Service exports

• The total value of Australian service exports was $57 billion in 2013-14 and about 17 per cent of total exports. The six services sectors covered in this study — tourism, education, financial services, professional services, information technology and health services — accounted for around 85 per cent of the total value of service exports.
  • The total value of service exports from all sectors has doubled (in real terms) over the past two decades.
  • Rising household incomes, particularly in some countries in Asia, have been an important driver of increasing global demand for services. Visitors from Asia account for much of the growth in Australian tourism and education exports over the past decade.
  • The costs of exporting services have fallen due, in part, to lower airfares and the development of internet tools including email, online video and audio calls, and electronic payment systems.
• The priority for the Australian Government should be policy reform that promotes competition and provides incentives for domestic firms, including in services sectors, to innovate and lift their productivity. Specific reforms to reduce domestic barriers to service exports include:
  • implementing visa processing arrangements for short-term visitors and international students that are no more onerous than is necessary to meet a single policy objective of immigration integrity
  • liberalising air services arrangements for the major gateway cities of Brisbane, Melbourne and Perth and, following this, Sydney — unless a published assessment shows the costs of liberalising access to Sydney Kingsford Smith Airport would outweigh the benefits to the community
  • simplifying Australia's regime of withholding taxes through greater uniformity in the rate applied to different types of investment and reducing the range of exemptions
  • implementing consistent screening thresholds for Foreign Investment Review Board examination of foreign investment proposals across investors from different countries.
• International barriers to services trade can be costly.
  • Restrictions on setting up a commercial presence abroad affect the education, health and professional service sectors, but are particularly costly for exports of financial services in key markets in Asia such as China, India and Indonesia.
  • Licensing requirements and regulation are used to maintain standards of quality, consumer protection and safety but can impose unnecessary restrictions on services trade, particularly for professional services.
  • All services providers seeking to export rely on the ability to move data across borders, making data restrictions costly. The financial services sector can be especially affected by restrictions on data flows, as are exporters who rely on cloud computing services.
• Realising benefits from trade depends on governments committing to further reducing barriers at and behind the border. No one mechanism will be sufficient to address international barriers to services trade.
  • Trade agreements can be a precursor to market access, including establishing a commercial presence abroad, but realised benefits may be limited without supplementary measures, such as mutual recognition. The Australian Government can help by putting in place a framework in trade agreements for developing mutual recognition agreements.
  • The Australian Government is well-placed to help facilitate cross-border data flows through trade negotiations and other international forums, and as leader of a project on harmonising standards for the movement of data across APEC economies.

Australian service exports - Realising opportunities

The opportunities for Australian service providers to participate in international trade are greater than ever before. Rising household incomes in Asia are one of the key drivers of increased global demand for services. The value of Australian service exports has doubled since 1994.

A draft report released today identifies barriers to Australian service exports. Barriers in other countries include restrictions on the movement of data, burdensome licensing regulations and restrictions on setting up businesses. Potential domestic barriers include inadequate infrastructure and visa processing arrangements. Barriers affect Australian service providers in different ways, with some forced to develop costly workarounds and others prevented from exporting altogether.

Australian governments should take steps to reduce barriers to service exports. The report includes draft recommendations directed at establishing priorities for international negotiations and improving domestic policy settings.

Commissioner Angela MacRae said: 'The priority for the Australian Government should be policy reform that promotes competition and provides incentives for domestic firms, including in services sectors, to innovate and lift their productivity.'

Reducing barriers to service exports could deliver significant benefits to the Australian community. The report cautions however that increasing service exports is not a goal in itself. Increasing service exports should only be pursued where it is expected to deliver net benefits to the community.

• Preliminaries
  • Cover, Copyright, Opportunity for further comment, Terms of reference, Contents, Abbreviations
• Overview
• Draft recommendations and information requests
• Chapter 1 Introduction
  • 1.1 What has the Commission been asked to do?
  • 1.2 Understanding service exports
  • 1.3 What is a barrier to service exports?
  • 1.4 The structure of this report
  • 1.5 How the Commission conducted the study
• Chapter 2 The analytical approach
  • 2.1 Barriers to service exports
  • 2.2 Assessing the potential benefits of reduced barriers to service exports
• Chapter 3 Australian service exports: trends and drivers
  • 3.1 Services make up the majority of the economy
  • 3.2 The value of Australian service exports
  • 3.3 Key trends and drivers of Australian service exports
  • 3.4 Australian service export sectors
• Chapter 4 Domestic barriers to service exports
  • 4.1 Investment barriers
  • 4.2 Barriers to attracting skilled employees
  • 4.3 Export assistance schemes
• Chapter 5 International barriers to service exports
  • 5.1 Overview of international barriers
  • 5.2 Cross-border data flows
  • 5.3 Intellectual property
  • 5.4 Licensing and standards regulations
  • 5.5 International investment barriers
  • 5.6 Further evidence on international barriers
• Chapter 6 Financial services
  • 6.1 Managed investment schemes
  • 6.2 Traditional trustee services
  • 6.3 Prudential regulation
  • 6.4 Taxation arrangements for financial services
• Chapter 7 Education and health services
  • 7.1 Australia's international education sector
  • 7.2 Barriers to education service exports
  • 7.3 Australia's health service exports
  • 7.4 Barriers to health service exports
• Chapter 8 Tourism, professional services and information technology
  • 8.1 Barriers to, and support for, international tourism
  • 8.2 Professional services
  • 8.3 Information technology
• Chapter 9 Addressing international barriers to service exports
  • 9.1 Introduction
  • 9.2 Mechanisms for addressing international barriers
  • 9.3 Trade agreements
  • 9.4 Other international agreements affecting service exports
  • 9.5 Mutual recognition or harmonisation of standards
  • 9.6 Encouraging regulatory reform through technical cooperation
  • 9.7 Further information on addressing barriers
• Appendix A Public consultation
• References

Please note: The following appendix is only available online and is not in the printed copy.

• Appendix B Questionnaire responses

Download the infographic

• High resolution - Barriers to Growth in Service Exports (PDF - 1384 Kb)

Exporting our services to the world (Text version of the infographic)

Service exports valued $57 billion - 17% of total exports in 2013-14 ... and that's not even accounting for services delivered via commercial presence abroad or embodied in goods.

We've examined six service sectors:

• Education
• Financial
• Health
• Information technology
• Professional
• Tourism

which accounts for 85% of total value of service exports.

^*Top service sectors 2013-14

• Tourism $36 billion
• Education $16 billion
• Professional $6 billion

Who are our major markets?

• China $8212 million
• USA $6620 million
• United Kingdom $4553 million
• New Zealand $4005 million
• Singapore $3670 million
• India $2498 million
• Japan $2054 million

What are some opportunities for growth?

• Global value chains
• Increased incomes - particularly from Asia
• Technological advances

But, there are international and domestic barriers to growing our service exports

• Restrictions abroad
  • Setting up a commercial presence
  • Cross-border data flows
  • Licensing regulations
• Arrangements at home
  • Tourism and education infrastructure
  • Air services
  • Visa processing

Barriers impede service exports in various ways

• Raise costs for service providers
• Restrict supply of Australian services
• Decrease demand for Australian services

We have 6 broad areas of recommendations to address barriers

• Cutting red-tape
• Priorities for international negotiations
• Streamlining regulation
• Promoting domestic competition and productivity
• Guiding principles for policy
• Securing mutual recognition agreements

'The priority for the Australian Government should be policy reform that promotes competition and provides incentives for domestic firms, including in services sectors, to innovate and lift their productivity.'
Commissioner Angela MacRae

Read more detail in the report.