The 21st century global economy is characterised by a number of trends, including the growth of cross-border trade in services, among others such as e-commerce. For Britain, focusing on services plays to its strengths as a largely services-based economy. Global trade in services is not as open as manufactured goods, which means that there is scope to liberalise services trade between countries. Capitalising on this gap would help position the UK for the decades to come.
The GATS (General Agreement on Trade in Services) under the World Trade Organisation (WTO) does cover trade in services, but more needs to be done. The 2013 launch of the Trade in Services Agreement (TiSA) by the EU, US, and other economies together representing 70% of global trade in services was intended to further open up the global market for services, helping these countries export what they specialise in.
For example, the economy of the EU is 70% services, but services make up just 25% of its exports. Even if services are partly non-tradable (e.g. consumed locally, such as restaurant services), these nations believed there was scope to increase their sale of services abroad.
This group of countries had hoped that if TiSA became widely adopted, then it could eventually constitute the next round of multilateral liberalisation under the WTO. Instead, it has stalled. However, TiSA underscores how it is possible to negotiate a services free trade agreement (FTA). The challenge in terms of separating manufacturing from services is considerable, since a number of industries sell services as well as physical products. An OECD-WTO study found that over half of the total value-added embodied in the manufactured exports of major economies come from the services sector. But, as a result, a World Bank study concludes that liberalising services trade would facilitate more goods trade.