SGPAST

Trade in Services refers to the sale and delivery of an intangible product, called a service, between a producer and consumer. Trade in services that takes place between a producer and consumer that are, in legal terms, based in different countries is called International Trade in Services.

International trade in services is defined by the Four Modes of Supply of the General Agreement on Trade in Services (GATS).

(Mode 1) Cross-Border Trade - which is defined as delivery of a service from the territory of one country into the territory of other country, e.g. remotely providing accounting services in one country for a company based in another country, or an airline flying between two international destinations

(Mode 2) Consumption Abroad - this mode covers supply of a service of one country to the service consumer of any other country, e.g. tourism, telemedicine, or study-abroad

(Mode 3) Commercial Presence - which covers services provided by a service supplier of one country in the territory of any other country, e.g. a bank opening a physical branch or internet service provider offering internet services in another country

(Mode 4) Presence of Natural Persons - which covers services provided by a service supplier of one country through the presence of natural persons in the territory of any other country, e.g. a business transferring an employee from one country to another for work duties (doctors or architects traveling and working abroad)

l  Business and professional services, including:

v  Financial & Accountancy services

v  Advertising services

v  Architectural & Engineering services

v  Information Technology services

v  Legal services

l  Communication services

v  Audiovisual services

v  Postal and courier services

v  Telecommunications

l  Construction & related services

l  Distribution services

l  Educational services

l  Energy services

l  Environmental services

l  Health and Social services

l  Tourism services

l  Transport services

Over the past 20 years, trade in services has become the most dynamic segment of world trade, growing more quickly than trade in goods. Developing countries and transition economies have played an increasingly important role in this area, increasing their share in exports of world services from a quarter to one-third over this period. 

The GATS defines trade in services in terms of modes of supply:

• Mode 1 covers services supplied from one country to another (for example, call centre services).

• Mode 2 covers consumers or firms making use of a service in another country (for example, through international tourism).

• Mode 3 covers a foreign company setting up subsidiaries or branches to provide services in another country (such as a bank setting up a branch overseas).

• Mode 4 covers individuals travelling from their own country to supply services in another (for example, a consultant travelling abroad to provide an IT service).

Mode 2 is by far the most liberalized mode in terms of commitments by WTO members. This is mostly due to governments being less likely to restrict the movements of citizens outside domestic borders (e.g. tourists). Mode 1 is not often

committed, mostly because it is impossible for many services to be supplied remotely (e.g. construction services), while mode 3 is more open, reflecting its crucial role in driving the international supply of services, transferring know-how and improving the capacity of economies to participate in global value chains.

Mode 4 has the lowest depth of commitments, probably due to a number of sensitivities involved with the movement of foreign workers.

In 2014, trade in services totalled USD 4,800 billion, representing 21 per cent of world trade in goods and services.

However, this total does not cover services delivered via foreign affiliates (i.e. essentially mode 3). The total trade in services is therefore estimated to be much larger, even twice as large, as mode 3 represents 55 per cent of total services trade (see Figure 2).

First, the standard industrial classification method formulated by the UN. In 1971, the United Nations promulgated the International Standard Industrial Classification of All Economic Activities (ISIC), which divided all economic activities into 10 major items and several medium and minor items. According to it, the service industry could be divided into five categories, namely: 

A. Wholesale and retail business, restaurants and hotels; 

B. Transportation, storage and communication; 

C. Financial insurance and business services;

D. Public administration and national defense; 

E. Communal, social and personal services.

Second, according to the Industrial Classification for National Economic Activities, the service industry covers 15 industries, including transportation, storage and postal service, information transmission and computer industry, etc.

On August 15, 2004, Measures for the Administration of Examination and Approval of Foreigners' Permanent Residence in China was officially promulgated, which marks the formal implementation of China's "green card" system. Commonly known as Foreigner's Permanent Residence Card, China's green card is the legal identity card for foreigners who have obtained the permanent residence qualification to live in China.

According to Article 6 of Measures for the Administration of Examination and Approval of Foreigners' Permanent Residence in China, foreigners who apply for permanent residence in China shall abide by China’s law, be in good health, have no criminal record and meet one of the following requirements: (1) Invest in China directly, keep stable investment for three consecutive years, and have a good tax-paying record; (2) Have served as deputy general managers or deputy factory managers or have senior positions in China, or have associate senior titles such as associate professor or associate researcher or their counterparts, and have been working for at least 4 continuous years. During the 4 years of work in China, the applicant should have an accumulated tenure of residence in China of not less than three years and have a good tax-paying record; (3) People who have made significant contribution to China or who are especially needed by the country; (4) Spouses and unmarried children under 18 of the person referred to in item 1, item 2, and item 3 of this paragraph; (5) Spouses of Chinese citizens or foreigners who have obtained permanent residence qualification in China, whose marriage relations have lasted for at least five years, and have a continuous tenure of residence in China of not less than five years. During the five years of residence, the applicants should have stayed in China for at least nine months every year and have steady sources of income and domiciles. (6) Unmarried children under 18 who come to seek refuge with their parents; (7) People who have no directly-related family members abroad and come to seek refuge with their directly-related family members in China. The applicants should be not younger than 60 and have tenure of residence in China of at least five years, have stayed in China for at least nine months every year, and should have steady sources of income and domiciles.

After breaking the record of USD 120 billion in 2011, the total import and export volume of Shanghai service trade hit the record of USD 150 billion for the first time in 2012. According to the latest statistics of the Ministry of Commerce, the total import and export volume of Shanghai service trade totaled USD 151.56 billion in 2012, up 17.2 percent YoY, which completed the increase target of 15 percent growth rate set in the beginning of the year. Among them, service exports amounted to USD 51.53 billion, an increase of 8.9 percent YoY, and service imports reached USD 100.03 billion, up 22.1 percent YoY.

In 2012, the import and export volume of Shanghai service trade occupied 30.7 percent of the total volume of China's service trade. Shanghai service trade volume, its export and import of service trade all ranked first in China. The contribution of Shanghai service trade to the country’s service trade further strengthened. The proportion of service trade in the city’s total foreign trade (commodity trade and service trade) of the same period increased to 25.8 percent, and the contribution of service trade to the city’s economy and trade further strengthened.

Due to the influence of various domestic and foreign factors, the industrial structure and level of import and export of Shanghai service trade in 2012 changed to a certain extent, seen from the development trend in recent years. The import and export volume of transportation services amounted to USD 42.9 billion, up 9% YoY. Although it is higher than the growth rate of 2 percent in 2011, it is still far below the average growth rate. The import of tourism industry continued to keep relatively high growth, with a trade volume of USD 51.9 billion, up 33.3 percent YoY. Exports of emerging services increased rapidly. Export of computer and information services increased by 29.4 percent YoY. Export of advertising increased by 28.5 percent YoY. Although the proportion of export of insurance service and patent royalty service is not high, they have achieved a growth rate of more than 30 percent.

Launched in 2014, the OECD Services Trade Restrictiveness Index (STRI) is a unique, evidence-based diagnostic tool that provides an up-to-date snapshot of services trade barriers in 22 sectors across 44 countries, representing over 80% of global services trade. For the first time, comprehensive and comparable information has been available for policymakers to scope out reform options, benchmark them relative to global best practice, and assess their likely effects; for trade negotiators to clarify those restrictions that most impede trade; and for businesses to shed light on the requirements that traders must comply with when entering foreign markets.

The goods and services we buy are composed of inputs from various countries around the world. However, the flows of goods and services within these global production chains are not always reflected in conventional measures of international trade.

The joint OECD – WTO Trade in Value-Added (TiVA) initiative addresses this issue by considering the value added by each country in the production of goods and services that are consumed worldwide. TiVA indicators are designed to better inform policy makers by providing new insights into the commercial relations between nations.

International production, trade and investments are increasingly organized within so-called global value chains (GVCs) where the different stages of the production process are located across different countries. Globalisation motivates companies to restructure their operations internationally through outsourcing and offshoring of activities.

Firms try to optimize their production processes by locating the various stages across different sites. The past decades have witnessed a strong trend towards the international dispersion of value chain activities such as design, production, marketing, distribution, etc.

This emergence of GVCs challenges conventional wisdom on how we look at economic globalisation and in particular, the policies that we develop around it.

Trade deficits and surpluses are sometimes attributed to intentionally low or high exchange rate levels, though there has been no consensus on the matter. OECD analysis of impact of exchange rates and their volatility on trade flows between China, the Euro area and the United States finds that exchange volatility impacts trade flows only slightly. Exchange rate levels, on the other hand, were found to affect trade in agriculture and in the manufacturing and mining sectors but did not explain in their entirety the trade imbalances in the three economies examined.

The General Agreement on Tariffs and Trade (GATT) covers international trade in goods. The workings of the GATT agreement are the responsibility of the Council for Trade in Goods (Goods Council) which is made up of representatives from all WTO member countries. The current chair is Ambassador Stephen DE BOER (Canada).

The WTO’s General Agreement on Trade in Services (GATS) entered into force

in 1995. It remains the only set of multilateral rules covering international trade

in services. The Agreement reflects the gradual transfer of responsibility for

many services from government-owned suppliers to the private sector and

the increased potential for trade in services brought about by advances in

information and communication technology.

Services covered by the GATS are not automatically opened to competition. WTO

members guarantee access to their markets only in those sectors and modes of

supply specified in their “schedules of commitments”, subject to any “limitations”

they wish to maintain. These schedules provide legally binding commitments.

The only obligation that applies across all services covered by the GATS is the

most-favoured-nation (MFN) principle, meaning suppliers of services from all

countries are treated in the same way.

The GATS covers all services (see Box 1), with the exception of “services

provided in the exercise of governmental authority” and the bulk of air transport

services.

Several Policy Opinions on Accelerating the Development of Modern Service Industry in Shanghai (Hufu [2005] No. 102, hereinafter referred to as the Opinions). The Opinions proposed 30 policies and measures, including lowering the admission threshold, speeding up reform and opening up, facilitating innovation in technology, focusing on key areas, building key areas, building talent highland, implementing brand strategy and creating development environment. The Opinions determined to set up guidance funds for developing modern service industry at municipal and district/county levels to support the state guide funds, and bolster the city's cluster areas of modern service industry, traditional service industry with information transformation,  public platform for the development of service industry, key areas and weak links and the construction of other key projects and subsidized loans, to attract various social funds to invest in modern service industry.

Measures for the Use and Management of Guide Funds of the Development of Shanghai Service Industry (Hufufa [2009] No. 24, hereinafter referred to as the Measures). In accordance with relevant documents of the General Office of the State Council，Shanghai’s Action Plan for Speeding up the Development of the Modern Services Sector, and Several Policy Opinions on Accelerating the Development of Modern Service Industry in Shanghai, the guide funds for the development of Shanghai service industry was set up. In order to regulate the management and use of the guide funds, improve the efficiency of the funds, and further give play to the role of guidance and motivation of financial funds. The Measures have stipulated the sources of funds, supporting method and amount, range of use, application and approval procedures, materials submitted for application, supervision of use and management of assessment, etc.

The service trade of Shanghai is in the charge of the International Service Trade Department of Shanghai Municipal Commission of Commerce and the government departments of related industries. As there are many related industries of service trade, the Shanghai municipal government has established a joint conference system of service trade composed of 22 commissions, offices and bureaus. The office is located in the International Service Trade Department of Shanghai Municipal Commission of Commerce.

The main social service organizations of Shanghai service trade include Shanghai Association of International Services Trade, Shanghai International Freight Forwarders Association and Software Offshore Business Union of Shanghai, etc. The Implementation Opinions on Promoting the Integrated Development of Shanghai Service Trade clearly proposed that we should give full play to the industrial organizations of Shanghai international service trade, and "vigorously expanding the influence of industrial organizations, improving their functions, reinforcing the contact between the industrial organizations and the government and enterprises, and conducting a series of training work such as knowledge publicity of service trade. Help enterprises solve practical problems. Insist in the marketization operation of industrial organizations, endeavor to contact international famous enterprises and organizations of service trade, establish a long-term cooperation mechanism, and exchange information mutually. Take part in the research and formulation of relevant laws and regulations, industrial policies, technological standards, industrial development plans and admission conditions, and organize the implementation of them. Take advantage of the Credit Reference Center of the Central Bank to explore ways to improve the coverage of credit information collection, expand the application fields of credit products, improve the industry's self-discipline management and restriction mechanism, and maintain a fair market environment for competition.

The information service platforms of Shanghai service trade mainly include "Shanghai service trade guide website", which is the sub-website of “tradeinservices. mofcom. gov. cn” sponsored by the Ministry of Commerce, the official website of Shanghai service trade “sh-services.gov.cn”, the newspaper “International Services Trade” sponsored by the Shanghai Association of International Services Trade as well as the website “servtrad.org.cn”.

Established in 2007, "Shanghai service trade guide website", a sub-website of “tradeinservices.mofcom.gov.cn”, includes such columns as introduction, trade dynamics, policies, laws and regulations, trade promotion, window of statistics and service guidelines. As is required by the Ministry of Commerce, "Special Magazine of Shanghai" is published, and outstanding enterprises and entrepreneurs are recommended on the main website.

“www.sh-services.gov.cn” is the official website of Shanghai service trade. Besides the six columns of “Shanghai service trade guide website”, it also adds such columns as offices, news center, online service, information disclosure, online training, market window, enterprise display, industry overview, activity announcement and service navigation, etc. Currently it is the public online platform of the International Service Trade Department of Shanghai Municipal Commission of Commerce.

Founded in 1998, the newspaper International Service Trade is the earliest comprehensive internal monthly magazine of service trade. It has eight sections, including the sections of important news, service trade, political and business information, service trade, the government, the member units, etc., as well as columns such as newsletter of international service trade, dynamics of Shanghai service trade, policies and regulations, political and business information, market window, work study. It provides references for the Ministry of Commerce, Shanghai Municipal Commission of Commerce, the district (county) Commission of Commerce, and the commerce departments of its sister provinces and cities, the relevant industry associations of Shanghai, key enterprises of Shanghai service trade and the members of the Association.

In addition to publishing the information of service trade and the Association, the website “www. servtrad. org. cn” also publicizes its member units and promotes the cooperation between its member units and relevant enterprises.