U.S. Services Exports Grew by 9 percent from 2009-2010

The United States remained the world's largest services market and the world's leading exporter and importer of services in 2010, reports the U.S. International Trade Commission (USITC) in its publication Recent Trends in U.S. Services Trade, 2012 Annual Report.

The USITC, an independent, nonpartisan, factfinding federal agency, compiles the report annually. Each year's report presents an overview of U.S. trade in services and highlights some of the service sectors and geographic markets that contributed substantially to recent services trade performance.

This year's report focuses on infrastructure services, such as banking and telecommunications, which are essential to a country's overall economic growth and development and are used by every firm regardless of economic sector. The report also includes separate chapters on specific industries (banking, insurance, logistics, retail, securities, and telecommunications). These chapters analyze global competitive conditions in the industry, examine recent trade performance, discuss non-tariff measures that affect trade, and summarize the industry's outlook.

The 2012 report covers cross-border trade in services through 2010 and affiliate sales through 2009. Highlights of the report follow.

• From 2009 to 2010, U.S. cross-border services exports increased by 9 percent (to $518 billion) while U.S. services imports grew by 6 percent (to $358 billion). This represented a recovery from the previous year, when exports and imports of services fell following the financial crisis. Infrastructure services accounted for 25 percent of total U.S. cross-border services exports and 37 percent of cross-border imports in 2010.
• Services supplied abroad by foreign affiliates of U.S. firms continued to exceed services purchased from U.S. affiliates of foreign firms, reaching $1.1 trillion and $669 billion, respectively, in 2009. Infrastructure services accounted for 60 percent of both sales and purchases of services through affiliates.
• The value added (i.e., the output minus the cost of inputs) by U.S. infrastructure services in 2010 was $3.8 trillion, equal to 43 percent of the value added by all services and 34 percent of total private sector GDP. This figure had declined in previous years as the financial crisis and ensuing recession weakened demand, but the sector's value added in 2010 represented 6 percent growth over the previous year.
• Infrastructure services employed 30 million full-time-equivalent employees in 2010, equal to 30 percent of the total U.S. private sector workforce. Retail services accounted for 13 million of these employees. In 2010, labor productivity in infrastructure services grew by 7 percent while average annual wages grew by 4 percent (to $56,000), exceeding the private sector average wage but trailing wages in goods manufacturing and professional services. Both productivity and wages varied widely among infrastructure services industries.
• Regulation is a recurring theme among infrastructure services industries covered in this year's report. For example, financial reforms enacted in 2010 affected the banking, insurance, and securities services industries. Such regulations aim to address the potential negative effects of providing services and to meet economic and social objectives. However, regulations can also represent non-tariff measures that impede the ability of services providers to enter and operate in markets.
• The outlook for growth in each infrastructure service industry is, for the most part, dependent on the overall level of economic growth, although factors such as regulatory reform, technological innovation, and market access will also have a major impact. Joint ventures and mergers and acquisitions are likely to increase as a way for firms to reduce costs and enter foreign markets. Market access will be increasingly important to the banking, logistics, and retail industries, which anticipate faster demand growth in developing countries than in developed countries.
• The USITC hosted its fifth annual services roundtable on November 3, 2011. The discussion, summarized in the report, covered multilateral and regional trade negotiations, ways to harmonize services regulations, and services industries' contributions to global economic activity.

Recent Trends in U.S. Services Trade, 2012 Annual Report (Investigation No. 332-345, USITC publication 4338, July 2012) is available on the USITC's Internet site at http://www.usitc.gov/publications/332/pub4338.pdf.