Service exports down by 11 percent in Q3

In the first quarter of this year, international trade in services was still showing a year-on-year increase. Trade fell over the second and third quarter following the outbreak of the coronavirus pandemic and the ensuing government measures aimed at containing this outbreak. The decline over Q3 was less substantial than over Q2. This was related to the fact that, despite a continued year-on-year export contraction, international service trade did pick up slightly this summer.

Passenger transport hit most severely

Transport services form a major component of Dutch service exports. With an export value of 9.2 billion euros, this type of service accounted for 16.5 percent of total service exports over Q3. Although exports of transport services still fell in Q3 relative to the same quarter last year, the decrease was smaller than in Q2. Transport services - which include freight handling services such as loading, unloading and storage - performed better instead relative to the previous quarter. International road freight services practically returned to the same level as in Q3 2019 (-2.6 percent); maritime transport services were still slightly below last year’s level (-4.8 percent), whereas air transport services showed a 52-percent increase year-on-year.

Signs of recovery in exports to nearest countries

The largest export destinations in international service trade are Ireland and Germany. In Q3, both countries received approximately 7.9 billion euros worth of Dutch services, i.e. over 14 percent of total service exports in that quarter. Service exports to the top ten destinations all declined relative to one year previously; notwithstanding this year-on-year contraction, service exports to Germany, Belgium and Singapore did show some recovery over the summer. Exports of services to the neighbouring countries in particular picked up this summer, mainly due to more foreign tourism and business travel.

The picture is a little more mixed in service imports. In Q3, imports from several different countries showed a year-on-year increase, e.g. from the United States (+15 percent) and Ireland (+35 percent). This can mainly be traced back to intellectual property transactions. On the other hand, Dutch service imports from most other origin countries declined substantially, especially from China (-46 percent) and the United Kingdom (-27 percent).

Brexit and developments in service trade with the United Kingdom

As of January 2020, the United Kingdom is no longer a member of the European Union and is now in a transition period. In the absence of a trade agreement by 1 January 2021, trade barriers and tariffs will be implemented post-Brexit between the EU and the UK. Even before such changes in trade regulations and circumstances take effect, in Q3 our bilateral service trade with the United Kingdom again showed an above-average decline: service exports to the United Kingdom fell by more than 16 percent year-on-year, while service imports contracted by 27 percent. The decline was therefore higher than average in both exports and imports (11 and 16 percent, respectively). The decline in service trade with the UK was sustained in Q3, in spite of the modest recovery in total service imports and exports relative to the previous quarter. A similar trend was observed in goods trade with the United Kingdom.