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Thinking in a box: A ‘mode 5’ approach to service trade

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Abstract

This paper draws the attention to the growing importance of services inputs in manufacturing sectors’ exports in the EU and beyond. The GATS existing four modes of supply do not adequately cover this type of indirect services value-added trade. Hence, theoretically, the case for a new indirect mode of services supply - ‘mode 5’ - is made. On the basis of the TiVA database, our estimates of mode 5 services exports point to a substantial share of total merchandise trade. The paper also finds that from a ‘mode 5’ perspective, services embodied into products are also subject to fairly complex trade rules. One such example illustrated in this paper is the area of customs valuation. Other issues (trade facilitation, rules of origin) could have an impact on the way ‘mode 5’ services are traded. The renewed impetus at the WTO on trade facilitation and the post-Bali agenda should provide a new opportunity for policy makers to forge trade rules that are well-suited for the ways in which goods and services interact along global supply chains.

Suggested Citation

  • Cernat, Lucian & Kutlina-Dimitrova, Zornitsa, 2014. "Thinking in a box: A ‘mode 5’ approach to service trade," DG TRADE Chief Economist Notes 2014-1, Directorate General for Trade, European Commission.
    • Handle: RePEc:ris:dgtcen:2014_001
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    References listed on IDEAS

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    1. Yvonne Wolfmayr, 2008. "Producer Services and Competitiveness of Manufacturing Exports," WIFO Studies, WIFO, number 34225, April.
    2. Magnus Lodefalk, 2014. "The role of services for manufacturing firm exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(1), pages 59-82, February.
    3. Cernat, Lucian & Pajot, Michael, 2012. ""Assembled in Europe" - the role of processing trade in EU export performance," DG TRADE Chief Economist Notes 2012-3, Directorate General for Trade, European Commission.
    4. Sabine Biege & Martin Borowiecki & Bernhard Dachs & Joseph F. Francois & Doris Hanzl-Weiss & Johan Hauknes & Angela Jäger & Mark S. Knell & Gunter Lay & Olga Pindyuk & Doris Schartinger & Robert Stehr, 2012. "Convergence of Knowledge-intensive Sectors and the EU's External Competitiveness," wiiw Research Reports 377, The Vienna Institute for International Economic Studies, wiiw.
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    Citations

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    Cited by:

    1. Lucian Cernat, 2016. "Toward “Trade Policy Analysis 2.0”: From National Comparative Advantage to Firm-Level Trade Data," ADB Institute Series on Development Economics, in: Ganeshan Wignaraja (ed.), Production Networks and Enterprises in East Asia, edition 1, chapter 0, pages 21-31, Springer.
    2. Lucian Cernat & Nuno Sousa, 2016. "The Trade and Jobs Nexus in Europe: How Important Are Mode 5 Services Exports?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(04), pages 65-67, January.
    3. Rueda-Cantuche, José & Kerner, Riina & Cernat, Lucian & Ritola, Veijo, 2016. "Trade in services by GATS modes of supply: Statistical concepts and first EU estimates," DG TRADE Chief Economist Notes 2016-3, Directorate General for Trade, European Commission.
    4. Wenxi Lu, 2018. "FDI, Service imports and Export development," School of Economics and Public Policy Working Papers 2018-05, University of Adelaide, School of Economics and Public Policy.
    5. Lodefalk, Magnus, 2017. "Servicification of Firms and Trade Policy Implications," World Trade Review, Cambridge University Press, vol. 16(1), pages 59-83, January.
    6. Diakantoni, Antonia & Escaith, Hubert & Roberts, Michael & Verbeet, Thomas, 2017. "Accumulating trade costs and competitiveness in global value chains," WTO Staff Working Papers ERSD-2017-02, World Trade Organization (WTO), Economic Research and Statistics Division.
    7. Julia Bock-Schappelwein & Michael Böheim & Elisabeth Christen & Stefan Ederer & Matthias Firgo & Klaus S. Friesenbichler & Werner Hölzl & Mathias Kirchner & Angela Köppl & Agnes Kügler & Christine May, 2018. "Politischer Handlungsspielraum zur optimalen Nutzung der Vorteile der Digitalisierung für Wirtschaftswachstum, Beschäftigung und Wohlstand," WIFO Studies, WIFO, number 61256, April.
    8. José M. RUEDA‐CANTUCHE & Lucian CERNAT & Nuno SOUSA, 2019. "Trade and jobs in Europe: The role of mode 5 service exports," International Labour Review, International Labour Organization, vol. 158(1), pages 115-136, March.
    9. Antimiani, Alessandro & Cernat, Lucian, 2017. "Liberalizing global trade in Mode 5 services: how much is worth?," Conference papers 332872, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Latorre, María C. & Yonezawa, Hidemichi, 2018. "Stopped TTIP? Its potential impact on the world and the role of neglected FDI," Economic Modelling, Elsevier, vol. 71(C), pages 99-120.
    11. Escaith, Hubert, 2014. "Exploring the policy dimensions of trade in value-added," MPRA Paper 59891, University Library of Munich, Germany, revised 08 Nov 2014.
    12. Johannes Schwarzer, 2017. "The Effects of Exporting on Labour Productivity: Evidence from German Firms," Working Papers 1702, Council on Economic Policies.
    13. Hein Roelfsema & Christopher Findlay & Xianjia Ye, 2021. "Decomposing International Trade in Commercial Services," Foreign Trade Review, , vol. 56(3), pages 238-256, August.
    14. Rueda-Cantuche , José M. & Sousa, Nuno, 2016. "Eu Exports To The World: Overview Of Effects On Employment And Income," DG TRADE Chief Economist Notes 2016-1, Directorate General for Trade, European Commission.
    15. Lanz, Rainer & Maurer, Andreas, 2015. "Services and global value chains: Some evidence on servicification of manufacturing and services networks," WTO Staff Working Papers ERSD-2015-03, World Trade Organization (WTO), Economic Research and Statistics Division.
    16. Lucian Cernat & Nuno Sousa, 2016. "The Trade and Jobs Nexus in Europe: How Important Are Mode 5 Services Exports?," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 16(4), pages 65-67, January.
    17. Johannes Schwarzer, 2015. "Services Trade and Employment," Discussion Notes 1502, Council on Economic Policies.
    18. Michael Böheim & Elisabeth Christen & Matthias Firgo & Klaus S. Friesenbichler & Philipp Piribauer, 2018. "Auswirkungen der Digitalisierung auf die Entwicklung von Wirtschaftsräumen," WIFO Monatsberichte (monthly reports), WIFO, vol. 91(12), pages 881-890, December.

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    More about this item

    Keywords

    International trade; trade in services; modes of supply;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy

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