LEARNING OBJECTIVES

Differences between services and goods

Linkages between services and goods

Role of international services in world economy

Global transformations in service sector

Problems and Macro responses to problems in international services trade

DIFFERENCES BETWEEN SERVICES AND GOODS

Goods
Tangible and Transferable Homogeneous Non Perishable i.e can be stored Separable

Services
Intangible and Non Transferable Heterogeneous Perishable Inseparable

LINKAGES BETWEEN SERVICES AND GOODS

Services may complement goods; at other times, goods may complement services
Offerings goods that are in need of technological support and maintenance

The initial contract of sale often include important services

Ex- When aircraft is purchased buyer also contracts for training of personnel, maintenance service, technological updates

ROLE OF INTERNATIONAL TRADE IN SERVICES IN WORLD ECONOMY

Services have become the single largest sector in many developing countries Less than 45% of GDP in underdeveloped countries 55% of GDP in developing countries 70% of GDP in developed countries Services sector contributes 2/3rd of world production 1/3rd of global employment 1/5th of global trade

CONTD...
Efficient services sector is crucial for the economy as well as competitiveness

Asymmetry exists between developed and developing countries in services trade

STRUCTURE OF SERVICES EXPORTS

Developing Transport countries are Tourism quite successful in exports of
Developed countries dominate in

Communication services Financial services

MODES OF SUPPLYING SERVICES

Cross-border supply
It cover services flows from the territory of one country into the territory of another country e.g. banking or architectural services transmitted via telecommunications or mail

Consumption abroad

It refers to situations where a service consumer moves into another country's territory to obtain a service e.g. tourist or patient

CONTD
Commercial presence
a service supplier of one country establishes a territorial presence including through ownership or lease of premises, in another country's territory to provide a service e.g. domestic subsidiaries of foreign insurance companies or hotel chains

Presence of natural persons

persons of one country entering the territory of another country to supply a service e.g. accountants, doctors or teachers

GLOBAL TRANSFORMATIONS IN THE SERVICE SECTOR

RISE IN SERVICE TRADE IS DUE TO

Changes in the environment Changes in the technology
Reduction of government regulation. GATS establishes a framework of rules to ensure that services regulations are followed

Technical innovations Ex- electronic banking, telehealth or tele-education services

PROBLEMS IN SERVICE TRADE

Data Collection Problems Data is often sketchy Service transactions are often statistically as well as physically invisible Global Regulations of Services National and economic security issues result in barriers to entry Additional problems in the performance of services abroad tradition, regulation, etc

RESPONSES TO PROBLEMS IN SETVICE TRADE

Many governments are beginning to develop improved measuring techniques for service sector e.g USA

Eurostat, IMF, OECD, United Nations, World Bank and WTO are working together to improve the statistical situation
. In the fifth edition of the IMFs Balance of Payments Manual from 1993, the clear separation of goods, services and factor income was a key development.