Rethinking what services trade is really worth...: UNCTAD report spells it out

Trade in services is no longer a sideshow in global economy. The real value of services trade lies not in figures, but in what it delivers for employment, productivity and development quality. This message is conveyed by the United Nations Conference on Trade and Development (UNCTAD) in its most recent technical report.

The report, "Measuring servicification and impacts of services trade and policy," frames services as the connective tissue of the modern economy. Services already account for more than half of economic activity in developing countries and almost half of employment, according to UNCTAD's analysis of World Bank data.

More importantly, services are increasingly "embedded" in other sectors—a phenomenon the report calls "servicification": the rising share of services in the input mix of agriculture, mining and manufacturing, alongside "servitization", where goods producers bundle services into their offerings or even sell the service a product provides rather than the product itself.

The scale of this integration is easy to underestimate. Services embodied as intermediate inputs in traded goods account for roughly one-third of the total value of global goods trade, based on OECD Trade in Value Added data cited in the report. Firm-level surveys suggest in-house service use in manufacturing can amount to as much as half of total costs—far above what conventional trade statistics capture.

Digitalization is accelerating both trends. UNCTAD estimates digitally delivered services grew 7% annually in value terms between 2015 and 2024, outpacing goods trade's 4% compound annual growth over the same period.

The report's first key finding challenges the traditional yardstick. Judging services trade by export value and growth alone misses the point, UNCTAD argues—what matters is whether it generates development outcomes such as jobs, wages, productivity, firm performance and industrial upgrading.

The evidence supports this: manufacturing firms that bundle services with their products are more productive and participate more deeply in global value chains, while services sector labour productivity in developing countries has been rising steadily, narrowing the gap with developed economies.

Measuring these effects remains difficult, however. The report—which acknowledges China's financial support—notes that developing countries often already possess the data they need in national censuses, business surveys and tax records. It recommends systematic audits of existing data, more granular collection by partner and sector, and better researcher access through anonymization.

The second finding concerns policy, where the landscape is shifting unevenly. Unlike goods, services trade policy is largely embedded in domestic regulation. At the same time, the rulebook keeps evolving, most notably with the WTO Agreement on Electronic Commerce. Yet divergent regulatory approaches across economies threaten to fragment digital service flows.

The implication is that services trade policy is becoming a new space for international cooperation: as firms in every sector rely increasingly on services inputs, the knock-on effects of policy changes grow larger, and so does the cost of regulatory divergence — making coordination, not isolation, the pragmatic path forward.