LegiStorm

Summary:

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, maintenance, and other professional services from accounting to legal services. Compared to goods, the types and volume of services that can be traded are limited by factors such as the requirement for direct buyer-provider contact, and other unique characteristics such as the reusability of services (e.g., professional consulting) for which traditional value measures do not account. In addition to services as independent exports, manufactured and agricultural products incorporate and depend on services, such as research and development or shipping of intermediate or final goods. As services account for 82% of U.S. private sector jobs, U.S. trade in services, both services as exports and as inputs to other exported products, can have a broad impact across the U.S. economy. Rapid advances in information technology and the related growth of global value chains have expanded both the level and the range of services tradable across national borders. As a result, services have become a priority in U.S. trade policy, and a significant part of U.S. trade flows and of global trade in general, accounting for $752.4 billion in U.S. exports. As the United States is the world’s largest exporter and importer of services (15% and 10% of the global total in 2016), the Administration’s discussions on potential and existing trade agreements that include services are significant. A number of economists argue that “behind the border” barriers imposed by foreign governments prevent U.S. trade in services from expanding to its full potential. The United States continues to negotiate trade agreements to lower these barriers. It was a leading force in concluding the General Agreement on Trade in Services (GATS) in the World Trade Organization (WTO) in 1994, and in past U.S. free trade agreements, all of which contain significant provisions on market access and rules for liberalizing trade in services. Trade agreements involving trade in services currently under discussion include the following. Renegotiation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico.  Review of the U.S.-South Korea Free Trade Agreement (KORUS).  Potential continued negotiation of the Trade in Services Agreement (TiSA), a plurilateral agreement outside of the WTO with 22 other countries, or of the Transatlantic Trade and Investment Partnership (T-TIP) free trade agreement with the European Union (EU).  Potential new and updated bilateral free trade agreements with other partners. In each case, participants have difficult issues to address and the outlook for progress is uncertain. For each agreement, Congress may consider legislation to implement agreements potentially concluded in the future. Congress and U.S. trade negotiators face additional issues, including how to balance the need for effective regulations of services with the objective of opening markets for U.S. exports and trade in services; ensuring adequate and accurate data to measure trade in services to inform trade policy; and determining whether further international cooperation efforts are needed to improve the regulatory environment for services trade beyond initial market access. This report provides background information and analysis on these and other emerging issues related to U.S. international trade in services. In addition, it examines existing and potential trade agreements as they relate to services trade.