VI:Growth prospects in electronic commerce-related services trade

VI. Growth prospects in electronic commerce-related services trade

As previously noted, trade in digitizable media products has grown at a rate 1.5 times faster than total trade. Similar trends can be observed in relation to output and trade in electronic commerce-related service sectors. Output in communication services grew at two to six times the rate of overall economic output in Australia, France and the United States during the first half of the 1990s (OECD, 1997). Other relevant service sectors have also grown at above-average rates. Only financial and insurance services show below-average growth. This could be due to outsourcing (ATMs instead of clerks) or due to the use of deflators which do not fully take into account the price decline in many financial services in recent years. The well-documented rapid growth of international financial transactions in recent years was also due to the spread of electronic payments systems and other means of electronic commerce (Kono, Low, Luanga, Mattoo, Oshikawa, and Schuknecht, (1997)).

Table 6 provided sectoral openness indicators for a number of OECD countries in 1995. The relatively low indicators, however, mask the rapid trade growth which most countries experienced in the first half of the 1990s. Between 1992 and 1995, the openness indicator increased for all sectors, most strongly in insurance (from 11.6 to 14.4) and other business services (from 24.5 to 26.5) (see Annex Table 6).

Another way of assessing the growth dynamics of services trade is through foreign direct investment (FDI) flows. FDI reflects the establishment of a foreign commercial presence and leads to affiliate trade. European Union (EU) data on FDI flows in electronic commerce-related service sectors shows strong growth rates in recent years. Between 1992 and 1995, total FDI outflows from EU members almost doubled, from ECU 33 billion to 63 billion (Table 8). Total inflows to EU members increased by about 50 per cent, from ECU 29 billion to 42 billion. Total FDI flows can be sub-divided into intra-EU and extra-EU flows. Intra-EU FDI flows in electronic commerce-related service sectors increased by about 10 per cent per annum (from 25 to 36.3 billion and from 19.5. to 26.4 billion for outflows and inflows, respectively). FDI outflows to non-member countries increased by an average of 42 per cent per year. Inflows from non-members into the EU increased by 19 per cent per year over the same period.

These figures show that cross-border services trade and establishment trade through foreign affiliates have been growing rapidly in recent years. Trade in economic commerce-relevant services is still less important than trade in most manufacturing sectors. But there is strong reason to expect much more trade integration in the services sectors in the coming years, attributable in no small measure to the development of electronic commerce. Services trade which can easily be conducted in electronic form and which does not face regulatory obstacles may reach similar proportions to trade in many manufacturing sectors.