Source: World Trade Organization – WTO (video statements)
What is trade in services and why is it becoming increasingly important in today’s economy?
From booking travel and taking online classes to using banking apps, digital platforms and telecommunications, services are part of our everyday lives. But unlike goods, services do not travel in boxes or containers.
Juan Marchetti explains how services cross borders, the four modes of supply defined under the WTO’s General Agreement on Trade in Services (GATS), and how digitalization is reshaping global services trade.
Topics covered:
• What trade in services is • The four modes of supply under the GATS • Cross-border supply, consumption abroad, commercial presence and presence of natural persons • The rise of digitally delivered services • Opportunities created by digitalization • Key challenges affecting services trade • The WTO’s role in supporting transparent and predictable trade in services
Have a trade term you’d like explained in simple language? Let us know in the comments.
Download this video from the WTO website:
https://www.wto.org/english/res_e/webcas_e/webcas_e.htm
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Transcript:
It’s your first day after moving to a new city.
You take a taxi to go to the bank, open an account, and meet with a real estate agent to visit apartments.
In between, you buy your monthly transport pass with your phone.
Have you ever counted how many services you use in a single day?
We all rely on services every day: logistics, finance, transport, travel, telecom, education and more.
And they all share one thing: they are invisible.
Unlike goods, they do not come in a box or in a container.
Many of the services we use come from other countries.
So how do services cross borders?
Services travel through people, data, ideas and investment.
Let’s take the example of someone who wants to learn French.
I’ll call her Sarah.
She’s British.
If Sarah takes an online course with a teacher in France, that is cross-border supply, meaning the consumer and the provider are in different countries.
Only the lessons cross borders.
Another option: Sarah travels to France to study.
In this case, the consumer crosses the border.
We call it consumption abroad.
If a French language school opens a branch in Sarah’s country, we get the third option.
It is the company that crosses the border and we call it commercial presence.
Another option is when the teacher crosses borders to teach Sarah.
And we call this presence of natural persons.
These are the four modes of services trade defined by the WTO General Agreement on Trade in Services, most commonly known as the GATS.
This framework provides common rules for services trade by ensuring open markets, non-discrimination, transparency, and predictability, making it easier for businesses and individuals to export and import services.
Today, services are the fastest-growing segment of global trade, significantly outpacing trade in goods over the past decade.
Now, one in every four dollars of global trade comes from services.
Driven by digital technology, more trade is moving through fiber optic cables instead of cargo ships.
Digitally delivered services, like software, finance, consulting, online education and streaming now make up more than half of global services exports.
Digitalization is opening doors, particularly for women, youth, and small companies.
Today, a software developer in Nairobi, a consultant in Bogota, or a designer in Manila can reach clients around the world with just a laptop and an internet connection.
But challenges remain.
Unlike goods, services do not face tariffs at the border.
Yet, trade in services is affected by regulations: market access barriers, discriminatory measures, licensing rules, lack of recognition of qualifications, and restrictions on data flows.
Regulations play an essential role in protecting consumers, safeguarding privacy, ensuring the quality of the services and the competence of the supplier.
But regulations that are overly burdensome, discriminatory, or very different across markets can make it harder for services companies to compete globally.
The WTO Council for Trade in Services and its committees provide a platform for governments to address these challenges and other concerns, and also to discuss ways to improve how services flow across borders.
At the same time, the WTO Secretariat works with partner organizations to support developing economies through training, technical assistance, and practical tools that help unlock the full potential of the services economy.
Because in today’s world, everyone relies on services.
They connect people, power economies, and shape our future, helping to solve everyday problems and improving our lives.
Is there a trade term you have always wanted explained in simple terms?
Drop your question in the comments.
We are here to break it down.
Let’s make trade clearer, fairer, and easier to understand.