EC and Africa Services Trade

According to WTO Trade Policy Review of the EC 2009, services are the dominant economic sector in the EC, accounting for 69.5% of gross value-added, 68.9% of employment, and 96% of the newly created jobs in 2007. However, the size of the sector varies considerably across Member States and the sector is a priority for the completion of the Single Market. 

What is surprising however is that services accounts for only 20% of intra-EC trade, of which more than half is tourism and transport. According to the Review, the low level of intra-trade in services can be partly explained by the remaining barriers, such as monopolies that prevent the establishment of service providers from other Member States (e.g. postal services or energy utilities), differences in regulation across Member States and the fact that nearly 90% of all SMEs in the EC are in services industries and SMEs normally cannot afford the extra costs of engaging in cross-border activities.

Globally, the European Union continues to be the biggest global player in international trade in Services and in 2006, the EU-27´s global trade in services recorded a surplus of €68.5 billion, compared to €53bn in 2005 and 46bn in 2004, with the UK having the largest surplus.

Bilaterally, the US is the EU's main services trading partner and generally, services play a particularly important role in trade between industrialized economies.  For instance, EU services exports to the United States were equivalent to 49% of goods exports, whereas the corresponding ratio for EU-China trade is only about 20%. In fact, The EU runs service trade surpluses with nearly all major world regions, including countries where the EU trade balance for goods is negative. 

In Africa, the EU is somehow a more important market for Africa’s service exports than for its merchandise exports.  This is according to a 2008 World Bank EPA Report, which finds that the EU absorbs 66% of Africa’s $15 billion in service exports in comparison to 54% of its non-oil merchandise exports. While travel and transportation services account for the bulk of this, almost 70%, of Africa’s service exports are destined to the EU making it the largest services export market.

On imports, services accounted for 28% of Africa’s total imports of goods and services in 2003-2004. The residual category “other commercial services” accounted for the largest share of Africa’s services imports with 44% of the total, followed by transportation services with 35%, travel services with 17%, and government services with 5%. The EU, with a 48% market share, is the largest supplier of services imports to Africa.