A European Central Bank blog post analyses the rise of services in global trade and concludes that the expansion has been primarily driven by a decline in non-tariff barriers, enabled by improved communications technologies that allow more services to be delivered remotely. The analysis finds the euro area has benefited more than other regions and remains highly competitive in services, but has recently started to lose ground, with particular concerns around information and communication technologies (ICT). Using a gravity-model approach covering 62 countries from 2012 to 2019, the authors estimate that if non-tariff barriers had remained at 2012 levels, services exports would have stagnated in both the euro area and globally, with the effect mainly captured through a reduced “distance” penalty rather than changes linked to borders. Remote-deliverable services have grown fastest, rising to 48% of euro area services exports in 2021 (from 30% in 2012) and 61% globally (from 47%). Services represent around one-third of euro area exports, led by other business services (25%), ICT (21%), transportation (14%) and travel (13%); the post estimates that without the observed global decline in non-tariff barriers, the euro area’s extra-euro area services export market share in 2019 would have been below 20%, around 3 percentage points lower than observed. While the euro area remained the global leader in ICT services exports in 2023 with a market share above 25%, excluding Ireland the ICT share is estimated at roughly 10% and has fallen markedly over the past decade, and the authors point to a large gap in ICT business R&D investment in 2023 (US firms at 70% of global investment versus 7% for euro area firms).

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