RP trade profile continues shift toward services

MANILA, Philippines - Services emerged as the Philippines’ biggest export winner last year, growing by a third to nearly $8 billion, while traditional dollar-earners like electronics, clothing, and automotive products have either slowed down or contracted, data from the World Trade Organization (WTO) showed. The latest WTO statistics showed that the Philippines is the world’s No. 48 exporter of merchandise goods, with $50.5 billion worth of exports last year, up by 6% and equivalent to about half a percent of the global market. The country, meanwhile, ranked 34th in the list of the world’s biggest exporters of services, earning $7.9 billion last year, a growth of 33% or at the same pace as China. Philippine service exports reached $5.9 billion in 2006 and $4.5 billion in 2005, WTO data showed. Last year, the world market for service exports totalled $2.4 trillion, dominated by the European Union, the United States, Japan, China and India. Japan is the largest consumer of Philippine services, importing $1.6 billion worth of commercial services from the Philippines in 2006, a growth of 6% and equivalent to 1.2% of Japan’s total service imports. Japan spent $665 million on Philippine transport services, up by a fifth, while other commercial services reached $561 million, up by 50%, data showed. Other markets for Philippine services were Hong Kong ($357 million, 1% market share), Singapore ($271 million, 4% market share), and the US ($653 million). Service exports cover transportation services, travel , construction, royalties and license fees, business, professional and, technical services, and audiovisual services. The biggest importers of travel services from the Philippines were Australia, ($165 million, up by 5%), Hong Kong ($171 million, up by 1%), and Japan ($399 million). In contrast to the rosy picture in services, clothing — the Philippines’ No. 2 merchandise export — went down by 7% last year to $2.3 billion, losing out to Vietnam and Cambodia, which recorded growth rates of 29% and 12%, respectively. WTO statistics showed that the Philippines’ share in the world’s clothing exports has shrunk, to 4.5% in 2007 from 6.4% from 2000. Exports to major markets declined — Canada went down by 6% to $76 million, the EU by 13% to $275 million, and the US by 14% to $1.8 billion. Exports to Japan, however, grew by 11% to $78 million. Garments quotas were removed by the US, EU and Canada in 2005, opening up their markets to lower-cost competitors like China. Auto products managed to grow by 3.5% last year, with exports reaching $1.8 billion. Exports to major markets went up — shipments to the US increased by 5% to $103 million, while exports to the EU doubled to $98 million. Growth in electronics exports is also slowing down, with receipts up by a mere 1% between 2000 to 2007. The Philippines’ market share has also gone down, to 4.3% in 2007 from 5.4% in 2000. Electronic exports reached $18 billion last year. The biggest markets were the EU, US, China, and Japan. The 2008 WTO report noted the rapid increase in service exports, pointing out that it outpaced trade in goods in terms of growth in value. “In 2007 the value of trade in commercial services increased at a faster rate (18%) than trade in goods (15%) for the first time in five years. This was mainly due to the expanding international supply of many services and to the increase in transportation prices," the report said. “While the services sector generates approximately two-thirds of the total world value-added, its share in total trade remains below 19%," it added. In the Philippines, services account for more than half of gross domestic product, and has been the main contributor to economic growth. Lawyer Jeremy I. Gatdula, who specializes in international trade, said the WTO statistics point a shift in the Philippines’ trade profile, but added that the country should “go up the value chain" to maintain its edge in services. The Philippines apparently failed to do this in the clothing sector, which continues to lose ground to competitors following the abolition of garment quotas, he said. — Felipe F. Salvosa II, BusinessWorld