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INTERNATIONAL TRADE IN SERVICES
AN OVERVIEW AND BLUEPRINT FOR NEGOTIATIONS

 

Geza Feketekuty1

TABLE OF CONTENTS
Editor's Foreword - Claude E. Barfield
Foreword - William E. Brock

Chapter 1 OverviewSome Examples of Trade in Services
Who Buys Imported Services?
How Exporters Sell Services to Foreign Customers
A Buyer's Calculus: Buying Services Abroad
International Trade in Services and the World Economy
Conclusions
Notes

Chapter 2 The Invisibility of Trade in ServicesA Descriptive Model of International Trade in Services
Consequences of the Invisibility of Trade in Services
Conclusions
Notes

Chapter 3 Services in the World EconomyA Historical Perspective
Global Economic Integration
The Information Revolution
Centralization of Business Services
Internationalization of Business Services
Consumer Services and International Trade
Conclusions
Notes

Chapter 4 The Changing Perception of ServicesWhy Services Have Been Considered Unproductive
The Postindustrial Services Economy
Why Trade in Services Was Considered an Oxymoron
Growing International Recognition of Trade in Services
Conclusions
Note

Chapter 5 Concepts, Issues, and Definitions
Alternative Definitions of Trade in Services
The Substantive Policy Debate over the Definition of Trade in Services
Conclusions
Notes

Chapter 6
Does International Trade Theory Apply to Trade in Services?
Normative and Descriptive Theories of International Trade
Does the Theory of Comparative Advantage Apply to Trade in Services?
Dynamic Gains and Losses from Trade in Services
Economic Development
Empirical Investigations
Conclusions

NotesChapter 7 Barriers to International Trade in ServicesWhat Is a Barrier to Trade in Services?
Where to Expect Barriers to Trade in Services
What Surveys Show about Barriers
Reflections on the Nature of Barriers
Conclusions
Note

Chapter 8
Applying the Trade Policy Framework to ServicesThe Goals and Tools of Trade Policy
Extending the Framework to Trade in Services
The Relationship between Trade Policy and
Regulatory Policy
Conclusions
Notes

Chapter 9 Bilateral Agreements with Israel and Canada: Models for a Framework
AgreementU.S./Israeli Agreement on Trade in Services
U.S./Canadian Agreement on Trade in Services
Conclusions
Notes

Chapter 10 A General Agreement on Trade in ServicesThe Uruguay Declaration
The Goal of Multilateral Negotiations
The Basic Framework of a General Agreement on Trade in Services
Relationship between the GATT and the GATS
Conclusions

NotesChapter 11 Elaborating the General Agreement on Trade in Services for the Individual
SectorsSectoral Annotations of a General Agreement on Trade in Services
Illustrative Sectoral Annotations
Conclusions

NotesChapter 12
Negotiating Strategies for Binding and Reducing Barriers to Trade in Services Review of the Basic Framework
Negotiating Substantive Commitments on an
MFN Basis
Negotiating Regulatory Commitments on a Conditional MFN Basis
Alternative Scenarios for Negotiating Barriers to Trade in Services
Criteria for Evaluating Alternative Negotiating Scenarios
Basic Ground Rules for Organizing the Negotiations
Conclusions

Notes
Appendix The History of a Campaign: How Services Became a Trade IssueThe Birth of a Concept
The Effort to Negotiate on Trade in Services in the Tokyo Round
Development of a Strategy to Build Support for Negotiation
The OECD Study of Trade in Services
The GATT Debate
Notes

References


FOREWORD

Some historians suggest that the turning of a millennium has always been an unsettled, confusing, even tumultuous time. As we approach the year 2000, the historical precedents appear to be increasingly valid as forecasts. We are already in the midst of the most radical work force shift in our economic history. Like the industrial revolution experienced by our forbearers, this reshaping of our economic lives has substantial human consequences. Economic lives have become less predictable, less understandable, less controllable than in the past. Workers and managers alike, caught in a changing industrial system, are beset by uncertainty and a vague sense of powerlessness in the face of economic shifts beyond their ken or command.

For decades our manufacturing employment has remained relatively stable while services jobs have virtually exploded in number. It is an oft-ignored fact that many of those "services" exist primarily in order to make our manufacturing firms more productive. Informatics, computer services, satellite communications, education and training, financial services, - transportation, engineering, accounting-all are available as enormous assets for the U.S. industrial base to an extent equaled by no other nation in the world. Many, in fact, are specialized spin-offs from manufacturing firms of a few years ago.

It is misleading, and even dangerous, to ignore these developments or to mischaracterize them as an attack on manufacturing. Our memories cannot be so short that we forget earlier years in this century when one of every three or four citizens worked on the farm. Today one out of thirty Americans feeds not only all of our own people, but much of the rest of the world.

Similarly, we produce far more manufactured goods than did the preceding generation, and we do so more efficiently and with less "people per pound" of production. That trend will continue. We need to understand how to make it work to our benefit and how to seize the new trading and employment growth opportunity paved by a healthy services and manufacturing economy.
This book, then, is important on more than one level. In it Geza Feketekuty seeks to explain the negotiations on international trade in services currently under way in the Uruguay Round of Multilateral Trade Negotiations. In the process of examining the underlying rationale for these negotiations, however, he provides a much broader insight into the role of services in economic activity.
As United States Trade Representative from 1981 to 1985, I was deeply involved in efforts of the United States to put trade in services on the world agenda, and as Secretary of Labor more recently, I became equally involved in helping U.S. workers adjust to the new economy. I am convinced that a profound understanding of the role of services in both our economy and the world economy is required to deal intelligently with the crucial policy issues in areas such as trade, manpower retraining, labor laws, education, taxation, and regulatory reform.

Before U.S. trade officials began talking about trade in services in the early 1980s, very little was known about either the international flow of services or the new role of services as a major driving force in the domestic economy. As we began discussing trade in services, we increased public awareness of this forgotten element of the world economy and of the crucial role it plays in generating economic growth. Insights gained from an analysis of the trade dimension yielded new insights into the role of services at home.

This process, whereby international discussion of trade in services has lead to increasing public awareness of the role of services in the economy, has been fascinating to observe in many countries, including developing countries. While developing countries, for example, initially made opposition to international negotiations on trade in services a doctrinal issue, more and more of them came to see that not only could trade play an important role in their economic growth, but that their traditional neglect of the service sector created a major domestic bottleneck to economic growth.

My first effort to place trade in services on the world trade agenda in the 1982 GATT Multilateral generated considerable controversy, and the compromise we hammered out in the predawn hours-after several days of nonstop negotiations-was widely reported by the press at the time as a failure. Wrong. It set in motion a process of inquiry into the GATT that led to a decision by trade ministers four years later to include trade in services as a major negotiating item in the Uruguay Round of Multilateral Trade Negotiations. The account of how a process of intellectual inquiry and U.S. political leadership led to a collective judgment that the liberalization of trade in services was in the interest of individual countries around the globe, itself a fascinating story, is described in the appendix of this book.

Geza Feketekuty has played an important leadership role throughout the process of taking an idea and a glimmer in the eyes of a few farsighted business leaders to a negotiation on the world stage. International Trade in Services: An Overview and Blueprint for Negotiations-is well worth reading, both for the background it provides to the negotiations on trade in services in the Uruguay Round and the insight it offers on the issues we must confront at home in coming to terms with the new services based economy. The American Enterprise Institute is to be congratulated for its sponsorship of this book, as well as of the other books in the American Enterprise Institute Trade in Services Series.

-William E. Brock


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