EDC Report on World Trade in Services
OTTAWA – July 27, 2006 – A new report by Export Development Canada (EDC) called World Trade in Services examines the importance of service based trade to the world and Canadian economies. After having reached an estimated CAD 2.4 trillion in 2005, world services exports are forecast to grow 6 per cent to CAD 2.6 trillion in 2006, and 4.5 per cent to CAD 2.7 trillion in 2007.“Despite being the third largest export sector in Canada, the export of services receives scant attention,” said Peter Hall, Vice President and Deputy Chief Economist. “Worldwide, services represent 60 per cent of total economic activity while accounting for just 20 per cent of global trade, but when you consider the recent explosion of trade activity and technological capability, the future looks very bright for trade in services.”
Canada achieved total services export growth of 4.5 per cent in 2004 and 1.7 per cent in 2005 to reach CAD 65.0 billion. As a Canadian industry sector, the level of services exports is higher than forestry (CAD 43.4 billion) but lower than energy (CAD 86.9 billion). Growth in Canada’s service exports is forecast at 2.6 per cent to CAD 66.7 billion in 2006 and 2.5 per cent in 2007.
The services sector underperformed compared to the goods sector in 2005, with growth of 1.7 per cent and 5.3 per cent, respectively. Services exports were held back by the dual headwinds of the higher Canadian dollar and high fuel prices.
Regionally, a close examination of world services export data shows that Europe is the world’s largest single exporter of services, accounting for nearly half of total global exports, followed by Asia (one fifth), North America (17 per cent), and the rest of the world. Europe’s leadership in services exports is likely explained by the extremely high level of economic integration within the EU. Accordingly, exports to non-EU countries represent only 40 per cent of total services that year from Europe. The remainder, roughly three fifths of all EU services exports, are intra-EU.
While Asia accounts for only 20 per cent of total world service exports, export growth in services from the region outpaced the rest of the world by a wide margin during the 1990s – 15 per cent versus 9 per cent. That trend continues today, with the region’s total exports of services increasing by a considerable 26 per cent in 2004 and 19 per cent in 2005. Forecasts show Asia continuing to outpace the global average. While offshoring certainly explains part of this growth, it is a much more complex process than commonly thought. We may be witnessing the evolution of outsourcing business functions into business process outsourcing, where an entire function like a company’s HR support is outsourced.
Mr. Hall noted that “a feature of this process is that service outsourcing is moving up the value-added chain. Both developments – continued outsourcing and moving up the value chain – are expected to continue and perhaps spread to more industries.”
The World Trade in Services Report is available on EDC’s web site at http://www.edc.ca/english/publications_brochures.htm.
EDC is Canada’s export credit agency, offering innovative commercial solutions to help Canadian exporters and investors expand their international business. EDC’s knowledge and partnerships are used by 7,000 Canadian companies and their global customers in up to 200 markets worldwide each year. EDC is financially self-sustaining and is a recognized leader in financial reporting, economic analysis and human resource management.
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Media contact:
Phil Taylor
Public Affairs
Export Development Canada
(613) 598-2904
ptaylor@edc.ca
