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1 1 (December 16, 2020)

handle is hein.crs/govdczp0001 and id is 1 raw text is: International Trade in Services December 16, 2020 International trade in services refers to a wide and growing range of economic activities. These activities include transport, tourism, financial services, use of intellectual property, telecommunications and information services, government services, maintenance, and other professional services from accounting to legal services. As services account for over 80% of U.S. employment and 79% of U.S. gross domestic product (GDP), trade in services, both as exports and as inputs to other exported products, can have a broad impact across the U.S. economy. The United States is the world's leading services exporter and importer. The United States continues to negotiate trade agreements both bilaterally and multilaterally in the World Trade Organization (WTO) to lower behind the border barriers that limit U.S. services exports. Rle of r snc nory Rapid advances in information and communications technology (ICT) and the related growth of global value chains (GVCs) are making an expanding range of services tradable across national borders. Many services require direct contact between the supplier and consumer and, therefore, service providers often need to establish a presence in the country of the consumer through foreign direct investment (FDI). To account for the variety in how services are traded, WTO members defined a system for classifying four modes of delivery for services based on the location of the service supplier and the consumer, taking into account their respective nationalities: * Mode 1: Cross-border Supply (consumer and service supplier located in their respective countries) * Mode 2: Consumption Abroad (consumer travels) * Mode 3: Commercial Presence in another country (FDI) * Mode 4: Temporary Presence (service supplier travels) Measurements of trade in services are captured in two types of data: cross-border trade (sold via Modes 1, 2, and 4) and services sold by a local affiliate of a foreign company to a consumer of the local economy (Mode 3). The United States has continually realized surpluses in cross-border services trade, which have partially offset large deficits in goods trade (Figure 1). U.S. foreign affiliate trade generates greater revenue than cross-border trade and most of the revenue is from Europe (see Figure 2). Diia cnm andc ServiC&3 Trade Cross-border services are often provided online or on the telephone. These services are considered ICT-enabled or potentially ICT-enabled (PICTE) services, and include an array of services, such as insurance and financial services; customer service; and business services like research, consulting, and engineering. ICT-enabled and PICTE services accounted for 69% of U.S. cross-border services exports in 2019. GVCs divide production processes into discrete stages located around the world and their growth has heightened the interdependence and interconnectedness of the global economy. These networks have also expanded and redefined the role that services play in international trade. Traditional data may understate the role of U.S. services because trade statistics measure goods based on the value of the final product, and not on a value-added basis. Therefore, conventional data does not attribute any portion of the traded value of manufactured and agricultural products to services inputs, such as research and development, design, transportation costs, and finance. Figure I. U.S. Net Trade, 2000-2019 Services $2875b 2000 2005 2010 2015 2019 Total Trade -$576,9b -$sc~b N7 -$ 1 _b Goods -$864,3b Source: CRS, based on data from U.S. Department of Commerce, Bureau of Economic Analysis. Figure 2. U.S. Services Supplied Through Majority- Owned Foreign Affiliates, 2018 2018 Total: $1704,3 billion EU (wit U. K.} Asia andacific Latin Ameica and O Uther West. Hem. \ \`C\nada 6.5% Rest of Europe $xxxx Canada .3 Middle East O.8%Africa Source: CRS, based on data from U.S. Department of Commerce, Bureau of Economic Analysis. When the novel coronavirus (COVID-19) pandemic hit, the top U.S. cross-border services export, travel, declined sharply as countries implemented lockdowns and other restrictions. The WTO noted that global trade in services plunged by a record 30% in Q2 2020 across all regions, with tourism, transport, and distribution impacted the most. In contrast, online retail, health, education, audio-visual services, and telecommunications saw gains as consumers stayed home. U.S. services imports and exports declined 21% year-over-year for Q1-3 2020.

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