Identifying the Issues in Trade in Services

Because of the effect of government regulation on internationally traded services, there have been proposals for the liberalization of restrictions on service transactions, with strong pressure from the US and other developed countries for the subject to be placed on the agenda of the new round of General Agreement on Tariffs and Trade negotiations. A host of very different types of services are traded globally, including computing services, shipping, insurance, medical services, tourism, building design, and banking. In order to analyze the extent to which trade in services is the same as trade in goods, a simple classification system is developed based on how and where the services are produced and traded. It becomes clear that some services are very similar to goods and others are not. Policies relating to the movement of factors of production and to the movement of the receivers of services may affect trade in some services more than the case of goods. Such policies may be more important than restrictions on trade in services themselves.