1. Dr. Stephen K. Kwan
Professor, Service Science
Associate Dean
Lucas Graduate School of Business
San José State University, CA, USA
http://www.cob.sjsu.edu/kwan_s
Contact: stephen.kwan@sjsu.edu
ISSIP Economics Community of Interest
April 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.

2. 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 Organization
Note: Pakistan, Vietnam, and Mexico now larger LF than Germany
42%643331.4Germany
37%2611632.1Bangladesh
19%2010701.6Nigeria
45%672852.2Japan
64%6921102.4Russia
61%6614203.0Brazil
34%3916453.5Indonesia
23%762315.1U.S.
35%23176014.4India
142%29224925.7China
40yr Service
Growth
S
%
G
%
A
%
Labor
%
Nation
World’s Large Labor Forces
A = Agriculture, G = Goods, S = Service
2010
2010
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
Kwan 2015
2011:1.6 17.3 81.1
2

3. 3
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
2002 2003 2004 2005 2006 2007 2008
US$Million
Canada
Europe
Latin America & Other Western
Hemisphere
Africa
Middle East
Asia and Pacific
International Organizations &
Unallocated
US Services Trade Surplus

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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.
157
members

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Broad Areas of Trade:
Goods
Services
Trade-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.

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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-diagnosis
from 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 provide
services in A
Different Types of Trade in Services
Cloud
Computing?
The World is now more complex in Politics and Commerce.

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What happened in the last few years?
WTO Doha Round of Trade
Talks with goals of
Reduce Trade Barriers
Open Market Access….
“..fundamental disagreements between
the developed nations and the major
developing countries…”
BRIC nations…
Agriculture
Goods
Services
Services
Goods
Agriculture
vs.

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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

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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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