Global Trade in Services: Fear, Facts, and Offshoring

The service sector is large and growing. Additionally, international trade in services is growing rapidly. Yet there is a dearth of empirical research on the size, scope and potential impact of services trade. The underlying source of this gap is well-known—official statistics on the service sector in general, and trade in services in particular, lack the level of detail available for the manufacturing sector in many dimensions. Because services are such a large and important component of the US economy, understanding the implications of increased trade in services is crucial to the trade liberalization agenda going forward. In this path-breaking book, J. Bradford Jensen conducts primary research using a range of data sources to produce the most detailed and robust portrait available on the size, scope, and potential impact of trade in services on the US economy. Jensen presents new evidence on the prevalence of service firm participation in international trade. He finds that, in spite of US comparative advantage in service activities, service firms’ export participation lags manufacturing firms. Jensen evaluates the impediments to services trade and finds evidence that there is considerable room for liberalization—especially among the large, fast-growing developing economies. The policy recommendations coming out of this path-breaking study are quite clear. The United States should not fear trade in services. It should be pushing aggressively for services trade liberalization. Because other advanced economies have similar comparative advantage in service, the United States should make common cause with the European Union and other advanced economies to encourage the large, fast-growing developing economies to liberalize their service sectors through multilateral negotiations in the General Agreement on Trade in Services and the Government Procurement Agreement. Jensen notes that the coming global infrastructure building boom is of historic proportions and provides an enormous opportunity for US service firms if the proper policies are in place. Increased trade in services might help rebalance the global economy, and both developed and developing economies would benefit from the productivity-enhancing reallocation brought by increased trade in services.