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Dr. Stephen K. KwanProfessor, Service Science
Associate DeanLucas Graduate School of BusinessSan José State University, CA, USA
http://www.cob.sjsu.edu/kwan_s
Contact: stephen.kwan@sjsu.edu
ISSIP Economics Community of InterestApril 30, 2015
US and World Trade in Services
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This presentation looks at service at a macro level as an increasingly important sector of national economies. We will review the extent of the service sector in the US and its trade in services with the rest of the world. We will also discuss some of the current Free Trade Agreements under consideration by the US.
Quick Facts about US Service Sector
The largest labor force migration in human history is underway, driven by global
communications, business and technology growth, urbanization and
regional variations in labor and infrastructure costs and capabilities.
Numeric change in wage-salary employment by industry sector, projected 2004-14(Thousands)
Professional and business service 4566
Healthcare and social assistance 4303
CIA Handbook, International Labor OrganizationNote: Pakistan, Vietnam, and Mexico now larger LF than Germany
42%6433 3 1.4Germany
37%261163 2.1Bangladesh
19%201070 1.6Nigeria
45%6728 5 2.2Japan
64%692110 2.4Russia
61%661420 3.0Brazil
34%391645 3.5Indonesia
23%7623 1 5.1U.S.
35%23176014.4India
142%29224925.7China
40yr Service
Growth
S
%
G
%
A
%
Labor
%
Nation
World’s Large Labor ForcesA = Agriculture, G = Goods, S = Service
20102010
US shift to service jobs
(A) Agriculture:Value from harvesting nature
(G) Goods:Value from making products
(S) Service:Value from enhancing the
capabilities of people and their ability to interconnect and co-create value
Employment Change
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2011:1.6 17.3 81.1
2
3
2002 2003 2004 2005 2006 2007 2008
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
Canada Europe Latin America & Other Western Hemisphere Africa Middle East Asia and Pacific International Organizations & Unallocated
US
$ M
illi
on
US Services Trade Surplus
4
US Service Sector Employees
Total Service Sector 86.3 86.6 88.2 89.9 91.6 93.1 93.1
93.1/116=80.25%Private Sector Jobs
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Percent Employment in the Services Industry
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The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business.
157members
Kwan 2012 7
Broad Areas of Trade:
GoodsServicesTrade-related Aspects of Intellectual Property Rights
Ranging from architecture to voice-mail telecommunications and to space transport, services are the largest and most dynamic component of both developed and developing country economies. Important in their own right, they also serve as crucial inputs into the production of most goods. Their inclusion in the Uruguay Round of trade negotiations led to the General Agreement on Trade in Services (GATS). Since January 2000, they have become the subject of multilateral trade negotiations.
Agricultural
Non-Agricultural
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US Service Export Surplus vs. other Countries
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Adapted from WTO definitions
Modes of Trade Some Examples
Cross Border Trade Software, Insurance, tele-diagnosisfrom country B into A
Consumption Abroad A’s residents obtain education or hospital treatment in B
Commercial Presence Bank, telecommunications firm, hospital from B set up subsidiary in A
Movement of Natural Persons Engineers, doctors from B provideservices in A
Different Types of Trade in Services
Cloud
Computing?
The World is now more complex in Politics and Commerce.
14
What happened in the last few years?
WTO Doha Round of Trade Talks with goals of
Reduce Trade BarriersOpen Market Access….
“..fundamental disagreements between the developed nations and the major
developing countries…”
BRIC nations…
AgricultureGoods
Services
ServicesGoods
Agriculturevs.
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Doha Talks Aftermath
With plurilateral agreements derailed,nations are now engaged in more (inefficient) negotiations for
• Bilateral agreements• Regional agreements – e.g., NAFTA – to be renewed soon
• Sector/Sector Agreements – US has service sector agreements with Japan and EU
• Free Trade Agreements (FTA) – US has FTA (or pending) with Australia, Andean Countries, Bahrain, CAFTA, Chile, Colombia, FTAA, Korea, Malaysia, Morocco, Oman, Panama, Peru, Singapore, SACU
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Technical regulations and product standards may vary from country to country. Having many different regulations and standards makes life difficult for producers and exporters. If regulations are set arbitrarily, they could be used as an excuse for protectionism. The Agreement on Technical Barriers to Trade tries to ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles.
Technical Barriers to Trade (TBT)
Conformity Assessment Problems
and service
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More Complaints against China
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China – Complainant and Respondent
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US – Complainant and Respondent
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Service Sector Challenges
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China’s Nascent Package Delivery Service
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Alibaba doing business in US as AliExpress
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