International trade in service
By Lilin-Yang
Frame work of this course
Main content
Chapter1 Introduction to the international trade in services
Chapter2 Introduction to the Service Economy
Chapter3 Gernal agreement of trade in services(GATS)
Chapter4 The Basic Economics of trade in services
Chapter5
The policy of international trade in service
Chapter 6 Measuring trade in services
Chapter7 Service outsourcing
Presentation （team work)
Distribution of total scores
Total scores:100
Average score:50%
including Presentation 15%+Working paper:15%
Attendance 16%+ Class work 4%
Chapter1 Introduction to the international
trade in service
Look at these diagrams and figure out what happened
in service industry ?
1 The concept of international trade in service
1.1Historical Development of Service Concept
goods
free goods
goods with material shape
economics goods
goods with nonmaterial shape
T.P. Hill(1977)
.
“A Service may be defined as a change in the condition of a
person, or of a good belonging to some other economic unit,
which is brought about as the result of the activity of some
other economic unit, with the prior agreement of the former
person or economic unit.”
Service is added value to individual, whose
value is reflected in the form of activity.
1.2 The characters of services
 Services is heterogeneous.
 The production of service is simultaneous with its
consumption.
 Service is difficult to store.
 Services are intangible.
1.3 The property of the service
 Seek property
 Experience property
 Credence property
1.4 The types of services
(1)Labor-intensive services;
Capital-intensive services;
Knowledge-intensive services
(2)Tradable services;
Non-tradable services
Tradability
(3)Producer service; Consumer service
(4) Public service; Private service
Private goods; Public goods; Quasi-public goods
(5) individuality services; complementary
services
(6) Long-distance service; face to face service
Goods and Service
Baby-sit
Education
Law
invisible
individuality
services
Airline
Fast food
Make up
Soft drinking
Garments
Sugar
visible
complementar
y services
Role of Services in an Economy
The services sectoral classification
List GNS/W/120
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Business services
Communication services
Construction and related engineering services
Distribution services
Educational services
Environmental services
Financial services
Health-ralated and social services
Tourism and travel-related services
Recreational, cultural and sporting activities
Transport services
Other services not included elsewhere
1.5 Definition of International trade in service
1.5.1Traditional definition
Trade in services takes place between a
producer and consumer that are, in legal terms,
based in different countries, or economies, this is
called International Trade in Services.
The conventional statistical meaning of
international trade in services was that described in
the IMF Balance of Payments Manual, Fifth edition
(BPM5), which defines international trade in
services as being between residents and nonresidents of an economy.
1.5.2 Definition of service trade on NAFTA
1.5.3 Definition of service trade on General
Agreement on Trade in Service




GATS modes of service supply
Mode 1 – Cross-border
Mode 2 – Consumption abroad
Mode 3 – Commercial presence
Mode 4 – Presence of natural persons
Cross-border Supply (Mode 1)
 Service crosses border
 No movement of producer or consumer
 Examples:
 Customer support (call centers)
 Telecommunications
 Remote diagnostic services (telemedicine)
Consumption Abroad (Mode 2)
 Consumer travels to the location of the
producer
 Examples
 Tourism
 Education (study abroad)
 Medical services (involving travel)
Commercial Presence (Mode 3)
Foreign Direct Investment:
 Service is delivered through a locally
established affiliate eg. The establishment
of a branch of a foreign based firm such
as a legal office or bank
Intangible nature
·Many services require physical proximity of
provider and consumer
Conventional trade statistics do not cover all
international trade in services
·Services delivered by foreign
affiliates>conventional international trade in
services
Temporary movement of natural
persons (mode 4)
 Natural person (individual) travels to the
country where production occurs
 Self-employed service producer
 Employee of service producer
Temporary movement of natural
persons (mode 4)
Important question: At what point does the
person become a “resident” of the country
where the service is provided?
 BOP conventions – Longer than 1 year.
 GATS – Whatever is agreed, but may be
longer than 1 year.
Mode of Supply – Practical
Considerations
 Many transactions can be multi-mode
transactions
1.4 The differences between trade in and
some similar concepts
 Trade in services and trade in good
 Trade in services and invisible trade
 Trade in services and international service
exchange