Trade in Commercial Services Outlook in Asia and the Pacific 2020/2021

Trade in Commercial Services Outlook in Asia and the Pacific 2020/2021

Date: 
Friday, December 18, 2020
Type: 
Databases and related outputs
Abstract

• The COVID-19 pandemic has had a devastating impact on trade in commercial services, turning it from weak growth in 2019 to a sharp contraction in 2020. Globally, commercial services trade value grew by only 2% in 2019. In the first six months of 2020, global exports and imports declined by 19.5% and 20.1%, respectively, compared to the same period in 2019. Commercial services trade in Asia and the Pacific performed even worse, moving from a 0.3% growth in 2019 to export and import declines of more than 22% in the first half of 2020. If this trend continues, the region’s shares in global commercial services trade will also edge down to 26.5% (exports) and 30.1% (imports) in 2020, from 27.8% and 31.5% a year earlier.
• Adverse impacts of the pandemic are uneven across services and economies. Travel and transport dependent economies tend to face more negative impacts than other countries. International tourist arrivals during the first eight months of 2020 decreased by 78.8% compared to the same period of 2019. These are linked to a massive 65.3% decline in international flights during the first eight months of 2020. In contrast, economies exporting information and communications technology (ICT) services as well as digitally enabled services have seen some new opportunities during the COVID-19 pandemic.
• Despite the overall decline of trade in services because of depressed economic activities, selected ICT services grew in 2020. Indicators of online activities in Asia-Pacific economies show that social networking and online collaborative platforms, in particular, are expected to grow between 17.3% and 31.3% across major Asia-Pacific economies, while public cloud services are also expected to display a positive trend in 2020. E-commerce services were also growing rapidly, with orders up 70% for the first five months of 2020.
• Trade in services, except travel services, recovered during the second half of 2020 when many regional economies partially lifted the virus-containment measures, supporting a rebound in economic activity. Global transport services and the global services Purchasing Managers’ Index have shown moderate improvements since the second quarter of 2020. Although trade in commercial services is not expected to fully return to pre-COVID-19 levels in 2021, a partial recovery of demand for commercial services – in particular transport services – is anticipated. Maritime transport services will benefit from the positive growth in merchandise trade volume. Additionally, air transport services and travel services will grow in 2021 from a very low base in the previous year. However, the partial recovery of demand will not generate significant upward pressures on prices except in selected sectors that may experience supply shortages because of business shutdowns during the pandemic. The recovery of cross-border travel services will be limited because of high restrictions on crossborder travels.
• In the medium to long term, Asia-Pacific economies will see digitalisation, accelerated by the COVID-19 pandemic, redefine the nature of services trade. The trend of delivering services through digital means will stay after the pandemic, as the higher efficiency and productivity gains they can bring have been proven. Digitally-enabled services may substitute for some part of other services. For example, telemedicine and teleconference services, by reducing the need for person-to-person contact, may reduce demand for travel, including passenger air transport services. Similarly, COVID-19 pandemic related change in consumer behaviour has fast-forwarded e-commerce as a new normal. This may require developing countries in the region to adjust their development priorities and focus on acquiring the capacity to effectively engage in a rapidly digitalizing trade environment, especially hard and soft trade infrastructure.
• However, trade in digital services continues to be hindered by domestic regulations that are beyond the scope of trade policies, such as data protection, intermediary liabilities, filtering or blocking, and cybersecurity standards, among others. Also, since 2019, there have been increased restrictions on the usage of various mobile applications, perceived as potentially stifling national security, in certain countries. These recently emerged barriers appear to show uncoordinated and conflicting policy objectives in digital trade policy areas.

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