- Trade topics
When is a product a good or a service?
The link between goods and services is increasing, as access to services becomes more of a prerequisite for the strong economic performance of many manufactured products.
Trade in services covers a wide variety of sectors, such as transport, telecommunications, professional services, financial services, postal and courier services, retail and distribution, environmental services and tourism services. EU trade agreements typically cover trade in services. The EU's objective is to ensure that EU service providers are allowed to supply services in foreign markets and are not discriminated against vis-à-vis national operators or other foreign operators in the same sector.
Producers and exporters of goods such as textiles, cars or computers, for example, cannot be competitive without access to efficient banking, insurance or accountancy – or to telecommunications and transport systems. The purchase of many products often involves a service component.
Cloud computing allows services such as technical infrastructure, platforms and software to be provided on a global basis. Instead of installing hardware at their customers’ premises, service providers can now offer their services from the cloud remotely – and across borders – demonstrating how services can substitute goods in certain cases.
Why is it relevant?
- The EU is the world's biggest exporter of manufactured goods, and is a global market leader for high-quality products.
- The EU economy is already one of the world’s most open to trade: EU import tariffs for industrial products are among the lowest in the world.
- Imports from many suppliers of industrial products to the EU enter the bloc at reduced rates under the terms of bilateral agreements or other import duty suspensions, like the Generalised Scheme of Preferences.
- The services sector contributes more to economic growth and job creation in the EU than any other sector. Services represent some three quarters of the EU’s gross domestic product and two thirds of its employment. The EU is also the world’s biggest exporter of services.
- Services account for over 80% of the EU’s inward foreign direct investment, and for more than 60% of its outward foreign direct investment.
- Mutual Recognition Agreements (MRAs) facilitate market access by reducing costs and time associated with mandatory product certification.
- The significance of non-tariff barriers to trade, such as technical barriers to trade or sanitary and phytosanitary measures, has increased considerably, as tariffs steadily decline and governments worldwide introduce more regulatory requirements to address inter alia health, safety or environmental concerns.
- The way a product is treated on import is linked to its country of origin. Yet globalisation means that many different countries are involved in manufacturing. Determining where goods come from requires clear rules of origin.
EU trade policy on goods and services
Multilateral and plurilateral negotiations on goods and services:
Certain WTO members including the EU have joined the Information Technology Agreement (ITA) which provides duty-free access to IT products, including computers, telephones and inputs and components such as semiconductors.
- The ITA has helped to quadruple trade in information technology products.
- Since the ITA was signed in 1996, many products have become obsolete, while new products have emerged. Entire sectors have become digitised, such as medical devices and other sophisticated instruments.
On services, the EU is currently participating in two WTO plurilateral negotiations regarding e-commerce and domestic regulation.
- E-commerce: Digital technologies have transformed international trade and strongly influence trade policymaking. The EU proposed ambitious digital trade rules in the ongoing plurilateral negotiations on e-commerce in the WTO, which engage more than half of the WTO’s membership. These negotiations remain the EU’s most important strategic objective in the area of digital trade. More information on e-commerce at the WTO.
- Domestic regulation: Barriers to trade in services often take the form of ‘behind the border’ obstacles created through domestic regulatory regimes. The EU is in a group of over 60 WTO members committed to developing disciplines to mitigate the unintended trade-restrictive effects of measures relating to licensing requirements and procedures, qualification requirements and procedures, and technical standards. More information on domestic regulation at the WTO.
Bilateral negotiations on goods and services
A number of the EU's bilateral trade agreements have significantly liberalised trade in goods. Some also include provisions covering non-tariff barriers and trade in services. For example:
- The EU and Mexico's Economic Partnership, Political Coordination and Cooperation Agreement opens up trade in both goods and services.
- The Association Agreement between the EU and Chile creates a free trade area in goods and services.
- The EU-South Korea Free Trade Agreement eliminates tariffs. The agreement only excludes a limited number of agricultural products from tariff elimination. It also breaks new ground in addressing non-tariff barriers to trade.
- The EU's trade agreement with Peru and Colombia opens up goods and services markets on both sides.
- The Association Agreement between the EU and Central America improves access to goods and services markets, and improves conditions for trade through new disciplines on non-tariff barriers.
- The EU-Singapore Free Trade Agreement includes substantial commitments on trade in services, creating opportunities for investment in many service sectors. The deal facilitates access of industrial and agricultural products to this important export market and trade hub in Southeast Asia, through greater recognition of EU standards.
The way forward on goods and services
The EU continues to negotiate ambitious provisions to improve access to goods and services markets with several regions and countries including:
The EU also concludes Economic Partnership Agreements with African, Caribbean and Pacific (ACP) countries.
More on goods and services
- The General Agreement on Tariffs and Trade is a WTO Agreement that reduces import tariffs on trade in goods around the world.
- The WTO's General Agreement on Trade in Services aims at ensuring increased transparency and predictability of relevant rules and regulations, and promoting progressive liberalisation of international trade in services through successive rounds of negotiation.