New Zealand's international trade in services: A background note

Publication type: 
Working paper
Number: 
RN 2014/1
Author: 
Lisa Meehan
Publication date: 
05/06/2014
JEL Codes: 
F14 Empirical Studies of Trade; L80 Industry Studies: Services: General

Abstract

This research note draws together information on New Zealand’s international trade in services and was prepared as background information for the Productivity Commission’s inquiry into ‘Boosting productivity in the services sector’.

Services account for an increasing share of international trade.  Like goods trade, services trade can increase productivity through greater specialisation, agglomeration, competition and technological diffusion.  There are importance differences, however, between the nature of services and goods trade.  While goods trade typically involves the transportation of merchandise across borders, services trade often entails the cross-border movement of labour and investment.

Like other countries, the importance of international trade in services to New Zealand has grown over time.  However, New Zealand’s ratio of service trade to GDP remains low compared with other small OECD countries.  Moreover, while the importance of New Zealand’s commercial services trade has been growing, travel and transportation continue to account for a large share of New Zealand’s services trade.  New Zealand’s services trade also remains focussed on traditional trading partners such as Australia and the United Kingdom, while Asia has become a more important part of New Zealand’s goods trade.  These factors suggest that there is plenty of scope for services to contribute to the New Zealand Government’s goal of increasing the ratio of exports to GDP from 30% to 40% by 2025. 

Trade liberalisation in services is more difficult than with goods due to the importance of labour and capital mobility and the associated behind-the-border restrictions.  According to World Bank indicators, New Zealand has a low level of services trade restrictiveness, although there are some (unexplained) discrepancies between the World Bank indicators and relevant OECD Product Market Regulation indicators.