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Growth in Services Trade Slows Amid Restrictions, ITC Finds

Friday, May 30, 2014
Sandler, Travis & Rosenberg Trade Report

An annual International Trade Commission report finds that growth in U.S. exports and imports of services slowed in 2012 but the U.S. remained the world’s largest services market and leading exporter and importer of services. This report presents a qualitative and quantitative overview of U.S. trade in services and highlights some of the service sectors and geographic markets that contribute substantially to recent services trade performance. The ITC states that this year's report focuses on electronic services and includes chapters on audiovisual services, computer services and telecommunication services and that each chapter analyzes global market conditions in the industry, examines recent trade performance and summarizes the industry's outlook.

The report’s findings for the year 2012 include the following.

- Although they remain global leaders, the U.S. audiovisual, computer and telecommunication services industries have faced challenges brought about by rapid technological change, including the growing demand for and prevalence of Internet-enabled devices and the use of these devices by consumers to communicate and access a variety of content. The importance of electronic services to the U.S. and global economies is expected to grow as they continue to play a key role in enhancing productivity and facilitating trade.

- The value of U.S. commercial services exports was $621 billion (14% of global services exports) while imports totaled $411 billion (10% of global services imports). Leading sectors included travel services and passenger fares (26% of exports and 28% of imports) and professional services (23%/20%).

- U.S. cross-border services exports rose 5% (down from nearly 11% in 2011) and U.S. services imports grew 4% (down from 7%). Electronic services accounted for 7% of exports and 8% of imports, yielding a trade surplus of $7.1 billion in this subsector.

- Sales by foreign affiliates of U.S. firms, the leading channel by which many U.S. services are delivered to foreign markets, rose 11% to $1.3 trillion in 2011. Electronic services accounted for 15% of this total. Leading U.S. markets for affiliate sales included the United Kingdom, Canada, Japan and Ireland.

- Services accounted for 78% of U.S. private sector gross domestic product ($10.3 trillion) and 82% of private sector employees (85 million). Private sector electronic services accounted for about 6% of total domestic GDP and 3% of total private sector employment. Electronic services were the most productive U.S. sector, with an average output per worker of $249,802.

- A variety of impediments restrict trade in electronic services, including localization requirements for computer servers and online privacy protection measures that restrict cross-border data flows. In addition, limits on foreign investment and competition are prominent in several countries' telecommunication sectors, where former monopolies limit access to domestic networks. Noteworthy barriers affecting audiovisual services trade include quotas on imported films in such markets as France and China, Internet piracy of copyrighted intellectual property, and censorship.

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