This is a visual story of where stuff is made, moved and consumed.
In Part 1 we covered agricultural products. Part 2 covered minerals, metals, and industrial materials. Crude oil, iron ore etc. In Part 3, we dived into manufactured goods. Finally, here in Part 4, we’ll go over the tertiary sector: services.
While services might not be tangible “stuff,” we’ve included it into this Where Stuff Is Made series for 3 reasons.
First, many economies have steadily shifted away from agriculture, mining, and manufacturing, in favour of services. This gradual deindustrialisation over the past century is apparent when we look at the share of employment and GDP contribution by sector.
Even in factory-of-the-world China, services now makes up more than half the GDP.
This trend holds true across most economies (See Visual Capitalist’s Sector Breakdown for Top 50 Economies)…
… including developing economies too (note the increasing share of dark blue over time below).
Second, not only is services contributing to a bigger share of most countries’ GDPs, the global trade volume of services has outpaced that of goods.
Third, just as we saw with agricultural, mineral, and manufactured goods, service exports are progressively specializing. And much of this services growth is driven by middle-income countries.
With all this in mind, we’ll explore 6 key export services: travel, transport, business services, financial (and insurance), IT, and IP.
Travel is the most traded service export. It encompasses accommodation, meals, shopping activities etc from international tourists, business travellers, and international students (but excludes transport to and from the country).
While tourism is only a subset of the travel category, it’s a good proxy for gauging the top ‘exporters’ and ‘importers’. By international visitor arrival count, the top destinations (ie top tourism exporters) in 2018 were: France, Spain, US, China, and Italy.
But in dollar terms, the US boasts triple the international tourism receipts compared to that of France or Spain, despite similar visitor numbers.
Tourists from China, US, Germany, UK, and France splash the most cash. In other words, they’re the top tourism ‘importers’. (Rankings are similar for 2021 data)
As we’d expect, small island nations are most dependent on tourism. Among the larger economies it’s Mexico, Spain, and Italy.
We’ve intentionally presented 2018/2019 data for tourism to reflect the pre-pandemic status quo. Tourism in 2022 is only 50% of pre-pandemic levels. Notably Mexico was the second most popular destination in 2022, likely due to Americans favoring it over European alternatives.
Millionaire migrations can also be thought of as a special category of tourism exports… with even greater cash splashing and prolonged stays. Australia and UAE are the clear winners here.
Transport services move people and goods across borders.
I struggled to find relevant transport service export data categorised at the country-level. However, noting where the the largest sea transport providers are domiciled is a good start….
… since 70% of global trade is moved by ocean freight (18% road, 9% rail, 2% inland waterways, 0.25% air).*
Business services encompasses professional services, technical and trade-related services, and R&D services.
- Professional services include: legal, accounting, advertising, strategy advisory.
- Technical and trade-related services include: engineering, leasing, and merchanting.
- R&D services include the purchasing or development of IP.
Overall, top exporters are US, Germany, and France. Notably both China and Japan’s business exports have an abnormally low composition of professional services, and extremely high share of technical and trade-related services.
Financial Services and Insurance:
- Financial services are measured based on transaction fees, margins, asset management fees, and various intermediation charges.
- Insurance services, on the other hand, are measured by the total value of premiums paid to insurers, net of any claims settled.
Top exporters are the US, UK, Luxembourg, Singapore, Germany, and Hong Kong.
For financial services, however, it’s more appropriate to gauge export leadership at the city level rather than country level. London and New York are in a perpetual battle for the top spot.
Although notably, the UK depends on financial service exports a lot more than the US does.
Meanwhile Hong Kong and Singapore compete for third place. Both have benefitted as gateways into China. Despite recent social unrest and fears of an increasingly assertive and unpredictable Beijing, HK remains firmly entrenched as Asia’s financial center. In comparison to Singapore, Hong Kong boasts: $2.3T in assets booked by non-residents in 2021 (vs Singapore’s $1.5T), 30-50% higher senior wages, and several multiples larger average daily trading turnover and IPO deal flows.
While Singapore shows some hints it’s rising as a financial hub – evident in the decline of prime office vacancies compared to Hong Kong’s steady climb over the past 5 years, and its increasing share of global FX turnover as Hong Kong’s share declines—it still has a considerable distance to cover in order to match Hong Kong’s stature.
Meanwhile on the import side, below is older 2016 data but I’ve shown this here as it shows exports (left) alongside imports (right). We can see that imports are fairly distributed among many nations.
IT & communications: IT service exports (eg IT admin support) are not to be confused with IP exports (eg software licenses). Communication services relate mostly to contact centres (customer support via phone, chat, and email etc).
India and Phillippines are the world’s back office. And the two countries’ GDPs are increasingly reliant on them.
Intellectual Property: IP trade involves businesses using IP owned in other countries, including patents, trademarks, copyrights, franchises, and trade secrets. This includes movies and music too.
Most transactions are actually intra-firm, such as those between a multinational company’s global headquarters and one its offshore subsidiaries. For instance, two thirds of US IP exports are intra-firm.
Advanced economies are net exporters – transferring their technology and know-how to middle-income manufacturing countries. The euro area stands out as a notable exception, with a considerable portion of their IP imports attributed to businesses relocating to Ireland for tax and legal benefits.
Foreign Workers: While not officially tallied an export (GDP vs GNP), foreign / migrant workers are effectively unofficial labor exports. Especially if they’re sending most of their earnings back home as remittance.
Indian workers (mostly in Middle East), Mexicans (mostly in US), Chinese (everywhere), and Filipinos (mostly in Asia) send the most money back home.
And that wraps up this four part series.
Yes, indeed things are far more complicated in practice. Trade is profoundly shaped by government policies, strategic investments, trade agreements, and more. However, the actual transactions are usually orchestrated and executed by companies. And relying solely on each global firm’s domiciled country (global HQ) may not provide the most accurate reflection of that country’s corresponding exports or imports.
The intricacies of hyperconnected and hyperconcentrated global supply chains further compound the complexity. For instance, a monogrammed leather bag might be exported from Australia, but its components have traversed several countries: imported from China, with cosmetic finishing from Vietnam, and leather sourced from Pakistan. While export data captures product components (and at its core, commodities), it can misleadingly over-inflate the true value added or captured by the exporting country.
This is why it’s more fitting to think of manufacturing that heavily depends on foreign imports for its upstream inputs as a service export. Metrics like foreign value added (share of the value of exports that comes from foreign inputs) best accommodates this.
Despite these overlooked nuances, I trust that this post provided a valuable high-level insight into where stuff is made.
If you enjoyed this, you may also enjoy:
Where Stuff Is Made: An Illustrative Overview (Part 1: Agricultural Commodities)
Where Stuff Is Made: An Illustrative Overview (Part 2: Minerals, Metals, and Industrial Materials)
Where Stuff Is Made: An Illustrative Overview (Part 3: Manufactured Goods)