Essays in Honor of Mordechai Kreinin
Edited by Michael G. Plummer
Chapter 7: The Role of Intra-Industry Trade in the Service Sector
Robert C. Shelburne* and Jorge G. Gonzalez 1. INTRODUCTION International trade in services has become a very important component of overall international trade. Over the past two decades trade in services has grown faster than trade in goods. In 2001 the world traded $1.5 trillion worth of services; this represented over 19 percent of total international trade. Furthermore, the trade of most developed economies tends to be even more concentrated in the service sector. For instance, service exports represented 27 percent of total US exports during 2001.1 These statistics are likely to underestimate the true volume of services trade, since much of this type of trade is done through subsidiaries and these transactions are often not included in the balance of payments statistics from which the services trade data are usually derived. The growing importance of services in international trade should not come as a big surprise since the service sector has been the largest and most dynamic sector for most developed and leading developing economies for many years. Consequently trade in services is likely to continue to grow at a rapid pace. Over the previous decades, trade in the service sector has grown in spite of arbitrary and capricious unilateral barriers imposed by national governments. Given the importance of international trade in services, it is puzzling that it was not until the mid-1980s that trade in services was the subject of multilateral trade negotiations. Under pressure from developed nations, services were brought under WTO (GATT) rule during the Uruguay...
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