Global services trade affected by Covid-induced travel curbs: WTO report

Covid 19-induced travel restrictions have had a devastating impact on the global services trade, said a report by the World Trade Organization (WTO).

This was despite Mode 4 Trade, which allowed cross-border movement of individuals, accounting for just three per cent of the world services trade, according to the report.

This mode of supply is important for certain members and certain sectors, such as professional and other business services, it said in the report, titled Cross-border Mobility, Covid-19 and Global Trade.

"For instance, in 2017, even though the dominant export mode was cross-border supply (mode 1), some 13 per cent of India’s exports of information technology (IT) services, which overall totalled over $ 52 billion in value, were exported through the deployment of IT professionals abroad," said the report.

With the limited exception of individuals working in "essential" sectors, all such trade that relies on the cross-border movement of individuals has effectively come to a halt, it said.

There is also an impact of visa restrictions on both trade and foreign direct investment (FDI), WTO said.

For instance, with unilateral border restrictions, bilateral trade and FDI have been estimated to fall by 19 and 25 per cent, respectively. If mobility restrictions are symmetrical, the negative effect on trade is larger, at up to 25 per cent, while the impact on FDI is essentially the same as with unilateral restrictions.

So far as other services are concerned, the most obvious impact is on the mobility of service consumers, or mode 2 of the  General Agreement on Trade in Services (GATS). Tourism is the most striking case in point. It is mostly traded through individuals (i.e. tourists and business travellers) travelling abroad to consume services such as hotel and restaurant services, the report said.

Globally, tourism accounts for one in four of net jobs created over the past five years and an estimated 10 per cent of economic output. In recent years, the sector has become a particularly important source of growth for many developing economies and several least-developed countries (LDCs), contributing to over one-third of GDP in some South Asian and Central American economies, for instance.

The Covid-19 pandemic has triggered an unprecedented crisis in the sector. In 2020, international tourism is expected to register its worst performance, in terms of the number of travellers and of revenue, since 1950.

Anecdotal evidence suggests that Covid-19 has resulted in a collapse of in-person visits. In a survey conducted in May 2020 by the Global Business Travel Association (GBTA), a trade group for corporate travel managers, almost every one of the GBTA's member companies reported that they had cancelled and/or suspended most, if not all, international business travel, regardless of destination.

However, as these movements do not exactly match mode 4, and this fall in international travel happened alongside a steep increase in the use of videoconferencing tools, at this stage it is hard to gauge the extent of a longer-term substitution of mode 4 trade with online supply, the report said.