A closer look at services exports to FTA markets

21 Dec 2017

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  • Divya Skene
  • AIBS 2017

One of the features of this year's AIBS survey is the information we've collected on services exports to FTA markets.

The previous AIBS 2017 blog reported that more AIBS respondents were selling services into FTA markets than selling goods. Sixty-six per cent of all internationally-active firms surveyed were exporting services to FTA markets compared to the 61 per cent that were exporting goods.

  • Thirty-eight per cent are exporting both goods and services to FTA markets.
  • Twenty-eight per cent are selling only services into FTA markets while 23 per cent are selling only goods.

The industry and market breakdown of services exporters at the firm level is information that is not easily identified through other data sources. The AIBS survey shows that the manufacturing sector is an important exporter of services to FTA markets.

AIBS - Industry share of services exporters to FTA markets

As we would expect, Professional, Scientific and Technical Services and Education and Training are other sectors key to the export of services.

Interestingly, 71 per cent of AIBS services exporters to FTA markets sold services to at least one ASEAN market. Collectively, ASEAN was by far the most popular FTA market for our services exporters, followed by China (51%) and the United States (47%).

AIBS - Market share of services exporters to FTA markets

As is the case with any services export data however, there is some bias in the findings. The bias results from the fact that measuring international revenue earned by the diverse firms that make up the tourism and education sector is difficult. (Many companies that earn international revenue would consider themselves domestic businesses, and may not know how many foreign visitors they service and what share of their revenue was from overseas – consider a restaurant servicing international tourists for example.)

Service exporters responding to the AIBS survey are therefore more likely to be mode 1 exporters (exporting via cross-border trade), mode 3 exporters (exporting via commercial presence) or mode 4 exporters (exporting via travel by natural person)– rather than mode 2 exporters (exporting via servicing foreign visitors to Australia). This will obviously influence the industry and market preferences of FTA exporters that we've reported above.

AIBS - Modes of service delivery

Figure 4 shows that services exporters to any market tend to favour cross border travel (Mode 4) or traditional cross-border trade (Mode 1).

AIBS - Mode of service delivery by market (1)

Finally, the survey confirms much of what we'd expect for the mode of services delivery into specific markets. Figure four highlights that:

  • Mode 1, traditional cross-border services trade, is most popular for those businesses selling to New Zealand and least for those selling to Japan.
  • Mode 2, such as servicing students and tourists here in Australia, is most popular for those firms selling to China and least for Singapore and the United States.
  • Mode 3, selling services via an offshore commercial presence, is most important for services exporters to ASEAN and the US, and least important for South Korea.
  • Mode 4, delivering services through staff travel overseas, is most popular in ASEAN and China, and less common among services exporters to Japan and South Korea.
AIBS - Mode of service delivery by market (2)