The Development and Importance of Travel Service Exports from South Africa

Trade-in-services is fast becoming one of the foremost areas of research and policy making in the international trade arena. Although the General Agreement on Trade-in-Services (GATS) was implemented in 1995, it is only recently, with the realisation of the close linkages between goods and service exports and the advent of better data, that researchers have begun to pay more serious attention to questions such as 'comparative advantage' and 'trade liberalisation' in the service trade. While research on the subject has lagged, negotiations and policy analysis (because of GATS) has had to make do with what little is understood about the service sector. One reason for the lack of clear stylised facts about service exports is the diverse nature of the industries that comprise it. The World Trade Organization (WTO) defines twelve service industries, each with specific characteristics, measurement issues and economic incidence. Furthermore, each service industry consists of four modes of trade. In addition, trade involves both imports and exports. South Africa has a long history of travel service exports. The first Europeans settled in the Cape to provide services to passing ships on their voyages to the East Indies and back to Europe. Cape Town, known as the 'Tavern of the Seas', offered sailors and soldiers accommodation, entertainment and health care before commencing the second leg of their journey. Today, South Africa offers the international traveller a diverse travel experience. Blessed with unique natural landscapes, fauna and flora, history and cultures, together with a built environment offering quality services, travel exports are one of the fastest growing sectors in the South African economy. Given this, South Africa seems to enjoy a comparative advantage: Travel service exports comprise more than 65% of the country's total service trade, significantly higher than the world average of 38%. This paper defines travel service exports and reflects on its development in South Africa. Using a new United Nations Conference on Trade and Development (UNCTAD) dataset, tests the hypothesis that South Africa has a comparative advantage in exporting travel services. The relative advantage of this sector is also compared against that of other countries. The evidence supports the notion that South Africa has a revealed comparative advantage in exporting travel services.