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On April 17, 2008, the trade express released by World Trade Organization (WTO) reviewed the development of world economy and trade in 2007, made prospects for 2008 based on preliminary data.
WTO's preliminary estimates show that the world economy's real growth rate slid to 3.4% in 2007 from 3.7% of the previous year. Over the same period, world merchandise trade growth slowed down apparently to up by 5.5% compared with a high level of 8.5% in 2006. In nominal terms, the dollar value of world merchandise exports rose by 15% to $13.57 trillion, 1% lower than 2006, and that of commercial services rose by 18% to $3.26 trillion, 6% higher than 2006. From 2000 to 2007, world trade in goods and commercial services exports grow synchronized with an average annual growth rate of 12%.
Table 1 World exports of merchandise and commercial services, 2000–07
Source: WTO Secretariat.
The increase in commercial services exports in 2007 was markedly faster than in the preceding year and somewhat faster than that of merchandise trade. In the last 4 years, commercial services trade growth has been lower than merchandise trade. The acceleration in services exports could be observed in all major regions and in all three services categories. Much of this acceleration is due to exchange rate movements and in some cases also to higher costs of transportation fuels. It can be assumed that exchange rate changes played a stronger role in the dollar value change of services trade than in merchandise trade, as Europe accounts for a larger share of services than merchandise exports, and euro appreciated apparently to dollar in 2007.
Transportation, travel and “other commercial services”(including communication services, construction services,insurance, financial services, computer and information services, exclusive rights to use and licensing, consulting,accounting, legal and advertising services, recreational, cultural and sporting services, etc)are the three most important broad commercial services categories, the last of these has been the largest and the fastest growing category over the last seven years and accounts for slightly more than one half of total services exports. In 2007,other commercial services expanded by 19% to $1.65 trillion, again faster than transportation and travel. Higher fuels cost contributed to the relatively sharp rise of 18% in the dollar value of transportation services, and travel services export rose by 14%. Between 2000 and 2007, other commercial services achieved an average annual growth rate of 14%, higher than transport services of 11% and travel services of 9%. Other commercial services expanded more than transportation and travel, mainly due to world merchandise trade increase and much higher cost of transportation. The differences of growth rate lead to vibration of commercial services exports overall structure. The proportion of transport, travel and other commercial services in the total exports of commercial services is 22.8%, 26.5% and 50.7% respectively.
Table 2 World exports of commercial services trade by major category, 2000-07
Source: WTO Secretariat.
Europe’s commercial services exports and imports were up by 19% and 17% respectively, consolidating Europe’s leading position in world services trade by region. The exports and imports volume were $1660 billion and $1430 billion, accounting for 51% and 46.9% of the total world commercial services respectively. Europe’s other commercial services and transportation services expanded markedly more than travel services for both exports and imports. For the latter category, the preliminary data indicates that Europe’s travel receipts lagged and somewhat behind the expansion of the global average. The United Kingdom and Germany, the two largest services traders in Europe,experienced an increase in their services exports in line with European exports. The increase in France, Italy and Netherlands was weaker than the European average, but much stronger than the average in Spain, Ireland, Sweden,Switzerland and Poland. On the import side, Spain, Denmark and Sweden recorded services import growth in excess of 20%.
The Commonwealth of Independent States (CIS) registered the highest export and import growth in commercial services trade of all regions in 2007, which were 25% and 29% relatively. However, CIS still has the smallest share in world services trade，with exports of 1.96% and imports of 2.94%. The volume were $64 billion and $ 90 billion in 2007.
Asia’s commercial services trade rose only slightly faster than the world total in 2007, in which exports and imports were up by 17% and 19%. Exports of all three services categories expanded at roughly the same rate, while on the import side travel expenditure is estimated to have been much weaker than the other two services categories.Somewhat weak export and import growth in dollar terms was reported for Japan and Chinese Taipei, while growth remained moderate for Hong Kong China and Singapore. Services exports and imports rose by more than 20% in China, Malaysia and Australia. India is estimated to have one of the strongest import expansion rates of 24% for commercial services in Asia, while its services exports only rose by 15%, less than the global average of 18%, this situation is for the first time since 1996.
North America’s commercial services trade recorded the weakest export and import expansion of all regions in dollar value terms in 2007. The growth rate of imports and exports are 9% and 13%. Although exports rose more than in the preceding year of 9%, for the seventh year in a row, annual growth of 7% lagged behind that of the global trade expansion rate of 12%. US services imports grew by 9%, one of the smallest increases among the 30 leading traders. US services exports rose by 14%, contributing to a rise in the US trade surplus in commercial services of $120 billion. Affected by the slowdown in the US economy, Canada’s services exports rose by a mere 6% in 2007. The appreciation of the Canadian dollar stimulated Canadian travel expenditure in the United States and contributed to a rise in services imports of 11%.
In South and Central America commercial services imports expanded 18%, more than exports of 16% in 2007. According to preliminary data this development was largely due to the travel account, as it is estimated that travel expenditure in the region rose by about one quarter, or twice as fast as receipts. As the largest services trader of the region, Brazil’s exports and imports rose by about one quarter in 2007.
In Africa commercial services exports and imports expanded by 21% and 19%, both higher than the global average. Commercial services exports grew by 15% in the Middle East and were lower than the global average; imports grew by 17%, which were 1% higher than the average level.
Observed from a longer period of 2000-2007, Europe, Asia, Central and South America services exports grew higher than imports. In the CIS and the Middle East, the growth rate of exports was less than that of imports. North America and Africa services exports increased in line with imports.
Table 3 World commercial services trade by major districts, 2000-07
Source: WTO Secretariat.
Due to the serious imbalance between world economic development and services industry, as well as the competition imbalance of each country in international services trade, the development of world commercial services shows great asymmetry. At present, about 85% of global services trades concentrate in the developed countries and emerging Asian industrial districts. In 2007, the 10 leading exporters of services trade were developed countries except China (ranked 7), the 10 leading importers were also developed countries except China (ranked 5).
Trade performances of the leading commercial services exporters and importers differed widely in 2007. On the basis of the preliminary data, the four leading traders, namely the United States, the United Kingdom, Germany and Japan, maintained their rank for both exports and imports. Although China’s full-year data are not yet available, it seems to have moved ahead of Italy and become the seventh largest exporter of commercial services. Among the major shifts in the export ranking, Canada and Austria lost four and eight positions respectively, while the Republic of Korea gained five positions. Austria’s lower ranking is largely due to a revision in methodology which has also caused a similar drop on the import side. Canada recorded weak export growth rate due to sluggish exports to the United States, its major market. The gains in Korea’s services exports are based on the strong performance reported for transportation services.
On the import side, Spain, Russia, India and Australia all reported import growth of over 20% in 2007. Based on preliminary data, France has probably lost its number five position in the importer ranking to China.
Table 4 30 leading traders of Commercial services, 2007
Source: WTO Secretariat.
For the prospects of 2008, turbulence in international financial markets triggered by subprime crisis in the United States has not been completely eliminated, the American economy’s recession trend has emerged, European and Japanese domestic demands grow weaker, the pressure on global inflation is increasing, the dollar has depreciated, all the factors above have increased the uncertainty of short-term trend of world economy. At present, the central projections retained by major institutional forecasters indicate a further deceleration in world economic and trade growth in 2008. According to World Trade Organization economists, sharp economic deceleration in key developed countries is only partly offset by continuing strong growth in emerging economies, the financial market turmoil and bulk commodity price surges will further restrain global economic activities.
WTO estimates preliminarily that if turbulence in international financial markets could be contained soon, and its impact on the real economy is limited, world output could still grow at 2.6-3.0%. Global merchandise trade may slow down to about 4.5% in 2008, or about 1 percentage point less than in 2007, to the lowest level since 2002. Based on the results of the WTO Secretariat’s time series forecasting model, OECD area’s imports of goods and services may slow down to 3%, a further 1.5 percentage point decrease from in 2007.
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