A blog post by IMF Managing Director Christine Lagarde highlights the growth in trade in services and opportunities that this growth presents for the world’s economies. She highlights particularly the growth in digital trade.
Lagarde states that “we are entering a new era of trade — an era in which data flows are becoming more important than physical trade”.
She points out that between 1986-2008, global trade in goods and services grew at more than twice the rate of the global economy. In recent years, however, growth in this more traditional type of trade has barely exceeded global GDP growth.
At the same time, Lagarde notes that digital flows have been booming. According to Cisco, the amount of cross-border bandwidth used grew 90-fold between 2005 and 2016 and it is expected to grow an additional 13-fold by 2023.
While this increased digital flow includes video streaming, Skype calls, and social media posts, it can also be boosted further by making services more tradable — from engineering, to communications and transportation.
Trade in services has already been growing relatively fast. It now accounts for one-fifth of global exports. According to some estimates, half of the global trade in services is already driven by digital technology.
Lagarde notes that continued growth in this area could help many groups. Advanced economies could benefit because they are globally competitive in many service sectors, especially financial, legal, and consulting. Developing economies such as Colombia, Ghana, and the Philippines, could benefit because they are promoting growth in tradable services, such as communications and business services.
The growth in trade in services could also help small businesses and individuals who can use digital tools to leverage their expertise in the global marketplace.
Australia has also been a beneficiary of the growth in trade in services. Tourism earnings have risen by around 67% just in the past five years. Tourism has grown to be now more valuable than coal in Australia’s exports, while education services has also grown strongly.
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