1. International trade in service
By Lilin-Yang

2. 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)

3. Distribution of total scores
Average score:50%
including Presentation 15%+Working paper:15%
Attendance 16%+ Class work 4%

4. Chapter1 Introduction to the international trade in service
Look at these diagrams and figure out what happened in service industry ?

8. 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

9. 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.

10. 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.

11. 1.3 The property of the service
Seek property
Experience property
Credence property

12. 1.4 The types of services (1)Labor-intensive services;
Capital-intensive services;
Knowledge-intensive services
(2)Tradable services;
Non-tradable services
Tradability

13. (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

14. individuality services complementary services
Goods and Service
Baby-sit
Education
Law
Airline
Fast food
Make up
Soft drinking
Garments
Sugar
invisible
individuality services
complementary services
visible

15. Role of Services in an Economy

16. The services sectoral classification List GNS/W/120
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

17. 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 non-residents of an economy.

18. 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

19. Cross-border Supply (Mode 1)
Service crosses border
No movement of producer or consumer
Examples:
Customer support (call centers)
Telecommunications
Remote diagnostic services (telemedicine)

20. Consumption Abroad (Mode 2)
Consumer travels to the location of the producer
Examples
Tourism
Education (study abroad)
Medical services (involving travel)

21. 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

22. 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

24. 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

26. 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.

27. Mode of Supply – Practical Considerations
Many transactions can be multi-mode transactions

28. 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