News Column

Trade Talks Aim to Boost Services Exports

January 25, 2013

By Paul Davidson

International Trade

The Obama administration is set to begin negotiations with 47 countries on a trade agreement that could significantly boost exports of services -- from engineering and finance to movies and package delivery -- and possibly create millions of U.S. jobs.

Last week, U.S. Trade Representative Ron Kirk sent a letter notifying leaders of Congress that the White House plans to begin talks within 90 days on a pact aimed at removing regulatory barriers that hinder U.S. service firms abroad.

"We need to surmount a range of barriers that lock out, constrain or disrupt the international supply of services," Kirk said.

France, for instance, limits the number of U.S. movies that can be shown in the country each year.

The 47 nations, which represent about 70% of global trade in services, include the 27 in the European Union, as well as Japan, Korea, Mexico, Pakistan, Canada and Turkey.

Each $1 billion in services exports supports about 4,200 U.S. jobs, Kirk said. A 2011 study found that only 5% of services firms export, vs. a quarter of manufacturers.

U.S. services exports, which totaled $606 billion in 2011, could grow by up to $800 billion annually if they matched the export rate of manufacturers, theoretically creating more than 3 million jobs, the study said.

"We haven't devoted enough attention to reducing barriers to services trade," says Brad Jensen, the study's author and a senior fellow for the Peterson Institute for International Economics.

Since 2004, services exports have risen by 77% in dollar terms to $606 billion in 2011, and exports of goods have risen by 82% to $1.5 trillion. But the export of business services, such as architectural, insurance and computer services, has jumped 91% to $270 billion, while lower-value travel and related services have risen more modestly. The U.S. has a trade deficit in goods but a surplus in services.

Driving the surge are developing countries such as China, India and Brazil, which seek U.S. companies' expertise as they build roads, airports and water systems, Jensen says. He also cites a maturing Internet that makes it easier for U.S. service firms to work with clients overseas.

But various hurdles have impeded sharper growth. Some countries make foreign suppliers form joint ventures with local firms, establish a local presence or obtain licenses that may be granted only to local companies, says Peter Allgeier, head of the Coalition of Services Industries.

China limits UPS deliveries to certain cities, says Laura Lane, UPS chief of global public affairs. "It's like putting speed bumps in our way," she says.

The developing economies with the most egregious barriers have chosen not to participate in the trade talks. But a pact that Allgeier predicts is likely to result from the negotiations could pressure those nations to join, he and Jensen say. -------

$1 billion = 4,200 jobs (The number of jobs produced by each $1 billion of service exports)

Source: Copyright USA TODAY 2013

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