1. What is the tertiary sector?
   1. What is the relationship between employment by sector and economic development?
2. Who provides the services?
   1. The welfare state
3. The trade
   1. Internal and external trade
4. International trade organizations
5. Transport and communications
6. The tertiary sector in Europe: The tertiaryization of the economy in Europe
   1. The EU, a leader in world trade
   2. The European connection network
   3. Europe, favorite destination

What is the tertiary sector?

Economic activity is traditionally divided into three sectors: primary ,  secondary and  tertiary .

The  tertiary sector  or  service sector  includes all activities that produce  intangible goods   and provide services to the  population  or  companies . This definition includes essential services such as education and health, but also advertising, legal aid, cleaning and internet providers.

To approach its analysis, we divide it into several  subsectors :

• Commerce  , related to all the processes of distribution and sale of goods and products.
• Transport   and  communications , which include the movement of people and goods, as well as communication and information flows.
• Tourism  , which includes the temporary displacement of the population for leisure purposes.

Since the end of the 20th century, and in the present century, the quaternary subsector has gained more weight and importance   with activities linked to  information  and  knowledge , such as information and communication technologies, consulting services, activities included in R  +D+I  and financial services.

This subsector is gaining so much weight in the economies of the most developed countries that some authors single it out as a new economic sector.

What is the relationship between employment by sector and economic development?

The active population works in one of the three sectors of economic activity. The resulting distribution is the structure of employment  and reveals details of the economy of the country or area.

In the  most developed countries  around  70% of the population works in the tertiary sector , compared to a primary sector reduced to the maximum possible employing only 4%-6% of the active population. In contrast, countries with a lower level of development have a large volume of workers in the primary sector. Along with the active population, the contribution to   a country’s  GDP from each economic sector  is related to the  level of development:  the higher the tertiary sector’s contribution to GDP, the higher the level of development.

Who provides the services?

One of the most common ways to classify services is based on  who provides this service , dividing them into  public  and  private services .

The State  is the provider of  public services  that seek to guarantee the  well-being of citizens  through what we call  basic services : health, education, defense and public order, etc.

Private services  , managed by  companies , have as their objective the  financial benefit  of these companies, such as banks.

There are exclusively private services, such as advertising and commerce. Others can be offered publicly and privately at the same time, such as health care, and it is the user who opts for one or the other, depending on their interests and financial solvency.

The welfare state

The provision of public services to citizens by the state is linked to the concept of the ” welfare state  ” which was consolidated in European states during the 1940s. The difficult social conditions after the Second World War pushed the European governments to approve a  set of social laws that created a ” social security”  system that  would protect the citizen and guarantee fair access to public services and the well-being of the population . Within these services, there are measures such as unemployment benefit, retirement pension, paid working holidays, health care, paid maternity/paternity leave, etc.

Although some of these measures existed since the late 19th century, they did not become widespread until the mid-20th century. This does not mean that conditions are the same in all countries of the world today; there are huge differences between developed and developing countries in terms of the welfare state. One of the ways to measure these inequalities is found in the HDI  or  Human Development Index  , an indicator developed by  the United Nations . In this index the maximum value is 1, so the closer a country’s value is to 1, the higher the quality of life and well-being of the population.

The trade

The products we use and consume every day are made in different places on the planet. It is the commercial activity that distributes them and brings them to our homes.

Commercial activity is the distribution of raw materials, goods and services, connecting producers and consumers. Commerce has evolved from ancient barter to electronic commerce.

Its main characteristics today are:

• It is based on the law of supply and demand . The offer today is very varied with electronic sales, self-services, large and small surfaces, etc. Demand has changed due to the evolution of consumption habits, the enormous influence of advertising, marketing techniques, etc.
• It has become globalized , creating an enormous global interdependence between countries. Today, large multinationals play a very prominent role in major international trade flows.
• It is concentrated in urban areas and is connected to transport and communications networks. There are large logistics distribution centers, on a global and national scale, that transform spaces.
• It encompasses very diverse activities, from sales at street markets to large multinational purchase transactions.

Internal and external trade

Traditionally, we classify commercial activities according to the space where they take place as internal trade, within a country, and foreign trade, between countries.

Internal trade records   all the activities that are carried out  within the borders of a country , classifying them as  wholesale  and  retail trade .

Wholesale trade includes   all  transactions in which you buy directly from producers and sell to retailers or other companies . There are large  logistics platforms  that store and distribute these products. An example of this wholesale activity would be the distribution of fruit: a company buys large quantities of fruit from the producer and distributes it to central wholesale markets throughout Spain where it is purchased by fruit growers in our neighborhood, village, etc.

Retail   is what  buys directly from  producers or a wholesaler  and sells to end consumers . There are different forms of retail:

• Street markets or   street  markets  are temporary places where sellers have their wares on a daily, weekly or temporary basis.
• Traditional commerce ,  stores located in urban or rural areas that sell directly to the consumer.
• Large  commercial areas,  such as supermarkets, hypermarkets and shopping centers.

Foreign trade is   the exchange of goods and services of a country with the rest of the world . This exchange includes two types of buying and selling: 

• Exporting is selling goods or services produced or generated in one country to buyers in any other country or place.
• importing is just the opposite, that is, buying from one country goods or services produced and sold by a different country or region.

Associated with imports and exports we find two economic indicators: the  trade balance  and the  balance of payments .

The  trade balance  measures the  difference between the value of all goods imported and exported  by a country. This value can be positive, when exports exceed imports, with the country having a  trade surplus . If it is negative, imports exceed exports, we speak of  a trade deficit .

The  balance of payments  not only measures trade, but also  all economic and capital transactions  of a country with the rest of the world. Like the trade balance, it can be positive or surplus and negative or deficit.

International trade organizations

Globalization   and the strong  competitiveness  of the world market have pushed countries to integrate into  international trade organizations  to generate synergies that allow them to have positive balances.

The WTO ,  World Trade Organization , is an international organization that deals with the world-wide rules that  regulate trade . Headquartered in Geneva (Switzerland) it was created in 1995 and in 2021 it is made up of 164 members representing 98% of world trade. Among its functions are: the administration of trade agreements, cooperation with other institutions and the forum for negotiations for commercial disputes.

Among the  global trade blocs  that seek to stimulate the free movement of goods and services that favor the growth of their economies, we highlight:

• The  European Union  is one of the main global agents of trade, positioned as the second largest importer and exporter worldwide. We have a deficit in the import of goods and a surplus in the export of services.
• The  North American Free Trade Agreement  (NAFTA or NAFTA in English) signed between the United States, Canada and Mexico, which promotes exchanges between these countries.
• ASEAN  , Association of Southeast Asian Nations.

The UN is also present with the  United Nations Conference on Trade and Development (UNCTAD) , created in 1964 for matters related to trade, investments and development. Made up of 195 countries, it supports developing countries to join the globalized economy.

Transport and communications

Transport   is the  transfer and  distribution  of people, goods and services between different places  . The 19th century saw a first revolution in this sector with the introduction of the steam engine and, since then,  technological innovations have been added to it  that have increased  speed ,  connectivity  and  reduced distances .

The  areas  of travel are  land  (by rail and road transport),  naval  (river and sea) and air  (  by plane). Let’s now analyze their advantages and disadvantages. 

Means of transport	advantages	Disadvantages
train	Great load capacity. Low price in the transport of goods. Safe.	High cost of infrastructure construction. Little flexibility.
road	Door to door, it’s very flexible.	High cost of construction and maintenance of infrastructures. Traffic congestion. High rates of air pollution. Risk of accidents.
ship	High cargo and passenger capacity. Low cost. Safe.	Low travel speed. Impact on the urban fabric of port infrastructures.
airplane	High speed allows you to travel long distances in a short time. Safe.	Impact of its infrastructures on the territory. Atmospheric and acoustic pollution.

The entire set of means of transport  is the infrastructure network of a country. These networks are conditioned by  physical factors  (the relief greatly determines the layout of transport),  economic  (availability of resources for construction),  political  (investment decisions in certain areas) and  historical . All this forms the density of the network of a space and marks its accessibility , essential for the development of  economic activities  .

From an environmental point of view, means of transport generate high  landscape, acoustic, atmospheric impacts  , etc. European governments have begun to bet on  more sustainable  and connected mobility strategies, based on the massive introduction of mobility technology and the need to  ” decarbonise  ” the economy .

tourism

Tourism is the  movement  of people, of a  temporary nature , from their place of residence to another space, for  leisure reasons  . We should not confuse it with migratory movements in which displacement occurs out of necessity or to try to improve living conditions.

This activity has grown exponentially in the last fifty years associated with various  social changes  :

• The emergence of  free and leisure time  , a consequence of shorter working days and paid holidays.
• Higher level of  income  , since the population has more money that they can spend during the holidays and in the enjoyment of their free time. 
• The  transport revolution  , which has allowed more mobility and accessibility, at more affordable prices.
• The  consumer society  and  advertising  , which offers us a great variety of activities.

All these factors have promoted that tourism has become a ” mass phenomenon  ” with more than 1.4 billion international trips in 2019 according to the WTO (World Trade Organization). A prosperous ” tourism industry ” has developed around it that seeks  to satisfy the needs  of tourists, from transport infrastructure to hospitality, which facilitate relaxation and enjoyment of leisure time. 

https://datos.bancomundial.org/share/widget?indicators=ST.INT.ARVL&view=map

International tourism, number of arrivals.  World Bank  .

This economic subsector of unstoppable growth has also diversified its destinations . People are traveling further and further. What attracts people to visit a place are  physical elements , natural   (the peaks of the great mountains),  human (  the great medieval cathedrals), or a combination of both. Depending on the destination, we talk about different  types of tourism  :

• Sun and beach , typical of coastal areas in warm and temperate countries.
• Mountain  ,  sport  and  adventure , which has grown in recent years associated with sports activities such as hiking, climbing or winter sports on snow.
• Cultural , focused on visits to places of historical interest, cities with rich heritage, great exhibitions, etc.
• Religious   with pilgrimages to holy places.
• Leisure , visits to theme parks, concerts, etc.
• Health , associated with activities that take care of the body and mind, such as  spas.
• Businesses , congresses and professional fairs, which move a huge volume of people.
• Rural , the increasingly high percentage of the urban population means that rural destinations are chosen as elements of leisure.

Is sustainable tourism possible?

The increase in tourism has generated many  benefits , but also  problems . We analyze below their advantages and disadvantages, as well as the need to develop tourism practices that are more respectful of traditional ways of life and the environment.

ADVANTAGES	INCONVENIENCES
Tourist activity stimulates other  economic sectors  , brings  wealth  and benefits the   country’s balance of payments .	Mass tourism is associated with  holiday packages  that are managed by ”  tour operators  “, who  export the profits  outside the country.
It creates a lot of  employment  .	The occupations are  temporary  .
It expands and diversifies the  cultural contacts  of the population.	It expels  the  population  and  traditional activities  from their usual neighborhoods.
Improve  the   transport and communications network .	It destroys  natural landscapes and  overcrowds  certain areas.

The UNWTO (World Tourism Organization) declared 2017 the International Year of  Sustainable Tourism  , which seeks to make  tourism practices sustainable from an environmental ,  economic ,  social  and  cultural  point of view  . It tries to prevent tourists from appropriating and modifying the local heritage and that the economic benefits go to companies that do not come from the local economy.

To achieve this, the UNWTO has established a series of  principles  that guarantee sustainable tourism; among them, we find:

• Policies that  minimize   the generation of  waste  by tourists.
• Adequate management of  drinking water  and waste water generated by tourist activities.
•   More sustainable transport models  .
• Involve  local communities  in conservation activities, but also in economic promotion activities, so as to generate  employment  and  diversify the local economy  .
• Achieving  sustainable development  .

Many  natural spaces , rural tourism initiatives   and  hospitality  have joined these principles of sustainability, and have grown the range of activities under this seal of quality.

The tertiary sector in Europe: The tertiaryization of the economy in Europe

The  European Union  is one of the  economic leaders  worldwide. Its economic position allows it  to compete  with  the USA  ,  China  and  Russia . The union of the 27 guarantees its primacy in the world with a  gross domestic product  (GDP) that represents  22% of the world total .

At the forefront of this economic development is the  tertiary sector  with a contribution of  70% to the GDP  of the union and  73%  of the  population employed   in this sector, according to data from 2019. An  enormous variety of economic activities,  such as trade, transport, storage, finance, insurance, business and personal services are included in the tertiary sector.

The importance of this sector has increased to become the  first generator of employment and wealth  in all the countries of the European Union (EU), although with internal differences. While in Germany the service sector accounts for 74% of the employed population, in Romania it is only 48%.

The EU, a leader in world trade

In   international trade,  the European Union  leads the world trade in services;  it is also the second largest exporter of goods, behind only China, and the second largest importer behind the USA. The  trade balance of goods and services  has registered  a surplus  in recent years, certifying the economic recovery after the 2008 crisis.

At global level,  the EU has only one voice in trade policy . Relations with third countries are made through commercial agreements and the existence of tariffs on the import of products are other key elements.

In  internal trade , the  single market  guarantees the  free movement of goods, services, capital and people within the EU . In practice, it involves the elimination of borders and technical and legal barriers, which, together with the creation of the euro zone, has been a huge stimulus to economic growth and trade between the countries of the union.

The  European commercial policy  of the coming years seeks to guarantee  security  in the circulation of goods and services and  sustainability , taking care of the environment and favoring socio-economic development.

The European connection network

One of the fundamental axes for structuring the EU is an  infrastructure network  that facilitates  connectivity between all territories  . In the past, there have been many investments in transport with the aim of reducing time and improving the capacity of the roads.

The current transport policy is based on three pillars:

• The commitment to   trans-European transport networks   ( TEN-T ), networks of common European interest to create corridors for goods and passengers, by road, rail and even have a “single European sky”. 
• The creation of  multimodal systems  and  platforms  .
• The challenge of   reducing  emissions  .

Europe, favorite destination

In 2019, 1.5 billion tourists traveled around the world, of which  755 million did so in Europe  , 50% of the global total. France is the first destination, followed by Spain, Italy and Germany. Tourism   within the EU is a  crucial element of the economy , facilitated by the free movement of people, established in the Schengen Treaty, and by the euro .

The tourism policy of the coming years is based on the  consolidation of employment , which is highly seasonal, and also on increasing the  environmental dimension  through the promotion of sustainable, responsible and ethical tourism. Within this policy, some outstanding lines of action have been set:

• The promotion of  tourist destinations of excellence  ( European destinations of excellence )
• The promotion of tourism for  elderly people  and  disadvantaged groups  .
• The creation of a  green belt  of 6800 kilometers of trails, from the Baltic Sea to the Black Sea.
• The promotion of tourist activities among  young people  ( Discover EU ).

References

• Buxaweb. Tertiary sector
• Miriam Hernando Leal. Itinerary The tertiary sector . Geography and History 3.º ESO Collection “Didactic Itineraries” INTEF.
• National Geographic Atlas