As economic and political headwinds slow global trade in commodities and manufactures, businesses seeking to boost sales through exports should explore opportunities in services, research from HSBC Commercial Banking shows.
While the dollar value of global merchandise exports has contracted by about three per cent this year, cross-border sales of services such as tourism, banking, construction and software development have risen one per cent in nominal terms, according to HSBC’s ‘Global Trade Forecast’, which includes a comprehensive country-by-country analysis of trade in services.
If governments do not introduce new barriers to trade, the value of global goods exports is expected to expand by three per cent in 2017 and then six per cent a year to 2030. Services, meanwhile, will average seven per cent annual growth to contribute $12.4trn to global trade flows in 2030, up from an estimated $4.9trn this year.
However, if new tariff and non-tariff barriers are implemented, whether due to US trade policy changes mooted by President-elect Donald Trump or a so-called ‘hard Brexit’ in the UK, the combined value of goods and services trade in 2030 could drop by three per cent to $48.8trn from a current projection of $50trn.
Michel Cordina, Head of Commercial Banking, HSBC Malta, commented: “This report confirms the shift to services in terms of global trade and Malta’s focus on the services industry as well as its strategic location at the centre of the Mediterranean are key to the growth of such trade opportunities on the island.
“We are at the forefront in helping businesses to grow internationally, and with the two Malta Trade for Growth funds launched in the last years to the tune of €125 million, we have assisted a number of our clients to connect with other customers in the HSBC Group.”
In their analysis, HSBC and Oxford Economics found that growth in services exports outstripped growth in goods trade since the global financial crisis. This is partly because spending on services is less affected by fluctuations in economic activity than spending on goods.
The US, UK, China, Germany and France were the world’s top exporters of services in 2015, and will remain so in 2030, but most developed markets will lose share as today’s emerging economies develop their workforce skills and digital infrastructure. India is already a highly successful exporter of business process outsourcing and support services for finance, medicine and engineering, and is set to increase these exports in the coming years. Nonetheless, while trade in services continues to thrive it is dwarfed by global trade in goods. The latter will be worth about $37trn by 2030, according to the forecast, equating to 75 per cent of total trade.