June 28, 2007
News Release 07-065
Inv. No. 332-345
Contact: Peg O'Laughlin, 202-205-1819

U.S. service firms remained preeminent in global services trade in 2005, reports the U.S. International Trade Commission in its report Recent Trends in U.S. Services Trade, 2007 Annual Report.

The U.S. service sector accounted for 83 percent of gross domestic product and 85 percent of employment in the private sector in 2005. Moreover, it experienced a 10 percent growth in cross-border service exports in 2005 and an 8 percent growth in sales of services abroad by foreign-based affiliates of U.S. firms in 2004.

The ITC, an independent, nonpartisan, factfinding federal agency, compiles the report annually. The report presents a statistical overview of U.S. trade in services and highlights the services and geographic markets that contributed substantially to recent services trade performance. Separate chapters on specific service sectors (architectural, engineering, and construction (A/E/C); audiovisual, computer and related; electricity; health care; retail; securities; and telecommunication services) describe how each service is traded, compare recent trade performance to historical trends, identify trends and issues affecting competitive conditions in the industry, and summarize WTO members' negotiating proposals on the selected services.

The 2007 report covers trade in services from 2000 to 2005. Highlights of the report follow.

• In 2005, U.S. cross-border exports of private services increased by 10 percent to $360.5 billion while U.S. imports rose by 9 percent to $280.6 billion. As a result, the U.S. services trade surplus grew to $79.9 billion, its highest level since 1999. The United States continues to have the largest services surplus of any country in the world. Both U.S. exports and imports grew more rapidly in 2005 than in the previous 5 year period, indicating heightened capacity of both U.S. and foreign service firms to compete in supplying services across borders.
• U.S. firms' sales of services through foreign affiliates are no less dynamic. Affiliate sales data reflect the importance of a commercial presence abroad to many U.S. services, including the A/E/C, computer and related, retail, and securities services analyzed in this report. Sales of services by the foreign-based affiliates of U.S. parent companies reached $489.6 billion in 2004 (latest available), the second consecutive year of accelerated growth. Economic growth in certain major markets and the effects of a depreciated dollar contributed to this strong performance. The growth in sales through affiliates based abroad illustrates the ability of U.S. multinational firms to compete effectively. In comparison, domestic purchases of services from U.S.-based affiliates of foreign parent firms increased 2 percent to $382.8 billion in 2004, continuing the slow-growth trend witnessed in recent years.
• Inadequate enforcement of intellectual property laws, such as those affecting audiovisual services, and equity limitations on foreign investments by U.S. securities firms continue to be significant impediments to U.S. services trade exports. Moreover, trade in computer and telecommunication services could expand further if there were consensus that new technologies are subject to countries' commitments on trade liberalization as set forth in the General Agreement on Trade in Services (GATS) of the World Trade Organization (WTO).
• WTO negotiations toward resolving various cross-cutting issues affecting trade in all services achieved little progress as of the first half of 2007, due in part to suspension of formal negotiations on services in July 2006. Members continue to exchange positions and proposals intended to improve domestic regulation, facilitate greater participation from least-developed countries, and shape potential emergency safeguard measures and subsidy disciplines. Elsewhere, as of the second quarter of 2007, the United States continued to craft bilateral and regional free trade agreements with some of its trading partners to improve market access and transparency for U.S. service providers.

Recent Trends in U.S. Services Trade, 2007 Annual Report (Investigation No. 332-345, USITC publication 3925, June 2007) will be available on the ITC Internet site (www.usitc.gov). A CD-ROM of the report may be requested by calling 202-205-2000 or by writing the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Requests may also be faxed to 202-205-2104.