The Top 10 Overlooked Facts About World Trade in Services

OVERLOOKEDWORLD TRADE IN SERVICESFACTS ABOUT

Top 10 Overlooked Facts About World Trade In Services

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Services Create the Vast Majority of U.S. Jobs

Services employ about 95 million of America’s 110 million private sector workers. The United States is home to thousands of highly competitive services companies in such sectors as audiovisual; finance; insurance; energy services; transportation, logistics, and express delivery services; information technology services; and telecommunications.

Source: U.S. Bureau of Labor Statistics; Gresser, Global Works Foundation.


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Source: World Bank; Gresser, Global Works Foundation.

Service industries account for 70% of world gross domestic product (GDP) and employ about 3.2 billion people around the world. The larger the share of services in a country’s economic output, the more prosperous that country is likely to be.

Services Make the World More Prosperous


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Source: Jensen, Peterson Institute for International Economics.

Jobs in Services Pay WellApproximately 18 million Americans are employed in business services such as software, architectural services, engineering and project management services, and insurance—all of which generate billions of dollars in exports. Their wages are 20% higher on average than those in manufacturing, which employs about 12 million Americans.


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Source: Office of the U.S. Trade Representative.

America Leads World Trade in ServicesThe United States is by far the world’s largest exporter of services. U.S. services exports reached $632 billion in 2012, and the U.S. services trade surplus reached $195 billion. In addition, services sales by foreign affiliates of U.S. multinational corporations topped $1 trillion. Combined, total sales of U.S. services abroad reached approximately $1.7 trillion in 2012.


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Source: WTO and OECD, “Measuring Trade in Value Added.”

Services generate about half of U.S. exports—measured on a value-added basis—in large part because services contribute significant value to the production of factories and farms. The same is true of other developed economies.

Services Provide the Lion’s Share of World Trade


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The Growth Potential for Services Exports Is Huge

While U.S. services exports lead the world, their potential for growth is almost untapped. One in four U.S. factories exports, but just one in every 20 providers of business services does so. Just 3% of U.S. services output is exported.


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Source: Office of the U.S. Trade Representative.

The Trade in Services Agreement Promises Big Benefits

The United States is now pursuing a high-standard trade agreement in services dubbed the Trade in Services Agreement (TISA). Some 50 countries* are taking part, and they generate 70% of world trade in services. This exciting new accord has the potential to ignite economic growth and job creation in the United States and abroad.


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Eliminating barriers to trade in services could boost U.S. services exports by as much as $860 billion—up from 2012’s record $632 billion—to as much as $1.4 trillion. Such a dramatic increase could create as many as three million American jobs. The TISA is a once-in-a-lifetime chance to address these trade barriers across dozens of countries.

Eliminating Services Trade Barriers Could Create Millions of Jobs


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Source: WTO.

Exports of Services Can Take Several Paths

For example, a U.S.-based software company can export its products via the Internet (“cross-border trade,” known as mode 1), provide training to its staff based in Spanish-speaking countries in Panama (“consumption abroad,” mode 2), sell service contracts through a Japanese affiliate (“commercial presence,” mode 3), and employ a Dutch national with an H-1B visa at its headquarters (“movement of natural persons,” mode 4). All four “modes” are important for companies doing business in today’s global economy.


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Source: U.S. Bureau of Economic Analysis; Gresser, Global Works Foundation.

U.S. services companies have invested more than $1.6 trillion abroad, creating more than 25,000 foreign affiliates in the process. These firms sold $1.16 trillion worth of services to foreign customers in 2009—a sum equivalent to 8.3% of U.S. GDP.

Investment Abroad Is a Key Part of U.S. Services Exports


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References

Edward Gresser, “Services Trade Liberalization as a Foundation of Global Recovery,” Progressive Economy Project at the Global Works Foundation, prepared for the Coalition of Service Industries: February 24, 2012.

J. Bradford Jensen, Global Trade in Services: Fear, Facts, and Offshoring, Peterson Institute for International Economics: September 2011.

World Trade Organization (WTO) and the Organization for Economic Cooperation and Development (OECD), Measuring Trade in Value Added, joint initiative and database (www.oecd.org/trade/valueadded): March 15, 2012 (ongoing).


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* Bonus fact: 48 countries are taking part in the ISA negotiations: Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, the European Union (on behalf of its 27 member states), Hong Kong China, Iceland, Israel, Japan, Korea, Mexico, New Zealand, Norway, Pakistan, Panama, Paraguay, Peru, Switzerland, and Turkey as well as the United States.

The Top 10 Overlooked Facts About World Trade in Services

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