Trade in services for inclusive and sustainable development: Water and sanitation, energy and food-related logistics

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Trade in services for inclusive and sustainable development: Water and sanitation, energy and food-related logistics

Trade in services for inclusive and sustainable development: Water and sanitation, energy and food-related logistics
Photo credit: OCHA | Charlotte Cans

Experts met in Geneva from 7-8 May 2018 to examine how to facilitate and expand services trade to achieve the relevant Sustainable Development Goals under the 2030 Agenda, with a focus on water and sanitation, energy and food-related logistic services.

As a major contributor to output, jobs, investment and trade value added, services are key to economic and human development, and hence to the achievement of the inclusive and Sustainable Development Goals set out in the 2030 Agenda for Sustainable Development.

United Nations Member States will conduct a thematic review of progress on the 2030 Agenda at the High-Level Political Forum on Sustainable Development from 9 to 18 July 2018.

The forum, whose theme is “Transformation towards sustainable and resilient societies”, will examine progress achieved in relation to specific goals, including:

  • Goal 6: ensure availability and sustainable management of water and sanitation for all

  • Goal 7: ensure access to affordable, reliable, sustainable and modern energy for all

  • Goal 12: ensure sustainable consumption and production patterns

  • Goal 17: strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development

The sixth session of the Multi-year Expert Meeting on Trade, Services and Development examined ways and means to facilitate and expand services trade with respect to achieving the relevant SDGs under the 2030 Agenda.


Background note by the UNCTAD Secretariat

Role of services in the Sustainable Development Goals

Services contribute to equality and poverty reduction. First, productivity improvements in the services sector contribute to overall productivity increases through the sector’s direct importance in the economy and its effects as inputs to all economic sectors. A forthcoming UNCTAD study suggests that the services sector is responsible for two thirds of total productivity growth in developing countries.

Second, services are particularly relevant for microenterprises, and small and medium-sized enterprises. By improving the productivity of these enterprises, services promote opportunities for them to join value chains – and for many such enterprises and workers – to enter the formal economy. As services activities may be less dependent on economies of scale and less capital intensive, they could facilitate the integration of microenterprises, and small and medium-sized enterprises in value chains.

Moreover, services can be providers of atomized inputs for different stages of broader productive processes. Microenterprises, and small and medium-sized enterprises can concentrate on producing inputs of such atomized services rather than facing the challenge of producing the whole final product.

Dynamics of services relating to water and sanitation, energy and food-related logistics

Services have become a major contributor to output, jobs, investment and trade in all economies. In 2015, the share of services in gross domestic product (GDP) increased across all income levels, reaching 76 per cent in developed economies, 55 per cent in developing economies and 47 per cent in the least developed countries. The services sector accounts for over half of GDP in all developing regions: Latin America and the Caribbean, 65 per cent; Africa, 54 per cent; and Asia, 53 per cent. The increase in services output is accompanied by a decrease in industrial GDP in developed economies and a reduction mainly of agricultural output, but also of industrial GDP, in developing economies.

The prevalence of the services sector is also reflected in employment, where it is estimated to account for 59 per cent of jobs globally, 82 per cent in developed economies and 54 per cent in developing economies. Jobs have grown more in this sector, registering 2.8 per cent annual growth between 2000 and 2017. This trend is more pronounced in developing economies, reaching 3.4 per cent in the same period. The employment-creating effect of services implies that services are central for inclusiveness, particularly as global unemployment is expected to remain high at more than 201 million unemployed in 2017, equivalent to a global unemployment rate of 5.8 per cent. This represents an increase of 3.4 million people over the previous year.

Research and data suggest that the services sector contributes to gender equality and empowerment. Women’s employment is mostly concentrated in services (58 per cent in 2017), followed by agriculture (31 per cent) and manufacturing (10 per cent). In the developed economies, the share of women’s employment in services is even larger (89 per cent), owing to their important contributions to health, education and other business services. In the developing economies, services represent a smaller, yet still significant share of women’s employment (51 per cent), owing to the large contribution of agriculture (37 per cent) to women’s employment.

The importance of trade in services is revealed by greater dynamism of services exports over goods exports in both the developed and developing economies. The contribution of services to total exports increased from 25 to 29 per cent in the developed economies and from 14 to 17 per cent in developing economies between 2005 and 2016. Services exports have been growing faster in developing economies than in developed economies, recording an 8 per cent annual increase between 2005 and 2016. Services were relatively resilient during the 2009 global economic and financial crisis and again in 2016, when unlike goods exports, global services exports resumed growth after the recent downturn in trade.

Statistics on these services per se are unavailable and difficult to obtain. Among the reasons for this is the lack of a separate category of these services in classifications established for statistical purposes.

The level of access to water, sanitation and energy and the logistics performance level in developing and least developed countries may illustrate the development of these services. While these services have become basic services readily available to residents of developed countries, they are in serious shortage in many developing countries and least developed countries

International trade is playing an increasingly important role in the provision of these services. Again, it is difficult to obtain direct data from current trade statistics. In the energy sector, one option for measuring energy provision through trade may be consideration of the relevance of imports in the supply of energy. Energy provision through imported energy sources has become relevant in most energy types. International markets have a longstanding importance for crude oil, natural gas liquids and feedstocks, with imports accounting for over 30 per cent of global supply. In 2015, imports also represented meaningful shares of supply in coal (17 per cent), oil products (23 per cent) and natural gas (23 per cent). Imports of electricity and renewable sources only account for 3 per cent and 1 per cent, respectively, of the corresponding global supplies. However, between 2010 and 2015, the global share of imports of renewable sources of energy increased 7.5 per cent annually.

Trade in water and sanitation, energy and logistics services mainly occurs through commercial presence (mode 3) and can be roughly inferred from greenfield investment levels. The electricity, gas and water sector is the largest receiver of foreign direct investment, representing 15 per cent of total greenfield investment in 2016. The sector recorded the second-fastest growth, behind textiles, with an annual growth rate of 9 per cent between 2006 and 2016. Renewables are capturing two thirds of global investment in power plants, as they are often the least costly source of new power generation.

Likewise, trade in logistics services mainly occurs through mode 3. As companies are focusing more and more on core business competency, there is a growing preference for outsource logistics operations. The third-party logistics market is set to benefit from a better use of technology to improve processes and lower costs, which is likely to result in a year-on-year growth rate of 4.4 per cent of third-party logistics between 2015 and 2022. Despite its importance, the provision of other supporting and auxiliary transport services does not contribute greatly to services exports captured by the balance of payments, remaining around 0.6 per cent of total services exports in the European Union in 2016, growing only 1.4 per cent annually between 2010 and 2016.