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    Why Services Matter


    © International Trade Centre, International Trade Forum - Issue 2/2005

    Photo: photos.com Examine the potential of service exports for development: rapid global growth, combined with the potential to raise living standards for a wide range of society, makes investment in exporting services a strategic "must".

    When you picture "trade", "the world trading system" or "exports", what image springs to mind? You'd be hard-pressed to find anyone who thinks of trade in services. The most frequent responses are goods loaded in containers on a ship, boxes on a truck or cargo on a plane. In part, this reflects the relatively recent growth of the service economy in world trade. But that we have such a reaction is also because services are intangible, thus more invisible.

    This makes service exports a challenge to promote. Exporters sell a "promise", rather than a product that buyers can physically inspect. Selling services hinges on good impressions and referrals that give the buyer confidence. For exporters in developing and transition economies, this can be a real barrier.

    Because services are intangible, they are also less easy to track. If you live in one country but cross a national border to dine in a restaurant, repair your car or do your laundry, would you think of your activities as service exports? Most of us don't. Yet increasingly, countries track the economic impact of services, such as international students participating in educational programmes or services that multinationals outsource, such as translation, accounting, customer services and others.  These trade flows matter more than you might expect. Services are the fastest-growing component of international trade. While developed economies account for two-thirds of trade in services, exports are rising everywhere. Even least developed countries have experienced growth; transition economies have seen almost 14% growth in the last five years.

    Where are the business opportunities for developing countries? In a wide variety of sectors, but with very specific niches. Reporters already cover these trends anecdotally, and they go beyond the rise of call centres. What of the British man who goes on holiday in Hungary and, at the same time, has dental surgery? Or the family that joins a business executive in Bali after a business trip? What of new biotechnology hubs in Malaysia? Revolutions in information and communications technology and transportation have opened a world of opportunities.

    For governments, linking service growth to development planning could be a plus to help reduce poverty and build economies. Yet this potential is still largely untapped. To use service exports as a path to development, decision-makers first need to be aware of their potential. That's why this issue of Trade Forum concentrates on the basics of awareness-raising: an overview of trends with facts, figures and market opportunities; techniques to bring service exports to the attention of development and export planners, businesses and society at large; steps to address critical issues, such as business interests in WTO talks and credibility as ser-vice exporters; and information resources on a range of important issues. We encourage you to test these "leads", and we'd appreciate your feedback.

    Landlocked countries, small island states and those with few opportunities to diversify industry or agriculture might take a second look at what it takes to develop service exports. But all countries can benefit from examples of creative approaches to link export growth to development: community development as a commercially viable part of Brazil's biggest tourist resort; matching national strategy-makers with civil society to offer opportunities to disabled citizens; a seasoned view towards stronger African financial services; food for thought on links between services and the economy. Our aim? To illustrate that rapid growth in service exports can go hand-in-hand with development objectives, and can be designed to last.

    Natalie Domeisen