CHAPTER OUTLINES: Introduction. The Importance of Services in the Domestic Economy—defining services, size of the services sector. Importance of Services in International Trade—defining trade in services, measuring trade in services, reasons for the growth of trade in services, geographical distribution of trade in services. Determinants of Trade in Services. Liberalising Trade in Services. The Uruguay Round Negotiations. Trade-Related Intellectual Property Rights. Conclusion.
In Chapter 1, we saw that a significant proportion of world trade consists of trade in services as opposed to goods. The post-war era has witnessed a major growth of service activity within the advanced industrialised countries of the world. Well over one-half of the Gross Domestic Product of most developed market economies is now contributed by what is loosely termed the ‘service sector’. This represents a major transformation in the structure of economic activity within these countries. The relative decline of manufacturing and the rise of services has been variously described as a process of de-industrialisation or, perhaps less emotively, as post-industrialisation.
Although many services are non-tradable, service trade accounts for a large and probably growing proportion of world trade. The World Trade Organisation has estimated that 19.8% of world exports and 20.4% of world imports are accounted for by commercial services (WTO, 1996). Exports of services constitute an important source of export earnings for a number of developed countries and quite a few developing countries also. For these reasons, any book concerned with the changing pattern of world trade must concern itself with trade in services and not just with trade in goods.
Although it is not always possible to distinguish a good from a service, there is value to be gained from discussing trade in services separately from trade in goods. To begin with, for a variety of reasons that will be explored in this chapter, the manner in which many services are traded differs from trade in goods. The determinants of trade in services may also differ from trade in goods. Then, too, the factors that impede trade in services are generally different. Trade in services tends to be reduced by the regulatory laws of countries that deny foreign service-providers access on the same terms as domestic service providers.