Getting Real with AI - Columbus DAW - May 2024 - Nick Woo from AlignAI
Kwan US Trade in Services
1. 10/25/11
Prepared for
SJSU International & Extended Studies
IT group, Russian Federation
October 26th, 2011
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Abstract & Motivation
Data Sources and Data Collection
Creating a Profile of US Trade in Services
US Trading CompPartners
Looking forward – are Trade Barriers just over
the Horizon?
Implications for US Service Sector
Conclusion
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2. 10/25/11
Service Sector in
US Economy
Currently the service sector accounts for over eighty percent of the US economy and
forty percent of the world economy according to the International Labor Organization.
The growth in trade in services has become increasingly an important factor in the
global economy. Countries which had enjoyed a trade surplus in manufactured goods
(such as Taiwan, Korea, Japan, Countries with facing an increasing trade deficit in
etc.) are now
Trade Deficit in
services with the US which had maintained a competitive position. In the case of
Services with US
China, the service sector is one area the US had kept a growing surplus in trade in
contrast to a substantial deficit in other sectors. China had recognized the importance of
its service sector and designated it for development in its current 2006-2011 Five Year
Plan. This research will use US Department of Commerce and WTO data to create a
profile of US trade in services. An attempt will be made to identify whether traditional
methods employed in the manufactured goods and farm product sectors Technical such as
protectionist measures, subsidies to domestic producers, domestic standards, etc. to Trade
Barriers are
being employed by US and its trade partners as technical barriers to trade in services.
APEC, TPP
We will draw examples from countries such as China and Korea and will also consider
other countries (such as Singapore) and groups (such as APEC, Trans-Pacific
Partnership, etc.) that have trade agreements with the US. We will consider how the
current state of trade in services impacts on the growth of the US service sector
US Competitive
economy domestically and globally and, and the long run, affects US’s competitive
Position in Policy
position.
Panel: National Policies on Service Sector and Innovation
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3. 10/25/11
Thanks to
Bob Vastine et al Acting Deputy Assistant
Secretary for Service
Industries
J. Bradford Jensen (2011)
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US shift to service jobs
World’s Large Labor Forces
A = Agriculture, G = Goods, S = Service 2009
2009
Nation Labor A G S 40yr Service (A) Agriculture:
% % % % Growth Value from
harvesting nature
China 25.7 49 22 29 142%
India 14.4 60 17 23 35% (G) Goods:
U.S. 5.1 1 23 76 23% Value from
making products
Indonesia 3.5 45 16 39 34%
(S) Service:
Brazil 3.0 20 14 66 61% Value from enhancing the
capabilities of people and their ability
Russia 2.4 10 21 69 64% to interconnect and co-create value
Japan 2.2 5 28 67 45%
Nigeria 1.6 70 10 20 19%
Bangladesh 2.1 63 11 26 37%
Germany 1.4 3 33 64 42%
CIA Handbook, International Labor Organization
Note: Pakistan, Vietnam, and Mexico now larger LF than Germany Employment Change
Numeric change in wage-salary employment by industry sector,
The largest labor force migration in projected 2004-14
human history is underway, driven by (Thousands)
global communications, business and Professional and business service 4566
technology growth, urbanization and
regional variations in labor and Healthcare and social assistance 4303
infrastructure costs and capabilities. 6
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4. 10/25/11
Kwan
2011
In its 11th Five-Year Plan, China had targeted an increase of the service
sector’s output to 43.3% of GDP by 2010, up from 40.3% in 2005
In its 12th Five-Year Plan,
China had targeted an
increase of the service
sector’s value-added
output to 47.3% of GDP by
2015, up 4%.
But don’t forget the WTO!
Kwan
2011
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5. 10/25/11
• 78.3% of GDP ≈ $8.5 Trillion
• Export of $535 Billion
• Import of $367 Billion
• Trade Surplus of $168 Billion
• Employs 93 million people
• Average annual pay $55,000+
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Modes of Trade Some Examples
Cross Border Trade Software, Insurance, telediagnosis
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
Adapted from WTO definitions
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7. 10/25/11
180,000
160,000 161,420
140,000 139,926
120,000
100,000
US $Million
96,886
89,010
80,000 78,184
70,513 68,279
60,000
40,000
20,000
-
2002 2003 2004 2005 2006 2007 2008
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60,000
50,000
Canada
40,000
Europe
Latin America & Other Western
30,000 Hemisphere
US $ Million
Africa
20,000 Middle East
Asia and Pacific
10,000
International Organizations &
Unallocated
0
2002 2003 2004 2005 2006 2007 2008
-10,000 14
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93.1/116=80.25%
Private Sector Jobs
Total Service Sector 86.3 86.6 88.2 89.9 91.6 93.1 93.1
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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…”
BIC nations…
R
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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, Israel, Jordan, Malaysia, Morocco, Oman,
Panama, Peru, Singapore.
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G20 and APEC meeting in November 2008
agreed on a “standstill” policy:
• revive Doha talks
• no imposition of new trade barriers
• 12 months
Global
Financial Ineffective
Crisis
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• Less imports, less exports
• less consumption, particularly for services (less disposable income)
• stimulus of domestic markets (more protectionist measures)
“The US Service Sector contracted for the
11th straight month, …”
“Global trade is expected to shrink 10% in 2009.”
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11. 10/25/11
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Global Trade Alert:
G20 members passed over 100
“blatantly discriminatory
measures”.
WTO reported 53 new
measures this year.
Everyone sinned a little,
or a lot…
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12. 10/25/11
White House policy decisions + Trade Representative
Bottom Up pressure from Private Sector
Education about Competitiveness
Trade Adjustment Assistance
Trade Promotion Authority (Expiring!)
Free Trade Agreements
Need Doha talks for plurilateral agreements (efficient)
Help Private Sector promote trade (e.g., “golden
door” program)
………
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• Industry Trade Advisory Committees
• “doing a good job in promoting trade in services”
• “do not see any problems with trade barriers in services”
“ I get points for promoting export of US manufactured products into China.
But I do not get points for promoting export of US services……”
Senior Official at US Embassy in Beijing
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• Complacency – “We have a huge trade surplus…. We are doing fine…”
• Other countries that are “top-down” will catch up or exceed US in their
service sector abilities
• No Intellectual Property protection on Service Concepts – no patents
• Very little International Service Standards – potential for national and
domestic standards development
• Continued weak economy – shrinking of global trade
• Loss of confidence in US services – e.g., financial services
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United States 12.2
Germany 7.2
United Kingdom 6.6
Japan 4.3
China 4.2
France 4.1
Italy 3.5
%
Spain 3.4
Ireland 2.8
Netherlands 2.6
India 2.6
Belgium 2.3
Korea, Republic of 2.3 Example of a “top down” approach
Singapore 2.2
Canada 2.1
Other Members 33.6
0 5 10 15 20 25 30 35 40
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Korean
Economic
Sectors
(Based
on
%
of
Nominal
GDP)
70
60
50
40
30
The United States has a
20
services trade surplus of
$6.2 billion with Korea
10 in 2007 (latest data
available).
0
2000
2002
1976
1977
1979
1980
1983
1984
1986
1987
1988
1989
1990
1992
1993
1994
1996
2003
2004
2005
2006
2008
1995
1997
1998
1999
1982
1985
2001
2007
1991
1981
1978
1975
Services Goods Agriculture/Fishery
From “The analysis of Korean industry structure change through I/O tables’ time series, 2003,
Dong-Suk Kim, Korea Development Institute. Data from 2002-2008 are extrapolated.
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“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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rvice
and se
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.
Conformity Assessment Problems
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US $ 3.7 Billion
Trade surplus
with China in
2007
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“2009 Joint Commission on Commerce and Trade (JCCT)
Input on Standards and Conformance Issues in China”
cited the following concerns:
• Transparency – national “GB” standards are easily accessible but not so
with regulatory agencies, local/provincial, professional, decrees, etc.
• Uneven Enforcement – inadequate enforcement for local companies,
tedious procedures put US companies at a competitive disadvantage, etc.
• Conformity Assessment Policies – only by designated Chinese bodies,
does not recognize external certifications, etc.
• Revisions to “China Compulsory Certification” Program
• Foreign Participation on Chinese Technical Committees
Will what happened to Manufactured Goods going to happen with Services?
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Research Completed
Directions Service
Standards
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24. 10/25/11
• US cannot become complacent – real/potential trade barriers
• Learn from (non-protectionist) best practices in other countries
• Sustainability of Competitive Advantage requires Innovation
Much more details
Available in this new book
J. Bradford Jensen (2011)
Prepared for
SJSU International & Extended Studies
IT group, Russian Federation
October 26th, 2011
48
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