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1 1 (January 21, 2022)

handle is hein.crs/govegfz0001 and id is 1 raw text is: Congressonnal Research Service nformiing helegislative debatb sinw 1914 International Trade in Services Updated January 21, 2022 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, and other professional services, from accounting to legal services. In 2020, services accounted for 82% of total U.S. private employment and 69% of U.S. gross domestic product (GDP). Trade in services, including as inputs to other traded 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. Role of Services in the Economy 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 face a 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: Presence of Natural Persons (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). Digital Economy and Services 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 86% of U.S. cross-border services exports (and 77% of imports) in 2020, according to the U.S. Department of Commerce. 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, marketing, and finance. Figure 1. U.S. Net Trade, 2000-2020 $500b Services $245.3b Sob 1 2000 2004 2008 2012 2016 2020 Total Trade -$76.lb -$500b -$1OOb Goods -$922.Ob Source: CRS, based on data from U.S. Department of Commerce, Bureau of Economic Analysis. December 2021 release. Figure 2. U.S. Services Supplied Through Majority- Owned Foreign Affiliates, 201 9 2019 Total: $1,765.3 billion -EU (with U.K.J Asia and Pacific 24% Latin Ameica and 0 rther West. Hem. - C7nda7% Rest of Europe 7% - Canada 2% Middle East 1% Africa Source: CRS, based on data from U.S. Department of Commerce, Bureau of Economic Analysis. October 2021 release. I pact of COVID-19 Pandemic When the Coronavirus Disease 2019 (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 was down 9% year-over-year in Q1 2021, driven by declines in travel and transport. In contrast, ICT-enabled and PICTE services, such as online retail and telecommunications, saw gains as consumers stayed home.

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