Closer int'l cooperation needed to promote global services trade

Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".

The latest World Trade Report released by the World Trade Organization (WTO) shows that services have become the most dynamic component of international trade, and that they will continue to expand in the coming decades. But against the backdrop of rising trade protectionism and unilateralism, enhanced international cooperation is urgently needed to support this expansion.

The China Securities Regulatory Commission on Friday announced its timetable to lift foreign ownership limits on fund management firms, brokerages, and futures companies next year. [Photo: IC]

According to the WTO report, services account for over one-fifth of global trade today - more than double what it was in 1970. The trade in services, ranging from financing to logistics, helps to facilitate economic development, streamline industrial structures, and create job opportunities. On average, services now account for about half of the global GDP. In developed countries, services make up about three-quarters of the GDP, and their share of the economy in developing countries is rapidly increasing.

But the fast growth that the service sector has enjoyed is being overshadowed by rising protectionist sentiment and unilateralism. The reading of the WTO's Services Trade Barometer issued last month stood at 98.4, below the baseline value of 100. That suggests the services trade has continued to face strong headwinds leading into the second half of the year. To inject new momentum into the global services trade, the WTO is urging all countries to strengthen their international cooperation.

First and foremost, countries need to eliminate barriers to trade. According to the WTO report, barriers to cross-border services trade are much higher than the barriers to the trade of goods. These limitations include overly restrictive limits on foreign ownership, restrictions on the movement of people, and complicated regulatory approval procedures. China has been committed to reducing and eliminating these kinds of barriers, having already significantly lowered the threshold for foreign investment in the banking, securities, and insurance sectors. Next year, restrictions over ownership in those sectors will be scrapped altogether. And the government has also moved to break down barriers to foreign investment in the urban gas supply, cinema, and value-added telecommunication service sectors.

The continuous expansion of platforms that facilitate international cooperation is also very much needed to promote the global services trade. In this regard, China's Belt and Road Initiative provides a good example: Last year, services trade between China and its Belt and Road partners surpassed 120 billion U.S. dollars, accounting for more than 15 percent of China's services trade revenue. China has also strived to promote the trade in cross-border services using other influential platforms such as the China International Import Expo and the China International Fair for the Trade in Services.

The WTO report predicts that by 2040, the trade in services will account for one-third of total world trade. It will take concerted and coordinated effort by all countries to eliminate policy barriers and make the most of the great potential in the sector. The results of this global effort will benefit developed and developing countries alike.