Liberalizing global trade in Mode 5 services: how much is worth?

As indicated in a series of recent papers, the growing role of embedded services in manufacturing exports ("services in boxes") led to a proposal for a new modality of exporting services (mode 5 services), beyond the four modes of supply envisaged in GATS. For the vast majority of WTO members, the significance of mode 5 services is considerable, both in exports and imports. Furthermore, mode 5 services activities are a main driving factor in the trade-jobs nexus, particularly in the new services areas poised to play a greater role as a result of technological progress. However, unlike traditional GATS services trade, mode 5 services "in boxes" pay tariffs. Against this background, the current paper estimates the global gains that could be achieved from liberalizing mode 5 services at multilateral level. Using the latest data available on the share of embedded services in goods exports, the paper uses a CGE model to simulate a global mode 5 liberalization scenario. The paper also tries to capture the interplay between mode 5 services trade and the growing importance of future technological developments (software, digitalisation, Internet of Things, etc). Our preliminary set of results show the relevance to deal with Mode 5 in trade agreements not just because of its positive impact on global trade flows but also for the growing content of domestic services in goods exports. In our scenarios, global trade increase for all countries and, at the same time, the domestic share of services embodied in goods increase. The economic impact of a mode 5 multilateral initiative is considerable and can build a platform for a more inclusive set of trade rules for both developed and developing countries interested in promoting synergies between international trade rules and technical progress. For the latter, Mode 5 is a strong opportunity for economic growth since it is a driver for pushing investments in human capital.