Edited by William A. Kerr and James D. Gaisford
Chapter 14: Trade in Services
Eugene Beaulieu Introduction International trade in services has become a major policy issue in both developed and developing countries. The international (or oﬀshore) outsourcing of some service activities has attracted considerable media attention in the developed world as white-collar workers in the service sector face increased international competition from outsourcing.1 A recent article in the Wall Street Journal (2003) reported that white collar workers in the service sector have become a force in the anti-free trade lobby. Another article in the Wall Street Journal (2004) points out that it is very diﬃcult to measure the number of jobs that are being lost to outsourcing but this number appears to be growing. The rapid spread of service trade caught many oﬀ guard. As Thomas Friedman (2005) metaphorically states in his book on globalization, he woke up one day and found that the world is ﬂat. Friedman spends time discussing services that used to be strictly considered non-traded in nature, but are now traded internationally. He is not talking about haircuts. Rather he provides examples of software development, call centers and accounting work. All of this attention to international trade in services may seem peculiar as, until recently, services have been treated in economic analysis as the proverbial non-tradable. Compared to goods, services are non-tradable in the sense that many services are nonstorable and therefore must be produced where they are consumed. The classic example of such a non-traded service good is a haircut. Much of the recent attention a...
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