TWN Info Service on WTO and Trade Issues (Feb22/06)
8 February 2022
Third World Network

Services trade recovers in third quarter of 2021, says WTO
Published in SUNS #9506 dated 3 February 2022

Geneva, 2 Feb (Kanaga Raja) -  Global services trade posted a 25% year-on-year increase in the third quarter of 2021, mainly driven by digitally deliverable services such as computer, financial and business services, as well as transport services, which were boosted by soaring shipping rates, the World Trade Organization has said.

According to the latest statistics on trade in services posted on the WTO website, the rise in services trade has yet to represent a full recovery from pre-COVID-19 pandemic levels, as it remains 5% below the levels recorded in the third quarter of 2019.

The WTO said unequal distribution of vaccines, the emergence of new variants of the virus, and border restrictions continue to weigh on international travel.

According to the WTO, the services trade growth in the third quarter of 2021 has kept pace with growth in trade in goods (24%) in the same period.

"World transport services, in particular, rose 45% year-on-year in the third quarter of 2021, and by 12% compared with the same period of 2019," said the WTO.

Recovery was boosted by soaring consumer demand for goods due to lockdowns, the shift from services requiring physical proximity, and fiscal stimulus measures in advanced economies, it added.

"The surge in demand coupled with pandemic-related restrictions resulted in port bottlenecks, mis-allocation of containers worldwide, and delays, which led to a strong increase in shipping rates."

Asia's transport exports rose by 71% year-on-year in the third quarter of 2021, and by 46% compared with the third quarter of 2019.

On the other hand, the WTO said that the recovery of air passenger transport continued to lag, due to restrictions, remaining well below pre-crisis levels.

"Global international travellers' expenditure in the third quarter of 2021 grew 54% year-on-year from a very low base in 2020," it added.

"However, it remained 52% below the value in the third quarter of 2019, before the pandemic."

The WTO said that European countries saw the lowest declines (-32%) compared to pre-crisis levels as travel restrictions were eased in the continent in the summer and cross-border movement was facilitated by COVID-19 vaccination passes.

In comparison, the WTO said that Asia's travel exports were 81% below pre-pandemic values as several countries remained closed.

For instance, the WTO cited the case of Cambodia, the largest exporter among least-developed countries (LDCs), which saw travellers' expenditure fall by 97%.

"LDCs' travel exports in the first half of 2021 were 67% below their value in the same period of 2019 according to preliminary estimates," said the WTO.

According to the WTO, "Other services", which includes construction, recreational, legal and financial services, increased on average by 15% year-on-year in the third quarter of 2021.

"As a group, these services were less affected by the pandemic, with exports contracting by only 1% in 2020 on an annual basis," it said.

The WTO said that computer services continued its impressive rise in January-September 2021, with cumulative exports up 34% compared with the same period of 2019.

"Rapid growth was recorded both in developed and developing economies: computer services exports increased 29% in the United States, 42% in Mauritius, 51% in Ireland, 63% in Ukraine, and 68% in Bangladesh."

The WTO said that internet traffic peaked during the pandemic due to remote working, learning, entertaining as well as e-commerce.

International internet bandwidth expanded by an estimated 30% in the world in 2021, according to the International Telecommunication Union.

However, the WTO said that the value of telecommunications services fell by 4% in the first nine months of 2021 compared with 2019, reflecting steady declines in global prices, especially for bundled communication services.

On the other hand, the WTO reported that construction remains one of the sectors most affected by the pandemic, with world exports contracting by 18% in 2020.

It said in the period January-September 2021, global construction exports were still down 12% compared with the same period in 2019.

In the European Union and China, the largest builders, exports were down by 19% and 4% respectively compared with 2019.

"Rising prices of essential inputs which cannot be easily substituted - such as steel (which faced supply chain bottlenecks) and labour (which saw shortages) - resulted in delays or cancellations of building projects," said the WTO.

The WTO said that according to the latest figures, the cumulative value of services exports in the period January- November 2021 remained below 2019 levels in many economies, with the sharpest decline recorded in Australia (-35%).

In Africa, Morocco's and Uganda's services exports were 20% lower than in 2019, it added.

On the other hand, the WTO pointed out that services exports from China increased by 37% and from the Republic of Korea by 12% supported by transport services.

It said that other Asian economies such as Pakistan and India exported more than before the pandemic owing to computer services.

The WTO said European countries showed differing trends, with Luxembourg's services exports up 21% due to financial services while large tourism exporters in the region continued to see a contraction.