2. Main patterns of trade in services

license from the Ministry of Labour of the Argentine Republic in advance28. Non-automatic licensing also applies to certain household chemical goods, as well as fertilizers and certain textile bedding for delivery to Paraguay29 and the supply of certain foodstuffs to Ecuador.30 When exporting footwear, sewing and textile products to Brazil, enterprises from countries that are non MERCOSUR members face additional monitoring, reinforced by inspection.31 Thus, a prerequisite for intensifying trade relations between regions is the effort necessary for identifying and reducing existing trade barriers and organizing information and analytical support for potential trade counterparts.

2. Main patterns of trade in services

Trade in services follows similar patterns in the EAEU and LAC. In 2018, EAEU exported almost US$ 84 billion worth of services, which accounted for nearly 12% of its goods exports and 1.4% of global services exports. LAC exported US$ 190 billion in services, which were equal to 16% of its goods exports and 3.3% of global services exports. The services trade has grown at a slower pace than the goods exports have. EAEU services exports increased an annual average of 7.2% and its services imports rose 3.3% between 2005 and 2018. For LAC, the corresponding rates constituted 5.4% and 2.6%, respectively, during the same period. ECLAC groups services exports into two categories for the purpose of facilitating their analysis: traditional and modern services. Trade in traditional services involves those that have always formed part of trade statistics: services related to goods, transportation, travel, construction, personal, cultural and recreational services, and government services. Modern services refer to services that are marketed mainly through the Internet and other digital media, such as telecommunications, computing and information services, financial services, insurance and pension services, royalties and other business services. This category also refers to knowledge-intensive services (ECLAC, 2017). Most EAEU and LAC services exports are considered traditional services (see figure II.5). In 2018, 71% of EAEU services exports were classified as traditional services and 29% referred to modern services. Most of EAEU exports in services were transport, travel and other business services,32 making up 36%, 19% and 17% of the region’s total, respectively (see figure II.5). This pattern was like that of LAC services exports, even if travel was its single most valuable service. In 2018, 73% of LAC services exports consisted of traditional services and 27% of modern services. Travel exports made up more than half its total services exports (53%), followed by other business services (17%) and transport (15%). Figures II.5 and II.6 show that the import and export patterns of services are similar in both regions. Both regions see higher imports than exports of other business services, resulting in increased participation of modern services in imports. For EAEU and LAC, modern services make up 37% and 40% of services imports, respectively. Transport and travel are also important category of services imports for both regions.

28 See [online] http://servicios.infoleg.gob.ar/infolegInternet/anexos/275000-279999/276625/texact.htm, http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/305752/norma.htm, http://servicios.infoleg.gob.ar/infolegInternet/anexos/305000-309999/308278/norma.htm, http://servicios.infoleg.gob.ar/infolegInternet/anexos/310000-314999/314238/norma.htm. 29 See [online] http://www.snin.gov.py/publico/. 30 See [online] http://extwprlegs1.fao.org/docs/pdf/ecu154886.pdf. 31 See [online] https://ustr.gov/sites/default/files/files/Press/Reports/2018%20National%20Trade%20Estimate%20Report.pdf (p. 59). 32 Other business services include research and development, professional and management services, and technical, trade related, and other business services.

60% 50% 40% 30% 20% 10% 0% Figure II.5 Eurasian Economic Union and Latin America and the Caribbean: exports in services, 2018

Traditional services

Modern services

Other business services Insurance and pension services Financial services Charges for the use of intellectual property Telecommunications, computer, and information services Manufacturing services on physical inputs owned by others Personal, cultural, and recreational services Government goods and services Maintenance and repair services Transport Travel Construction

Eurasian Economic Union Latin America and the Caribbean

Source: Prepared by the authors, on the basis of United Nations Conference on Trade and Development (UNCTAD), UNCTADstat [online database] https://unctadstat.unctad.org/EN/#1.

40% 35% 30% 25% 20% 15% 10% 5% 0% Figure II.6 Eurasian Economic Union and Latin America and the Caribbean: imports of services, 2018

Traditional services

Modern services

Other business services Insurance and pension services Financial services Charges for the use of intellectual property Telecommunications, computer, and information services Manufacturing services on physical inputs owned by others Personal, cultural, and recreational services Government goods and services Maintenance and repair services Transport Travel Construction

Eurasian Economic Union Latin America and the Caribbean

Source: Prepared by the authors, on the basis of United Nations Conference on Trade and Development (UNCTAD), UNCTADstat [online database] https://unctadstat.unctad.org/EN/#1.

According to the EEC data, the key export markets for the services of EAEU member States (excepting Armenia) in 2019 were Europe and Asia. Europe consumed 50% of EAEU services, Asia–28%, the United States–7% and the LAC countries–1.3% only, which is proximate to the LAC share in EAEU goods exports. Market shares are comparable for imports of services; 56% of EAEU services imports originated in Europe, 24% from Asia, 4% from the United States and 1.4% from LAC.

Once again, among EAEU member States for which the statistics are available, Russian Federation leads the international trade in services, being responsible for 81% of trade turnover in tertiary sector, followed by Kazakhstan (10%), Belarus (8%), and Kyrgyzstan (1%). The largest LAC services exporter to the EAEU was Panama, providing 40% of total LAC services exports. Panama’s role as a services exporter to the EAEU reflects the trend toward offshoring to the country that is leading to increased demand for its financial services, as well as the transportation services provided by the Central American county’s logistics hub. Other relevant LAC suppliers were Cuba, Mexico, Argentina and Brazil. Those five countries made up 79% of overall EAEU imports in services from LAC (see figure II.7). With respect to exports, Panama is also an important destination for EAEU services exports. In 2012, 40% of EAEU services exports to LAC were destined for Panama. Other important markets were Brazil (11%), Belize (8%), the Bolivarian Republic of Venezuela (8%) and Argentina (7%). The market concentration of those five countries was 73%.

Figure II.7 Eurasian Economic Union: trade in services with Latin America and the Caribbean countries, 2018

60% 50% 40% 30% 20% 10% 0%

Panama Brazil Belize Venezuela (Bol. Rep. of) Argentina Peru Mexico Colombia Saint Kitts and Nevis Chile Uruguay Cuba Trinidad and Tobago Dominica Barbados Haiti Ecuador Paraguay Rest of LAC

Exports Imports

Source: Prepared by the authors, on the basis of Organisation for Economic Co-operation and Development (OECD), OECD Data [online database] https://data.oecd.org/.

As discussed above, there appears to be a great potential for developing trade between the two regions in spheres in which long distances might not detract from the attractiveness of supply, as in the case of trade in services. The ICT services sector does not require movement from suppliers or consumers, while being the segment with the greatest value added and potential for boosting technological advances and is, thus, especially attractive from the perspective of EAEU-LAC trade. Meanwhile, the fact that in the majority of the two regions’ States the ICT services sector is just now emerging while certain countries, such as Belarus or Brazil, have already gained experience in this sphere, results in two important conclusions. On the one hand, there is a non-zero probability that the current lack of intensive cooperation stems from low entrepreneurial awareness of the prospects for doing business overseas. On the other hand, ‘early bird’ experience and cooperation might lead the other States by example. Nevertheless, and similarly to our considerations on trade in goods, the choice of strategy for developing cooperation in trade in services will require in-depth investigation of the two regions’ regulatory peculiarities and identifying which ones represent barriers to trade intensification.