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A Handbook of International Trade in Services$
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Aaditya Mattoo, Robert M. Stern, and Gianni Zanini

Print publication date: 2007

Print ISBN-13: 9780199235216

Published to Oxford Scholarship Online: January 2008

DOI: 10.1093/acprof:oso/9780199235216.001.0001

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The Basic Economics of Services Trade

The Basic Economics of Services Trade

(p.84) 3 The Basic Economics of Services Trade
A Handbook of International Trade in Services

Brian Copeland

Aaditya Mattoo (Contributor Webpage)

Oxford University Press

This chapter starts with a brief overview on how services are traded and the different modes of service supply that include: cross-border trade, consumption abroad, foreign direct investment, and labor movement. It then reviews the reasons for trade in services together with the sources of potential welfare as well as the effects of services liberalization on income distribution. It notes that these issues are very similar to the standard analysis of trade in goods and factors. Next the interactions among the different modes of supply are discussed. These interactions are important because restrictions on some modes (such as labor mobility) may either render some services non-tradable, or may force service providers to use another (possibly less efficient) mode. An analysis is then provided of the effects of some of the most common barriers to trade in services, noting in particular how the effects of trade liberalization cannot be analyzed independently of the domestic regulatory system. The relative merits of trade agreements versus unilateral liberalization of services trade are discussed.

Keywords:   modes of supply, cross-border trade, foreign direct investment, labor movement, potential welfare, income distribution, goods and factors, non-tradable, domestic regulatory system, unilateral liberalization

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