On the basis of balance of payments data, the value of Australian service exports from all sectors was $57 billion2 in 2013-14 — about 17 per cent of the total value of exports (down from about 25 per cent of the total value of exports a decade prior) (ABS 2015b). The decline in the proportion of Australian exports that are services is due to several factors, including an increase in goods exports driven by the mining boom, a decline in financial service exports during the global financial crisis, and a fall in education exports following the introduction of enhanced integrity measures for permanent visas in 2009. The value of exports from all service sectors has grown at about the same average rate as services gross value added over the past two decades — both have doubled (in real terms) since 1993-94 — although the real value of exports has been relatively flat since about 2009 (figure 3.1).
Many of Australia’s largest trading partners are also key destinations for Australian service exports (table 3.1). Markets in Asia have been the fastest growing for Australian service exports, particularly China, which recorded average annual growth in the value of service exports of 12 per cent over the past ten years. There has also been strong growth in the value of Australian service exports to India, Malaysia and Singapore (DFAT, sub. 31).
When measured in value-added terms (rather than gross-value terms), Australian service exports account for a greater proportion of total exports (box 3.2). Australian services sectors are estimated to have accounted for about 41 per cent of exports in value-added terms in 2013, compared with 17 per cent in gross-value terms (PwC, ANZ and Asialink Business 2015).
Service exports through commercial presence abroad
Unlike exports through other modes, exports through commercial presence abroad are not included in Australia’s balance of payments data and there are few estimates of Australian service exports through this mode. The lack of periodic data on Australian exports through commercial presence abroad makes it difficult to assess trends in service exports through this mode. In a one-off survey, the ABS estimated that the value of Australian service exports through commercial presence abroad was about $60 billion in 2002-03 (ABS 2004), at which time the value of service exports through other modes was about
$35 billion (ABS 2015b).3
2 Unless specified, exports statistics presented in this chapter are in gross value terms, and refer to exports through cross border supply, consumption abroad and fly-in/fly-out. Exports through commercial presence abroad are presented separately, for reasons discussed below. Export modes are described in more detail in chapter 1.
3 For statistical purposes, a commercial presence abroad refers to an enterprise that is majority-owned by
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Table 3.1 Australia’s largest trading partners, 2014a
Australia has trade agreements with the countries shaded greenb
Country Total trade
a By total value of goods and services trade (exports plus imports). b Trade agreements refers to bilateral trade agreements except for the ASEAN-Australia-New Zealand Free Trade Agreement, where indicated. c Excluding special administrative regions and Taiwan. Negotiations for the China-Australia Free Trade Agreement have concluded, although it is not yet in force. d Part of the ongoing Trade in Services Agreement negotiations. e Part of the ongoing Trans-Pacific Partnership negotiations. f Bilateral trade agreement with Australia and also part of the ASEAN-Australia-New Zealand Free Trade Agreement. g Part of the South Pacific Regional Trade and Economic Co-operation Agreement. Part of the ongoing Pacific Agreement on Closer Economic Relations ‘Plus’ Agreement negotiations. h The India-Australia Comprehensive Economic Partnership Agreement is currently being negotiated. i ASEAN-Australia-New Zealand Free Trade Agreement. j The Indonesia-Australia Comprehensive Economic Partnership Agreement is currently being negotiated. k Part of the ongoing Australia-Gulf Cooperation Council Free Trade Agreement negotiations.
Sources: Productivity Commission estimates based on ABS customised report and ABS (2015f); DFAT (2015i).
Some organisations have attempted to estimate commercial presence exports for years later than 2002-03 — these estimates are likely to be less reliable than ABS data. The estimates
that are available suggest that between 2003 and 2013 the value of service exports through commercial presence abroad increased at a faster rate than service exports through other modes (figure 3.4).
Box 3.2 Global value chains and value-added measures of exports
Over the past few decades the structure of international trade has changed with the emergence of global value chains — production networks that span multiple countries. The production of a single good, such as a mobile phone, typically now takes place across several countries, with each country contributing a part of the final product. Value-added measures of exports have been developed in response to these changes.
Gross measures of exports attribute all export value to the final industry in the export production chain, whereas value-added measures of exports take account of intermediate inputs (goods and services) that are used in the production of exports. For example, if engineering services are used in the production of minerals, which are then exported, then a value-added measure of exports would count the engineering services embodied in the minerals as a service export. A gross measure of exports would count the entire value as an export of minerals.
Services used as inputs in the production of goods typically account for a significant proportion of the value of goods exports and, as a result, gross measures of exports understate the contribution of services to total exports (PC 2015f). The focus of this study is on barriers to service exports, which in general do not affect services embodied in goods exports.
Value-added measures also show that patterns of trade are different when considered in terms of the final (rather than intermediate) destination of exports. Using value-added measures, more Australian exports of goods and services ultimately end up in Europe and the United States (US), and less in China, Korea and Taiwan, than suggested by gross measures (Kelly and La Cava 2013).
The ABS is currently reviewing its statistical output related to international accounts. The ABS is seeking input from users as part of the review, and expects to announce any decisions by September 2015 (ABS 2015d). Assessment of Australia’s service exports would be much enhanced should more comprehensive statistics become available — particularly in relation to the commercial presence abroad of Australian service providers.
Australian service exports through commercial presence abroad are provided to customers in the country of the commercial presence, typically by employees that reside in the same country. They are counted as exports because the employing business is owned by an Australian enterprise. Australian exports through commercial presence abroad are different from Australian exports through other modes, which are provided to foreign customers (although they may be visiting Australia at the time) by Australian residents. The income earned on the investment in the commercial presence abroad will still flow to the Australian investor, but the overall economic effects from commercial presence exports will be different to the economic effects from exports through other modes.
There is limited evidence on the relationship between Australian exports through commercial presence abroad and economic outcomes in Australia. Research from other
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countries suggests that a greater volume of exports through commercial presence abroad is likely to be associated with economic benefits in the exporting country, such as higher employment, research and development, and export (through other modes) (Hufbauer, Moran and Oldenski 2013) .
Figure 3.4 Service exports by mode of deliverya
$ billion (nominal)
a Foreign affiliates’ sales consist of sales to residents of the country in which the foreign affiliate/commercial presence is located (exports through commercial presence abroad), and sales to residents of other countries. In 2002-03, the ABS estimated that 91 per cent of Australian foreign affiliates’
sales of services were exports through commercial presence abroad. Where estimates of exports through commercial presence abroad are not available, but estimates of foreign affiliates’ sales are, this study has estimated exports through commercial presence abroad based on the expectation that this percentage has been reasonably constant across sectors and over time. For statistical purposes, foreign affiliate/commercial presence refers to enterprises that are majority-owned by Australian resident enterprises.
Sources: ABS (2004, 2015b); Productivity Commission estimates based on CIE (2010) and PwC et al.
(2015).