs in advanced economies and emerging and developing economies (percent)
Imports of Goods and Services (percent of GDP in US dollars)
The liberalization led to a significant increase in the ratio of imports to GDP
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1991
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1995
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1997
1998
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2000
2001
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2006
2007
2008
2009
2010
2011
2012
2013
Advanced Economies Emerging Markets and Developing Economies
Source: UNCTAD TRAINS. *Simple averages of MFN Applied and Preferential tariffsNote: The data for tariffs does not pertain to a consistent sample of countries over time.
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Advanced Economies Emerging Market and Developing Economies
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New Database covers 103 countries (of which 79 are developing)
Source: Borchert, Gootiiz and Mattoo (2013)
But in services there remains significant scope for further liberalization
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Demographic change will also drive services trade
Source: Ozden (2012)
…are creating a mismatch between the demand and supply of services, especially face‐to‐face services
Shifting dependency ratios…
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Despite growing cross‐border trade, the gains from services trade yet to be fully realized
• Production of goods and electronically‐traded services has been fragmented but not other face‐to‐face services like care of the elderly, health care and even education
• One dimension is movement of services providers
• Other dimension is movement of services consumers held back by more subtle barriers
Procedure US inpatient
price ($)
US inpatient volume
US outpatient price ($)
Estimated US outpatient
volume
Foreign price including travel cost ($)
Savings if 10% of US patients undergo surgery abroad instead of in the US ($)
Knee surgery 10,335 399,139 4,142 60,000 1,236 380,604,366 Shoulder Arthroplasty 5,940 23,300 7,931 N/a 2,204 8,704,809 TURP 4,127 111,936 3,303 88,064 2,385 27,581,317 Tubal Ligation 5,663 78,771 3,442 621,229 1,248 171,065,574 Hernia Repair 4,753 40,553 3,450 759,447 1,608 152,655,706 Skin lesion excision 6,240 21,257 1,696 1,588,884 812 151,952,860 Adult Tonsillectomy 3,398 17,251 1,931 102,749 1,010 13,588,218 Hysterectomy 5,783 640,565 5,420 N/a 1,869 250,704,845 Haemorrhoidectomy 4,945 12,787 2,081 137,213 781 23,160,663 Rhinoplasty 5,050 7,265 3,417 N/a 1,906 2,284,315 Bunionectomy 6,046 3,139 2,392 41,507 1,487 5,186,290 Cataract extraction 3,595 2,215 2,325 1,430,785 1,133 171,078,116 Varicose vein surgery 7,065 1,957 2,373 148,043 1,393 15,618,521 Glaucoma procedures 3,882 - 2,292 75,838 1,017 9,670,440 Tympanoplasty 4,993 754 3,347 149,246 1,261 31,408,685
Total savings 1,415,264,725
Source: Mattoo and Rathindran (2006)
The US could save over $1.4 billion annually even if only one in ten US patients chooses to undergo just 15 types
of low‐risk treatment abroad
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Potentially big gains from the international fragmentation of education
• Need for education to be fragmented between: – Standardized components which poor would have a comparative advantage in
providing and– Specialized components which would continue to be provided in rich world
• Cost‐saving from even 2 years of education abroad could be $90,000 or 40% of the cost of a 4‐year US medical education
• Quality is probably not a serious problem. Why?– About one‐quarter of doctors, medical faculty, and nurses are already foreign
trained
• Mobility is already rising: – Post‐secondary US students studying abroad jumped from 65,000 in 1987‐88
academic year to 260,000 in 2008‐09. – US students studying in developing countries increased from around 2,500
students in 1987‐88 to 57,000 in the 2008‐09 academic year.
Source: Mattoo and Subramanian (2013)
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Growing trade and innovation in services: Chilean services firms spend nearly as much on innovation as manufacturing firms
Source: Iacovone, Mattoo and Zahler (2013)
Expenditure on innovation by sector, (Average 2005‐2006, using weights)
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Enaex has become a global pioneer in providing rock blasting services to mining companies
• Milodon is the world's largest truck for mixing and loading of explosives.• Inteliblast software processes input data and determines the type of rock
fragmentation strategy• GPS device mounted on the arm allows location of the perforation and
development of customized designs of the blasting processes based on field data.
Source: Iacovone, Mattoo and Zahler (2013)
24Source: Iacovone, Mattoo and Zahler (2013)
The port terminal in the region of Arica and Parinacota has innovated along multiple dimensions to increase productivity
• Improvement of the port’s layout, • More efficient slot allocation for management of trucks at the port,• Automation of electronic records of the port loads entered, and • New system to efficiently trace loads.
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25Source: Iacovone, Mattoo and Zahler (2013)
Cencosud has innovated in retail, creating a new client interface to enhance customers’ shopping experience
For example, in the electronics section, no more in‐store brand promoters but:• An initial adviser who advises clients on the best product suited for
their needs • An expert who is available to answer technical questions and • Comprehensive training in‐store to costumers on product use
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Mutually reinforcing relationship between trade and innovation: Exporters spend much more on
innovation than non‐exporters
Source: Iacovone, Mattoo and Zahler (2013)
Propensity to spend on innovation of exporters and non‐exporters
Trade and innovation in services are increasingly seen as a way of breaking out of the middle income trap: But are current IP and innovation assistance regimes biased against services?
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The goods trade slowdown may have an impact on countries’ growth, but services trade and FDI growth may help
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On the demand side – the Keynesian concern: • Sluggish world goods imports may reduce opportunities for
individual countries’ exports; though the elasticity of world value‐added exports to world GDP has been more stable ...)
• Could growth in services imports provide new opportunities?
On the supply side – Adam Smithian specialization: • Slower trade growth in goods – in particular, a slower pace of GVC
expansion could diminish the scope for productivity growth through specialization and diffusion of technologies; though the trade‐GDP ratio remains historically high and openness may continue to deliver benefits.
• But continued growth of inter‐industry, intra‐industry and vertically specialized services trade could still contribute to a more efficient international division of labor and knowledge spillovers