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Non-tradables becoming tradable (June 24, 2013. The Korea Times)
- Date : 2013.06.24
- Views : 1132
Non-tradables becoming tradable
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Service industries are increasingly facilitating vertical and horizontal integration among industries and regarded as key to job creation and productivity enhancement. By rapidly spreading cross-border value chains, many services are becoming important direct inputs for commodity trade and production fragmentation across nations.
Finance, logistics, telecommunications, e-customs services, etc. are indispensable for creating a high value added real economy. Trade in service has shown a new development path in international trade while boosting growth with structural adjustments. This is evident in the fact that the annual growth rate of global service trade in recent years has reached 9.3 percent, outstripping the annual growth rate of 8.8 percent of goods trade. More importantly, the recent global economic crisis has caused less of an impact on service trade than commodity trade.
However, the systematic liberalization of trade and investment in services even through trade agreements has progressed far less than has trade in goods, given their immobile and social overhead capital nature. International transactions in services in general require face-to-face contact between consumers and service providers. As a result, bilateral and multilateral service agreements are on the rise to facilitate service trade for mutual gain.
For this purpose, on the one hand, the liberalization of service trade involves the removal of regulations denying market access. On the other hand, the liberalization of commodity trade involves basically either the elimination or reduction of tariffs and non-tariff barriers. However, the World Trade Organization’s General Agreement on Trade in Services allows each country to choose the scope and sequencing for the market opening of various service industries, and even allows withdrawal from liberalization commitments. Therefore, a country should take proactive action toward a market opening for competition and engage in more service trade.
Very recently, hitherto non-tradable services such as cloud computing services from big data, cross-border distance learning, and distance medical examinations have become increasingly visible and are being perceived as a form of viable cross-border service trade without being at customer locations.
It is well known that the manufacturing sector in most advanced economies fails to provide additional jobs comparable to their contribution to national output values due to robotics and the digital transformation of conventional production lines. As a consequence, all countries are turning to service sectors not only for job creation but as a new engine of growth.
Recently, I had the privilege of attending an international forum organized by the China WTO Study Organization to address trade in services while hosting China’s annual service trade fair in Beijing in cooperation with the United Nations Conference on Trade and Development.
Noteworthy among the many points raised during the forum is that China, the global manufacturing mecca, is considering shifting its focus to service sector development in order to ensure inclusive and sustainable development by removing high-level regulations on foreign investment in services, especially in wholesale/retail trade, finance/insurance, and construction.
Korea and China are negotiating a bilateral free trade agreement. Cross-border investment in the service sector must be included to reap potential win-win benefits of the two manufacturing powerhouses. For example, finance, standards, e-customs services and mutual recognition could generate great mutual gains. Both service liberalization and welfare-enhancing regulatory reform in the bilateral trade context could be implemented through transparency, dialogue, and cooperation between regulators, trade officials, and stakeholders.
Korea now attempts to establish a “creative economy” not only for job creation but also a high value added economy. Knowledge-intensive services, domestic and foreign, are crucial inputs for a creative economy. As Korea has done in manufacturing exports, it should make various services more exportable.
Korea’s involvement in Middle East construction projects has turned around Korea’s construction industry to be globalized and competitive. In recent years, Korea’s medical services have also been gaining international recognition and become exportable. Combining medical services and tourism can provide jobs and competitive “life services.” Korea expects 10 million Chinese tourist arrivals by 2020.
Perhaps Northeast Asian economies can work out an early version of an open-sky agreement so that people in a lower-income bracket can visit their neighbors. Korea should take a more open and pro-active approach toward cross-border service trade.
http://www.koreatimes.co.kr/www/news/biz/2013/06/333_137944.html