Order Code RL31579
CRS Report for Congress
Received through the CRS Web
U.S. Foreign Trade in Services: Definition,
Patterns and Policy Challenges
Updated December 22, 2004
William H. Cooper
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress
U.S. Foreign Trade in Services: Definition, Patterns
and Policy Challenges
Summary
The term “services” refers to a broad and widening range of economic activities
such as accounting and legal services, banking, transportation, tourism, and
telecommunications. Services are a significant sector of the U.S. economy,
accounting for more than 50% of U.S. gross domestic product (GDP) and for nearly
80% of U.S. civilian employment.
Services have become an important element of U.S. foreign trade, consistently
generating surpluses. The European Union is by far the most important U.S. trade
partner in services, accounting for more than 50% of U.S. trade in services.
The increasing importance of services in domestic and global trade have placed
them on the U.S. agenda for bilateral and regional trade agreements, and services
trade occupies a prominent place on the agenda of the United States and the other 147
members of the World Trade Organization (WTO) in the Doha Development Agenda
round of multilateral negotiations. Furthermore, disputes related to trade in services
have arisen increasingly between the United States and the European Union, Japan,
Canada, and other major trading partners.
The 109th Congress will have a number of trade agreements to consider, and
services will be an important part of the deliberations. An overview of barriers, of
the disputes in services trade and of the rapidly changing characteristics of the
services sector, suggest that the negotiations and the agreements they produce will
become increasingly complex. With the passage and enactment of the Bipartisan
Trade Promotion Authority Act of 2002, these agreements are expected to be
considered by Congress under “fast-track”procedures, with limited debate and no
amendments, but with considerable executive branch consultation with Congress as
the negotiations proceed.
The United States presses its trading partners to liberalize their services sector
as much as possible, because U.S. services providers are very competitive in world
markets. However, to accomplish its objectives, the United States is pressed by its
partners to make concessions that might adversely affect “import-sensitive”
industries in the United States. U.S. negotiators and, ultimately, the U.S. Congress
will have to judge whether the agreements strike an appropriate balance for U.S.
interests. This report will be updated as events warrant.
Contents
Services and the U.S. Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
U.S. Trade in Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Four Modes of Delivery for Trade in Services . . . . . . . . . . . . . . . . . . . . . . . . 5
U.S. Policy Challenges in Foreign Trade in Services . . . . . . . . . . . . . . . . . . . . . . 7
Barriers to Trade in Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
General Trade Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Industry-Specific Barriers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Establishing Rules on Trade in Services . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The WTO and GATS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Role of Services in U.S. Regional and Bilateral Free
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Major Disputes in U.S. Trade in Services . . . . . . . . . . . . . . . . . . . . . . . . . . 18
The EU . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Implications for U.S. Trade Policy and the Congress . . . . . . . . . . . . . . . . . . . . . 20
List of Figures
Figure 1. U.S. Exports of Services by Area, 2003 Cross-Border
Percentages of Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Figure 2. U.S. Services Imports by Area, 2003 Cross-Border
Percentages of Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Figure 3. Sales of Services to Foreign Persons by U.S. MNCs, by Region,
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Figure 4. Sales by Foreign-Owned MNCs to U.S. Persons by Region,
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 5. U.S. Services Exports by Type, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Figure 6. U.S. Services Imports by Type, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
List of Tables
Table 1. U.S. Trade in Goods and Services, 1986-2003 . . . . . . . . . . . . . . . . . . . . 3
U.S. Foreign Trade in Services: Definition,
Patterns and Policy Challenges
The term “services” refers to a broad and widening range of economic activities
such as accounting and legal services, banking, transportation, tourism, and
telecommunications. Services are a significant sector of the U.S. economy,
accounting for more than 50% of U.S. gross domestic product (GDP) and for nearly
80% of U.S. civilian employment.
Services are becoming an important element of U.S. foreign trade and of global
trade in general, although their intangibility and other characteristics along with other
barriers have limited foreign trade in services. Because services are fundamentally
different from goods, trade in services generates a unique set of trade policy issues.
In addition, advances in technology continue to broaden the range of available
services and the means to deliver services, making the policy challenges very
dynamic.
The increasing importance of services in U.S. and global trade has placed them
on the U.S. agenda for bilateral and regional trade agreements, and services trade
occupies a prominent place on the agenda of the United States and the other 147
members of the World Trade Organization (WTO) in the Doha Development Agenda
round of multilateral negotiations. Furthermore, disputes related to trade in services
have arisen increasingly between the United States and the European Union, Japan,
Canada, and other major trading partners.
U.S. suppliers of services are among the most competitive in the world. The
United States has taken the lead in encouraging foreign trade partners to reduce
barriers to trade in services through bilateral, regional, and multilateral negotiations.
Congress has a significant role to play in these efforts. In fulfilling its responsibilities
for oversight of U.S. trade policymaking and implementation, the Congress monitors
trade negotiations and the implementation of any agreements reached as a result of
the negotiations. More directly, the Congress must pass any agreements requiring
changes in U.S. law before they can go into effect. FTA negotiations that include
services as part of the agenda, are in progress or are expected to begin in the near
future, while negotiations in the WTO continue.
This report provides background information and analysis on U.S. foreign trade
in services. It includes an examination of definitions and examples of services to
indicate their nature and scope; a review of the importance of services to the U.S.
economy including U.S. foreign trade; and an analysis of the policy challenges that
confront the United States, especially the challenge of negotiating a set of
international rules on trade in services and the challenge of resolving disputes over
trade in services with trading partners. This report will be updated as events warrant.
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Services and the U.S. Economy
“Services” encompass a very broad and widening range of economic activities.
According to one definition, services are “...a diverse group of economic activities
not directly associated with the manufacture of goods, mining or agriculture. They
typically involve the provision of human value-added in the form of labor, advice,
managerial skill, entertainment, training intermediation, and the like.”1 Services
differ from manufactured goods primarily in that they are intangible, so they cannot
be stored and must be consumed at the point of production (trips to the doctor,
enjoying a meal at the restaurant). However, rapid changes in technology are
reducing even these restrictions on services (computer software that can be stored
online, on disks, tape, etc.).2 Illustrative examples of services include wholesale and
retail trade; transportation and warehousing; information; finance and insurance;
professional, scientific, and technical services; education; arts and entertainment;
health care and social assistance; food and accommodation services; construction;
communication; and public administration.3
Services are an increasingly significant sector of the U.S. economy. In 1965,
they accounted for 41% of U.S. GDP. In 2003 they accounted for 58% of U.S. GDP.4
In 2002, workers in the services sector accounted for nearly 83% of the total civilian
workforce.5
The significance of services to a national economy and to the global economy
go beyond what can be measured by data. Many services not only have intrinsic
value but are also critical to running other parts of large economies. For example,
financial services (banking, investment, insurance) are the means by which capital
flows throughout an economy from those who have it (savers, investors) to those who
need it (borrowers). Financial services are often called the lifeblood of an economy.
There is a symbiotic relationship between many services providers and
manufacturers — demand for one creates demand for the other. Many manufacturers
are dependent on transportation, communication and distribution services networks
to ensure that inputs are available for the production of goods and to deliver final
goods to consumers. For example, car manufacturers depend on transportation
services (trucking, rail, etc.) to make sure that component parts are available for
assembly and that completed cars are delivered to dealers. At the same time,
demand for services creates demand for manufactures. For example, the production
of communication services leads to demand for telephones, radios, computers and
other communications apparatuses.
1 OECD. Science Technology Industry Business and Industry Policy Forum Series. The
Service Economy. 2000. Paris. p.7
2 Ibid.
3 Ibid. OECD, p. 39.
4 Calculations based on data in White House. Council of Economic Advisers. Economic
Report of the President. February 2004. Washington. Table B-8. p. 284.
5 Ibid. Table B-46. p. 338.
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U.S. Trade in Services
U.S. trade in services, as narrowly measured, plays an important role in overall
U.S. trade, albeit a much smaller role than domestic services play in the overall U.S.
economy. And the relative importance of trade in services has remained quite
constant. Between 1986 and 2001, for example, the share of services in overall U.S.
exports in goods and services remained at around 28%, although it increased to 30%
by 2003. From 1986 to 2003, the share of U.S. imports of goods and services
accounted for by services has been 17%-18%. These data are presented in Table 1.
These shares are substantially lower than one might expect from a sector that
dominates the domestic economy.6 Table 1 also shows that the United States
continually realizes surpluses in services trade which have partially offset large trade
deficits in goods trade in the U.S. current account. These figures only measure trade
in services that take place across borders as presented in the U.S. official balance of
payments data.
Table 1. U.S. Trade in Goods and Services, 1986-2003
(Billions of Dollars)
Exports
Imports
Balances
Year
Goods
Services
Goods
Services
Goods
Services
1986
223.3
85.4
368.4
80.1
-145.1
5.3
1991
416.9
163.0
491.0
118.5
-74.1
44.5
1996
612.1
237.7
803.3
150.8
-191.2
86.9
1997
679.7
258.8
876.4
166.9
-196.7
91.9
1998
670.2
263.7
917.2
181.0
-247.0
82.7
1999
684.6
272.8
1030.0
189.2
-345.4
83.6
2000
772.2
293.5
1224.4
217.0
-452.2
76.5
2001
718.8
279.3
1145.9
210.4
-427.2
68.9
2002
682.6
289.3
1,407.4
240.5
-484.4
48.8
2003
713.1
307.4
1,260.7
256.3
-547.6
51.0
Source: U.S. Department of Commerce. Bureau of Economic Analysis.
Because most services require direct contact between supplier and consumer,
many service providers prefer to establish or must establish a presence in the country
of the consumer. For example, hotel and restaurant services by their very nature
require a presence in the country of the consumer. Providers of legal, accounting,
6 U.S. Department of Commerce. Bureau of Economic Analysis. U.S. International
Accounts Data. October 14, 2004.
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and construction services prefer a direct presence because they need access to expert
knowledge of the laws and regulations of the country in which they are doing
business and they require proximity to clients. Thus, cross-border services trade data
do not capture all of the trade in services.
Data on sales of services by foreign affiliates of U.S.-owned companies and by
U.S. affiliates of foreign-owned firms help to provide a more accurate, albeit still
incomplete, measurement of trade in services. In 2002 (the latest year for which
published data are available), U.S. firms sold $401 billion in services to foreigners
through their majority-owned foreign affiliates. In 2002, foreign firms sold to U.S.
residents, $387 billion in services through their majority-owned foreign affiliates
located in the United States.7 The data for cross-border trade and for sales by
majority-owned affiliates are not directly compatible; therefore, it is difficult to
derive an accurate overall measure of services trade. Even these two sets of figures
do not capture the total value of trade in services. Two other modes of services
delivery are through the temporary movement of consumers to the location of the
provider and the temporary movement of the provider to the location of the
consumer. U.S. data on the sales of services via these two modes of delivery are not
readily available. (See text box.)
7 Bureau of Economic Analysis. U.S. Department of Commerce. sales of Services to
Foreign and U.S. Markets Through Cross-Border Trade and Through Affiliates.
[http://www.bea.doc.gov].
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The Four Modes of Delivery for Trade in Services
International agreements on trade in services, including the General
Agreement on Trade in Services (GATS), which is administered by the World
Trade Organization (WTO), identifies four modes of supply of services:8
Mode 1 — Cross-border supply: The service is supplied from one country
to another. The supplier and consumer remain in their respective countries, while
the service crosses the border. Example: A U.S. architectural firm is hired by a
client in Mexico to design a building. The U.S. firm does the design in its home
country and sends the blueprints to its client in Mexico.
Mode 2 — Consumption abroad: The consumer physically travels to
another country to obtain the service. Example: A Mexican client travels to the
United States to obtain the services of a U.S. architectural firm.
Mode 3 — Commercial presence: The supply of a service by a firm in one
country via its branch, agency, or wholly-owned subsidiary located in another
country. Example: A U.S. architectural firm establishes a subsidiary in Mexico
to sell services to local clients.
Mode 4 — Presence of natural persons: Individual suppliers travel
temporarily to another country to supply services. Example: A U.S. architect
travels to Mexico to provide design services to her Mexican client.
Identifying the various modes of delivery of services is important for
measuring the volume of services trade that takes place. Each mode requires a
different method of measurement, and the data derived from these measurements
are not likely to be compatible across the four modes, that is, one cannot combine
the data on services traded via mode 1 with data derived from services traded via
mode 3 in order to obtain a total. Identifying the modes is also important for
policy purposes because issues raised by trade in mode1can be different from
issues raised by trade in another mode. For example, the trade barriers faced by
providers in mode 1 are not necessarily the same as those faced by providers in
mode 4. Therefore, knowing the different modes helps to frame policy issues and
solutions.
Source: The description and examples of modes of delivery are based on and
adapted from the description contained in OECD. GATS: The Case for Open Services
Markets. Paris. 2002. p. 60.
8 The following description and examples of modes of delivery is based on and adapted
from the description contained in OECD. GATS: The Case for Open Services Markets.
Paris. 2002. p. 60.
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The United States
Figure 1. U.S. Exports of Services by Area, 2003
conducts trade in services
Cross-Border Percentages of Total
(both via cross border trade
European Union
Other Europe
34.4%
a n d f o r e i g n d i r e c t
5.6%
investments) with many
Canada
different regions of the
9.1%
world. However, the
Other
2.0%
graphs contained above in
the figures 1 and 2 show
Other West. Hemis.
18.2%
Other Asia and Africa
that much of the U.S.
18.6%
JapanAustralia
cross-border trade in
10.1% 2.0%
services in 2003 occurred
Data Source: Bureau of Economic Analysis. U.S. Department of Commerce
with EU-member countries.
Figure 1 indicates that more
than one-third of U.S.
services exports were to the
Figure 2. U.S. Services Imports by Area, 2003
European Union and more than
Cross-Border Percentages of Total
one third of U.S. imports of
European Union
37.6%
services were from the
Other Europe
6.8%
European Union. In contrast,
Canada accounted for only
Canada
8.4%
Other
9.1% and 8.4% of U.S. services
1.6%
e x p o r t s a n d i m p o r t s ,
respectively.
Other Asia & Africa
15.1%
Other West. Hemis.
21.5%
Australia
Japan
1.4%
The EU’s dominance in
7.6%
Data Source: Bureau of Economic Analysis. U.S. Department of Commerce
U.S. services trade is even
more apparent when taking
into account services that are
provided through multinational
corporations (MNCs). Figure 3 shows shares by region of sales of services in 2002
(the latest data available) by
U . S . m a j o r i t y - o w n e d
Figure 3. Sales of Services to Foreign Persons by
companies to foreign persons,
U.S. MNCs, by Region, 2002
a measurement comparable to
Percentages of Total
European Union
49.3%
U.S. exports.
Other West.Hemis.
Other Asia & Africa
12.9%
11.2%
Other Europe
Japan
3.5%
CanadaAustralia
9.5%
10.0%
3.6%
Data Source: Bureau of Economic Analysis. U.S. Department of Commerce
CRS-7
Figure 4. Sales by Foreign-Owned MNCs to U.S.
Figure 4 shows shares by
Persons, by Region, 2002
region of sales in 2002 to U.S.
Percentages of Total
persons by foreign majority-
European Union
60.6%
owned MNCs, a measurement
comparable to U.S. imports.
The figures indicate that the EU
accounted for 49.3% of sales to
Other
0.9%
Japan
foreign persons and 60.6% of
5.8%
sales to U.S. persons services
Australia
2.6%
Other Africa & Asia
through MNCs. Canada
1.7%
Other Europe
Other West. Hemis.
8.8%
8.1%
Canada
accounted for 10.0% and11.5%
11.5%
Data Source: Bureau of Economic Analysis. U.S. Department of Commerce.
of the total sales.
Figure 5. U.S. Services Exports by Type, 2003
Figures 5 and 6 show
Cross-Border-- Percentages of Total
the shares of U.S. services
Royalities and License
16.4%
e x p o r t s a n d i m p o r t s
Telecommunications
Travel
accounted for by types of
1.9%
21.9%
Other Services
6.0%
services. Travel and related
Passenger Fares
services dominate U.S.
5.3%
cross-border services trade,
Finance & Insurance
9.4%
accounting for 21.9% and
Other Transportation
10.8%
24.8% of U.S. services
Education
4.6%
export s an d i m ports,
Professional Services
23.7%
respectively, in 2003.
Data Source: Bureau of Economic Analysis. U.S. Department of Commerce
Passenger fares accounted
for another 5.3% and 9.2%
and other transportation services
Figure 6. U.S. Services Imports by Type, 2003
accounted for an additional 10.8%
Cross-border-- Percentages of Total
and 17.9% of U.S. services
Telecommunications
2.1%
exports and imports. The
Other Transporation
Travel
19.6%
24.8%
dominance of these services is not
altogether surprising, given the
relative ease with which such
Royalties and Licenses
8.8%
Passenger Fares
services can be traded across
Education
9.2%
1.2%
borders.
Other Services
0.4%
Professional Services
17.9%
Finance & Ins.
16.0%
Data Source: U.S. Department of Commerce. Buerau of Economic Analysis
U.S. Policy Challenges in Foreign Trade in Services
As U.S. service providers strive to increase foreign trade, U.S. policymakers are
faced with a number of challenges in constructing an international environment that
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is conducive to increased trade in services. One challenge is identifying the foreign
government laws, regulations, and policies that impede trade flows and prevent the
international system of trade in services from operating efficiently. While some of
these barriers are similar to those that exist in goods trade, many are different and
more complex and, therefore, sometimes difficult to identify. A second challenge
derives from the first — working with trading partners to build and administer “rules
of the road” to facilitate trade in services. The current rules, the General Agreement
on Trade in Services (GATS), are a recent phenomenon and are at an early stage of
development. A third challenge is managing disputes that arise when trading partners
do not agree on how trade in services should be conducted.
Barriers to Trade in Services
Because of the fundamental differences between goods and services, the barriers
that foreign service providers face are different from those faced by goods suppliers.
Many barriers in goods trade — tariffs and quotas for example — are at the border.
Restrictions on services trade occur largely within the borders of the
“importing” country and are in the form of government regulations. The right of
governments to regulate some services industries is widely recognized as prudent and
necessary to protect consumers from dangerous or unqualified providers. For
example, doctors and other medical personnel must be licensed by government-
appointed boards; lawyers, financial services providers, and many other professional
service providers must be also certified in some manner.
Governments regulate to protect the economy from sudden and potentially
harmful shocks. For example, controls on foreign currency transactions are designed
to protect the economy from “panic” capital flight and to maintain stable exchange
rates. The question in foreign trade is whether these regulations are applied in a
discriminating and unnecessarily restrictive manner. Because services transactions
more often require direct contact between consumer and provider than is the case
with goods trade, many of the “trade barriers” that foreign companies face pertain to
the establishment of a commercial presence in the consumers’ country in the form of
direct investment or to the temporary movement of people (Mode 4) — sellers and
consumers — across borders.
General Trade Barriers. Some trade barriers are evident across services
industries. In most cases the restrictions are ostensibly legitimate but may have
unintentional adverse affects on foreign services trade. Examples of such barriers
include:
! restrictions on international payments, including repatriation of
profits, mandatory currency conversions, and restrictions on current
account transactions;
! restrictions on the movement of personnel, including visa, work
permit, and immigration restrictions; requirements that foreign
professionals pass certification exams or obtain extra training that is
not required by local nationals; permission for entry and provision
of services contingent on local labor supply requirements;
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! restrictions on information transfer imposed to protect data and
maintain privacy;
! “buy national” requirements in government procurement;
! lack of national treatment in taxation policy or protection from
double taxation;
! government-owned monopoly service providers and requirements
by foreign service providers to use a monopoly’s network access or
communications connection provider;
! government subsidization of domestic service suppliers;
! limitations on foreign direct investment, such as equity ceilings;
local employment and sourcing requirements; restrictions on the
form of investment, that is, a branch, subsidiary, joint venture, etc.;
“net national benefit” requirements; quotas imposed on number of
foreign service suppliers; requirements that the chief executive
officer or other high level company officials be local nationals or
that a certain proportion of a company’s directors be local nationals;
and
! licensing requirements to market and sell services.9
Industry-Specific Barriers. In most cases, a service industry confronts
barriers that are largely specific to that industry. The following examples of major
service industries and the barriers they confront are illustrative.
Construction and Related Services. This category includes firms that are
involved in the construction of both residential and commercial buildings; firms that
are involved in the construction of transportation infrastructures, such as roads,
bridges airports, tunnels, and similar structures; firms that install prefabricated
structures; and firms that provide finishing work to structures. It is a category of
services in which U.S. firms have proved highly competitive in the global market.
In 1999, U.S. firms won bids on international construction contracts worth $29
billion. Although this figure was a small fraction of total U.S. construction business,
it represented 24% of all international construction contracts awarded worldwide.10
Construction and related engineering services is very labor intensive work,
combining low and highly specialized-skilled labor. Firms that provide services in
9 World Trade Organization. Guide to the GATS. Kluwer Law International. Boston.
2001. OECD. Working Party of the Trade Committee. Assessing Barriers to Trade in
Services — Revised Consolidated List of Cross-Sectoral Barriers. Paris. 28 February
2001.
10 United States International Trade Commission. Recent Trends in Services Trade — 2002
Annual Report. May 2002. Publication No. 3514. p. 4-5
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foreign markets usually require a presence in the country either temporarily or
through foreign direct investment often in the form of a partnership with a local firm
that has knowledge of local laws and other requirements. Because these firms
compete by offering specialized skills, they frequently must be able to move highly
skilled workers across borders.
In most countries, the construction and related services industry is tightly
regulated. For quality control and safety reasons, governments require construction
firms to meet technical standards and may also require developers to adhere to land
use and environmental controls. Some restrictions might be applied ostensibly on a
non-discriminatory basis but may be a greater burden to foreign suppliers, e.g., a
requirement that a certain percentage of labor be locally sourced.
In a number of countries, local or regional trade associations have the authority
to rule on applications of construction firms for required permits, thereby, creating
a conflict of interest as association members would have an interest in limiting
competition. Some countries employ “buy national” policies that favor domestic
construction firms in bidding on government projects. In addition, some
governments tolerate private company collusive practices. For example, in Japan
local construction companies have practiced bid-rigging called dango. Under this
practice a small group of Japanese construction firms agree which of them would
submit the lowest bid and therefore get the contract. They rotate the “winning
bidder”among them from project to project. The practice would guarantee work
among the participants but would keep foreign and other domestic competitors out.11
Travel and Tourism. Travel and tourism is a multifaceted industry. It
encompasses lodging and restaurants (including catering), travel agencies and tour
operators, and tourist guide services. It ranks among the top five service industries
in more than 75% of the countries, and is among the top sectors in U.S. cross-border
services trade. For many smaller countries, it is the primary means of earning foreign
exchange.
Travel and tourism is a labor-intensive industry that is highly dependent on
other service sectors — transportation; construction (to insure that sufficient and
appropriate lodging and other facilities are available to tourists); advertising;
telecommunications and distribution services, among others. It is an industry that is
undergoing major changes as the use of the Internet and the introduction of other
technologies change how tourism and travel services are delivered. The industry
faces few direct trade barriers but is indirectly affected by regulations pertaining to
the movement of people (immigration, visas); transportation (for example, the
distribution of slots to foreign airlines at major airports); movement of money (for
example, foreign exchange requirements); and construction standards (for example,
the quality of hotels and other tourist necessities).
Banking and Financial Services. Banking and financial services cover a
wide range of economic activities: maintaining deposits; lending money; brokering
11 United States Trade Representative. 2002 National Trade Estimates Report on Foreign
Trade Barriers. Washington. p. 227-228
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of securities (stocks and bonds); brokering of many types of insurance (health, life,
auto, home, and specialized insurance); managing pension funds and other assets;
financial planning; and more. It is also an industry in which American firms have
proved to be highly competitive and have a growing global presence. In addition,
among the industries that comprise the services sector, it is perhaps the most complex
not only because of its scope of activities but also because of its importance.
A viable financial sector is critical to an economy. It functions primarily to
protect the financial assets of residents and to facilitate the flow of capital from
savers and investors to borrowers. The sector has undergone rapid changes recently.
Technology, especially the emergence of the Internet, has facilitated sales of
insurance, the transmission of deposits, and the purchase and sale of securities across
international borders. Furthermore, many countries have liberalized regulation of
financial industries allowing for increased foreign ownership and the reduction of
“firewalls” between financial industries.
At the same time, because of their importance to the maintenance of economic
stability, financial services are a heavily regulated sector. Many regulations are
applied to protect investors and depositors and to ensure the viability of the sector.
These regulations, such as deposit insurance, reserve requirements, capitalization
requirements, and the like are considered prudent to maintaining a healthy financial
system. However, a fine line exists at times between prudent requirements and
requirements that are used to protect the domestic industry from foreign competition.
For example, governments often require insurance brokers and other financial agents
to be licensed to protect customers from unqualified or otherwise questionable
providers. But licensing can also be used to restrict competition and protect favored
companies. Foreign banks frequently face restrictions on the type of direct
investment they can make in a country, the types of services they can provide, or the
number of facilities they can establish in the country or in a region of the country.
Foreign-owned insurance companies may confront restrictions on the type of
insurance they can sell; for example, some countries prohibit foreign companies from
selling life insurance or auto insurance.12
Establishing Rules on Trade in Services
The United States is working with trading partners to develop and implement
rules on trade in services on several fronts. The broadest and most challenging are
the multilateral rules contained in the General Agreement on Tariffs and Trade
(GATS) that is administered by the World Trade Organization (WTO). Rules on
trade in services are also part of the North American Free Trade Agreement
(NAFTA) and other regional and bilateral free trade agreements. Furthermore, they
will likely be an aspect of free trade agreements (FTAs) now under negotiation or
discussion.
12 World Trade Organization. p. 331-352. For more information on U.S. foreign trade in
financial services, see CRS Report RL31110, U.S. Trade in Financial Services: An
Overview.
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The WTO and GATS. The seeds for multilateral negotiations in services
trade were planted more than a quarter century ago. In the Trade Act of 1974, the
Congress instructed the Administration to push for an agreement on trade in services
under the General Agreement on Tariffs and Trade (GATT) during the Tokyo Round
negotiations. While the Tokyo Round concluded in 1979 without a services
agreement, the industrialized countries, led by the United States, continued to press
for its inclusion in later negotiations. Developing countries, whose service sectors
are less advanced than those of the industrialized countries, were reluctant to have
services included. Eventually services were included as part of the Uruguay Round
negotiations launched in 1986.13 At the end of the round, countries agreed to a new
set of rules for services, the GATS, and a new agency, the WTO, to administer the
GATS and other agreements reached.
The GATS. The GATS provides the first and only multilateral framework of
principles and rules for government policies and regulations affecting trade in
services among more than 100 countries representing many levels of economic
development. The GATS remains a work in progress, and its expansion is a part of
the new round of WTO negotiations launched in November 2001 in Doha, Qatar.
The GATS agreement, most of which was completed by December 1993, is
divided into six parts.14 Part I (Article I ) defines the scope of the GATS. It provides
that the GATS applies —
! to all services, except those supplied in the routine exercise of
government authority;
! to all government barriers to trade in services at all levels of
government — national, regional, and local; and
! to all four modes of delivery of services.
Part II (Articles II-XV) presents the “principles and obligations,” some of which
mirror those for trade in goods while others are specific to services. These
principles and obligations include:
! unconditional most-favored-nation (MFN) non-discriminatory
treatment; that is, services imported from one member country
cannot be treated any less favorably than the services imported from
another member country; 15
13 Feketekuty, Geza. International Trade in Services: An Overview and Blueprint for
Negotiations. American Enterprise Institute. Ballinger Publishers. 1988. p. 194
14 This description of the GATS is based on WTO Secretariat — Trade in Services
Division. An Introduction to the GATS. October 1999. [http://www.wto.org]. Not all
services issues were resolved when the Uruguay Round was completed in 1993.
Negotiations on financial services and telecommunications services continued until
agreements were reached in 1997.
15 The GATS differs from the GATT in that it has allowed members to take temporary
(continued...)
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! transparency, that is, governments must publish rules and
regulations;
! reasonable, impartial and objective administration of government
rules and regulations that apply to covered services;
! monopoly suppliers must act consistently with obligations under the
GATS in covered services;
! a member incurring balance of payments difficulties may temporarily
restrict trade in services covered by the agreement; and
! a member may circumvent GATS obligations for national security
purposes.
Part III (Articles XVI-XVIII) of the GATS establishes market access and
national treatment obligations for members. The GATS —
! binds each member to its commitments once it has made them, that
is, a member country may not impose less favorable treatment than
what it has committed to;
! prohibits member-country governments from placing limits on
suppliers of services from other member countries regarding: the
number of foreign service suppliers; the total value of service
transactions or assets; the number of transactions or value of output;
the type of legal entity or joint venture through which services may
be supplied; and the share of foreign capital or total value of foreign
direct investment;
! requires that member governments accord service suppliers from
other member countries national treatment, that is, a foreign service
or service provider may not be treated any less favorably than a
domestic provider of the service; and
! allows members to negotiate further reductions in barriers to trade
in services.
Importantly, unlike MFN treatment and the other principles listed in Part II,
which apply to all service providers more or less unconditionally, the obligations
under Part III are restricted. They apply only to those services and modes of delivery
listed in each member’s schedule of commitments. Thus, unless a member country
has specifically committed to open up its market to service suppliers in a particular
15 (...continued)
exemptions to MFN treatment. The exemptions are listed in a special annex to the GATS.
The GATS allows only these one-time exemptions. The GATS (as is the case of the GATT)
also allows MFN exemptions in the cases of regional agreements.
CRS-14
service that is provided via one or more of the four modes of delivery, the national
treatment and market access obligations do not apply. This is often referred to as the
positive list approach to trade commitments. Each member country’s schedule of
commitments is contained in an annex to the GATS.16 The schedules of
commitments are, in essence, the core of the GATS.
Parts IV-VI (Articles XIX-XXIX) are technical but important elements of the
agreement. Among other things, they include the requirement that, no later than
2000, the GATS members start new negotiations (which they have done) to expand
coverage of the agreement and establish the requirement that conflicts between
members involving implementation of the GATS be handled in the WTO’s dispute
settlement mechanism. The GATS also includes eight annexes, including one on
MFN exemptions. Another annex provides a “prudential carve out,” that is, a
recognition that governments take “prudent” actions to protect investors or otherwise
maintain the integrity of the national financial system. These prudent actions are
allowed even if they conflict with obligations under the GATS.
Evaluations of the GATS in its first seven years range from those who view the
“glass as half empty” to those who see “the glass as half full.” The more pessimistic
school argues that not much has been accomplished in GATS, that, at best members
committed themselves to maintain the status quo before the GATS went into effect.
These critics argue that some countries actually made commitments that were more
restrictive than their current practices. Furthermore, critics question the value of the
so-called positive list approach to members’ commitments which can lead to slower
and more tedious trade liberalization negotiations.
The more optimistic school considers the mere establishment of the GATS to
be an important accomplishment considering that many countries strongly resisted
even negotiating on services at the beginning of the Uruguay Round. In addition,
even though the initial commitments may have only locked members in at the status
quo, they are bound by those commitments from sliding back into more
protectionism and may actually open up their services sectors as negotiations
proceed.
Continuing Negotiations. Article XIX of the GATS required WTO
members to begin a new set of negotiations on services in 2000 as part of the so-
called WTO “built-in agenda.” In so doing, it guaranteed that WTO members will
pursue negotiations on services even if they are not able to begin a new full round.
Article XIX stipulates that participants work to resolve some conceptual and
procedural issues, for example, how to give negotiating credit to governments that
had unilaterally liberalized their services sectors since the conclusion of the first set
of negotiations and whether to provide special treatment to least developed countries.
The new set of GATS negotiations began in February 2000, and during the
remainder of that year, the members reviewed the status of commitments already
16 Wilson, Arlene. Services Trade and the Uruguay Round. CRS Report 95-1051
(Archived). p. 17.
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made and developed a set of guidelines.17 In addition to the issues mandated by
Article XIX, the guidelines stipulate that negotiators will continue to use the service-
specific, mode-specific (positive list) approach.
At the November 2001 WTO Ministerial in Doha, Qatar, WTO members
launched a new round of multilateral negotiations. The negotiations on services were
folded into the agenda of the new round at the November 2001 WTO Ministerial in
Doha, Qatar. In their declaration establishing the agenda for the new round, the
ministers affirmed their support for the work that had already been accomplished in
the services negotiations. Each WTO member first indicates what general
concessions they request from the other members and then, separately, each member
indicates what concessions it is willing to offer. Members stipulated on the Doha
documents that by June 30, 2002, GATS members should have submitted their
requests for commitments from other members to liberalize trade in services and, by
March 31, 2003, should submit their offerings of what their initial commitments
would be toward liberalizing trade in services in their economies.
The United States had completed its requests for commitments from other
member countries on July 1, 2002. The U.S. requests call for many of the countries
to improve transparency in regulations of services to boost efficiency across all
services industries. In addition, U.S. requests centered on reduction of trade
restrictions in 12 service industries: telecommunications; finance; express delivery;
energy; environment; distribution services; education and training; lodging and other
tourism services; professional services; computer and related services; advertising
services; and audiovisual services.18
Other countries, including the 15 members of the EU, submitted their own
requests, including requests made of the United States to reduce trade barriers in
services. Of note, is a request by the EU, Japan, South Korea, and Norway that the
United States provide greater access to its markets for foreign maritime services
providers. Japan, for example, points to the Jones Act of 1920, which limits shipping
within the United States to vessels manufactured, owned, and operated by U.S.
companies. The EU has also focused some of its requests on the U.S. financial
sector, particularly restrictions on the foreign establishment of state-chartered
subsidiaries, branches, or representative offices.19
On March 31, 2003, the United States submitted its offer on reducing trade
barriers in services to meet the deadline established in the Doha Ministerial
statement. The U.S. offer covers 15 areas: accounting services; advertising and
related services; audiovisual and related services; distribution services; education and
training services; energy services; environmental services; express delivery services;
financial services; legal services; movement of natural persons (mode 4); small and
17 U.S. proposed negotiation guidelines are summarized in documents located at
[http://www.ustr.gov/sectors/services/docsvcs.shtml].
18 Office of the United States Trade Representative. U.S. Proposals for Liberalizing trade
in Services: Executive Summary. July 1, 2002. [http://www.ustr.gov/sectors/services/
docsvcs.shtml].
19 Washington Trade Daily. July 5 and July 6, 2002.
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medium-sized services enterprises; telecommunications, value-added network, and
complementary services; and transparency in domestic regulation.20
The negotiations on services have gone slowly since the Doha Development
Agenda was launched. Besides the United States, only 43 other WTO members (the
EU is counted as one member) have made offers on reducing their trade barriers.
Some negotiators and other observers have argued that not much progress would be
made until the WTO negotiators resolved how agricultural issues would be
addressed.21 Developing countries were reluctant to make offers on services until
they saw how far some of the developed countries were willing to go on agriculture.
Because the framework agreement addressed many agricultural trade issues,
supporters of liberalized trade in services are anticipating that the services
negotiations will gain momentum.
The Doha Development Agenda negotiations stagnated for many months. In
July 2004, after fits and starts, the WTO members agreed on a new “framework” for
the negotiations during the round having overcome critical questions on agriculture.
The framework itself mentions services only briefly because they were not the focus
of the negotiations over the framework and the parameters of the negotiations had
already been established as part of the “built-in agenda” and in the Doha Ministerial
Declaration that launched the new round. The framework reaffirms the commitments
made in the Doha Ministerial Declaration and charges the negotiators to complete
and submit their initial offers as soon as possible, to submit revised offers by May
2005 and to ensure that the offers are of high quality. The framework also charges
the negotiators to bear in mind when making their offers the sectors and modes of
supply that are of interest to developing countries.
The negotiating framework notes the particular interest that developing
countries have in issues pertaining to mode-4 supply of services. A number of
developing countries, including African countries and India, have complained that
developed countries’ offers to date have been largely deficient in the area of mode-4.
They assert that the developed countries often require a commercial presence by the
foreign supplier and/or employ strict requirements, such as pre-employment
conditions, economic needs tests, and quota restrictions on visas before permitting
temporary entry of foreign professionals.22 Because developing country concerns run
head-on into U.S. and EU heightened post-9/11 concerns about entry of foreigners,
this issue could be difficult as the services negotiations progress.
In many member countries, services are a large portion of economic activity.
Yet, services account for only a small portion of total trade, indicating many
untapped opportunities for trade in services if barriers are eliminated. However, for
20 For more information on the U.S. offer, see CRS Report RS21492, Services Negotiations
in the WTO: An Overview of the U.S. Offer.
21 Coalition of Services Industries. US Services Industry Association Welcomes WTO
Agreement to Move Ahead with Doha Round Trade Talks. Press release. July 31, 2004.
22 Developing Nations Again Criticize Lack of Mode 4 Offers in WTO Services Talks.
International Trade Reporter. April 8, 2004. p. 600.
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many countries, especially developing countries, liberalization in services trade is a
very sensitive issue that may make achieving the opportunities difficult if not elusive.
The Role of Services in U.S. Regional and Bilateral Free Trade
Agreements. The United States has in place several bilateral and regional free
trade agreements and is conducting negotiations on others. This section provides a
brief overview of the treatment of services in these agreements and negotiations.
The North American Free Trade Agreement (NAFTA). NAFTA, which
went into effect on January 1, 1994, is the largest free trade agreement in which the
United States participates. NAFTA’s coverage of services trade is very broad
reflecting the comprehensive integration of the three participating economies.
Chapter 12 contains NAFTA’s coverage of most “cross-border”services trade
(defined as all services trade except that requires a commercial presence). The
exceptions are financial services (which are covered in chapter 14) services
purchased by state enterprises or governments (which are covered in chapter 10) and
international air transportation and related services, which are not covered at all.
Services trade related to the commercial presence of the provider in the country of
the consumer is covered in Chapter 11 on foreign direct investment.
Chapter 12 of NAFTA requires Canada, the United States, and Mexico to
provide national treatment and most-favored-nation treatment to one another’s
services and service providers and prohibits the participating governments from
requiring services providers to establish a local presence in order to sell their
services. The three countries may exercise exceptions to these principles:
! where restrictions are already in place and listed in Annex I of
NAFTA ;
! in certain services sectors and subsectors listed in Annex II; and
! certain non-discriminatory quotas listed in Annex V.
In Annex VI, the three parties list their specific commitments to liberalize cross-
border trade in services.
A major controversy erupted over trucking services. As part of NAFTA, the
United States made a commitment to permit Mexican truckers to transport goods
to the southern U.S. border states beginning in 1995 and to the entire United States
by January 2000. However, in 1995 the Clinton Administration banned Mexican
truckers access beyond the border regions because of concerns raised by the U.S.
trucking industry and others over the safety of Mexican trucks. The issue became a
source of tension between the two NAFTA partners.
On February 6, 2001, in response to a complaint filed by Mexico against the
U.S. ban, an arbitration panel formed under NAFTA determined that the United
States was violating its obligations but also ruled that the United States could impose
requirements on Mexican trucks entering the United States to guarantee safety since
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U.S. and Mexican regulations were different.23 Provisions contained in the FY2002
transportation appropriations bill required a system of certifying the safety of
Mexican trucks before they would be allowed access to the rest of the United States.
On June 27, 2002, Secretary of Transportation Norman Mineta indicated that the
system was almost complete and that certification of Mexican trucking companies
would probably begin before the end of the summer of 2002.24
Other FTAs. The U.S.-Israeli FTA, the first in which the United States has
participated, went into effect in August 1985. Because services are a small
component of U.S.-Israeli trade, they are not a significant part of the agreement. In
the agreement, the United States and Israel committed themselves to provide national
treatment to each other’s services and to make their laws and regulations affecting
services transparent.
The U.S.-Jordan FTA entered into force on December 17, 2001. U.S.-Jordan
trade is small and services are not a significant part of that trade but are nevertheless
covered in Article 3 of the agreement. Article 3 essentially requires the two countries
to make commitments to open up trade in services that are no less liberal than the
commitments each has made under the GATS.
Ongoing Negotiations on FTAs. The United States completed bilateral
negotiations and has implemented FTAs with Singapore, Chile, Australia, and
Morocco. In addition, the Bush Administration completed negotiations with five
Central American countries (CAFTA) and with Bahrain. It is currently negotiating
with the South African Customs Union (SACU) to create a subregional free trade
area and with such countries as Thailand to create bilateral FTAs. The
Administration has expressed interest in beginning FTA negotiations with a number
of other countries. In each case, services trade plays a role in the negotiations.25
Major Disputes in U.S. Trade in Services
The multilateral rules contained in the GATS or in bilateral or regional
agreements are tailored for the trade that takes place among their participants. The
GATS is largely considered to be a bold effort at creating a multilateral regime on
services trade but still weak because it must conform to the consensus of a very large
group of countries from different levels of development. Regional and bilateral
regimes can be more comprehensive in their coverage because they are smaller.
However, there are some leading-edge issues that no regime covers but have
emerged in U.S. disputes with major trading partners.
One such issue is the protection of privacy in data transfers across borders that
is important to the European Union. A second issue is infrastructure inefficiencies
23 For more information on this issue see CRS Report RL31028, North American Free
Trade Agreement: Truck Safety Considerations, by Paul Rothberg.
24 Daily Report for Executives. June 28, 2002. p. A-14.
25 For more information on FTAs, see CRS Report RL31356 Free Trade Agreements:
Impact on U.S. Trade and Implications for U.S. Trade Policy, by William H. Cooper.
CRS-19
in the telecommunications sector, an ongoing issue with Japan. These and other
issues demonstrate a key challenge that U.S. policy faces as new, cutting-edge
technology expands the frontiers of trade in services — grappling with issues that are
not covered by international rules. These negotiations will likely set precedents for
U.S. bilateral negotiations with other countries and negotiations within the WTO.
The EU. The United States and the EU are engaged in path-setting negotiations
over the issue of protecting the privacy of personal information. In October 1995, the
EU enacted a directive requiring member states to pass national laws setting
standards for the transfer of personal data in order to ensure the privacy of the subject
of the data. The directive also prohibits private and public institutions in EU states
from transmitting personal data to non-EU countries whose data protection laws and
procedures do not meet EU standards. Many businesses consider the transfer of data
to be vital in conducting trans-Atlantic business. In order to facilitate data transfers,
the EU and the United States negotiated the “Safe Harbor” agreement. The
agreement allows U.S. firms to voluntarily comply with EU standards and thus send
and receive data from EU companies and institutions. The “Safe Harbor” became
operational on November 1, 2000.26
However, the “Safe Harbor” does not apply to banking, insurance, and other
financial companies to whom data transfer is the most critical. The EU has imposed
a “standstill,” refraining from any restrictions on financial data transfers between the
United States and EU as negotiators try to work out an agreement that would cover
this category. The United States claims that the Gramm-Leach-Bliley Act of 1999
(PL. 106-102) protects personal financial data to meet EU standards. Among other
things, the law requires financial institutions to provide their customers with notice
of their privacy policies, prohibits financial institutions from sharing personal
customer information with third parties without the consent of consumers, and
prohibits financial institutions from providing account numbers to third parties for
marketing purposes. The law also requires financial institutions to safeguard the
security and confidentiality of customer information.27 The EU has argued that the
law does not provide adequate protection. The negotiations are expected to continue.
Although financial data transfers between U.S. and EU institutions continue, many
in the financial sector are concerned that the EU may lift the “standstill” before an
agreement is reached, causing irreparable harm to financial business between the two
regions.28 This issue and how it is resolved could have implications for how other
countries decide to handle the rapidly growing traffic in personal data.
Japan. The services sector in Japan is notorious for its inefficiencies, bogged
down by heavy regulations designed to protect entrenched domestic providers from
competitors, both from within Japan and foreign. A prime example has been the
Japanese telecommunications sector.
26 For more information on “Safe Harbor” see, CRS Report RS20823, The EU-U.S. “Safe
Harbor” Agreement on Personal Data Privacy, by Martin A. Weiss.
27 CRS Report RS20185, Privacy Protection for Customer Financial Information, by M.
Maureen Murphy.
28 International Trade Reporter. July 25, 2002. p. 1303.
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In the 1970s and 1980s, the U.S. government waged disputes with the Japanese
government on behalf of American producers of telecommunications equipment,
such as mobile phones, claiming that unnecessary government regulations prevented
them from competing in the Japanese market — the regulations were written to favor
local producers. Since the 1990s, the United States has shifted its focus to pressing
Japan to open its domestic market to competition in telecommunications services,
such as long distance services, faxing, and Internet access. The United States has
argued that by permitting more competition, the government would help improve the
efficiency of the telecommunications sector and improve Japan’s capabilities for
meeting the technological challenges of the 21st century. U.S. negotiators also
reasoned that because American telecommunication service providers were highly
competitive, they would be in a good position to compete in the Japanese market if
it were opened up.
The United States has targeted the high fees Nippon Telephone and Telegraph
Company (NTT) has charged non-NTT providers to use its wires. Although NTT
is privatized, most of its shares are still held by the Japanese government. NTT has
a virtual monopoly on a land-wire system that competitors must connect into in order
to provide local and long distance telephone services and other services, such as
Internet connections.
The United States first approached the issue with Japan in 1995, suggesting that
the methodology used by the Ministry of Posts and Telecommunications (MPT) (the
regulatory body for NTT) results in interconnection charges far higher than those
charged in the United States and other industrialized countries, thus keeping non-
NTT providers at bay. Government regulation of the Japanese telecommunications
industry became part of discussions under the U.S.-Japan Enhanced Initiative on
Deregulation and Competition Policy, a framework that President Clinton and
Japan’s Prime Minister Hashimoto formed to negotiate key economic issues between
1997 and 2001. After much, sometimes heated discussions between the United
States and Japan and within the Japanese government, the Japanese MPT agreed to
change the methodology on interconnection charges and to phase in fee decreases.29
The Bush Administration has continued discussions with Japan under a new but
quite different framework, the Regulatory Reform Initiative. The issue remains an
ongoing one.
Implications for U.S. Trade Policy and the Congress
The background information and analysis presented here indicate that services
are a significant component of the U.S. economy, accounting for a major portion of
U.S. employment. It is also a component in which U.S. firms have proved to be
globally competitive. The services sector is also very broad and encompasses an ever
expanding range of economic activities of varying types.
29 Kawabata, Eiji. Still Bilateral After All of These Years: U.S.-Japan Trade Negotiations
in Telecommunications. A paper prepared for the conference on “After the Cold War and
Globalization: Changes in the Japanese International Political Economy.” Institute of
Social Science, University of Tokyo. June 20-22, 2002.
CRS-21
The broad scope of the services sector presents policy challenges to U.S.
policymakers, including the Congress, as the United States works with trading
partners to build regimes under which they will conduct trade in services. Disputes
with the EU over data privacy and with Japan over regulations in telecommunications
services show that the regimes that are developed must be flexible enough to
respond to the the growing challenges presented by technology.
The United States is expected to conclude free trade area (FTA) negotiations
with Chile and Singapore soon, to launch FTA negotiations with other countries in
the near future and to complete negotiations with the FTAA countries in 2005.
Services are or will probably be an important aspect of each of these sets of
negotiations. Furthermore, the United States plays a leading role in the overarching
negotiations to expand the GATS that are part of the Doha Development Agenda of
the new round of WTO negotiations and are scheduled for completion by the end of
2005.
The number of variety of negotiations planned or already underway suggests
that the 109th Congress will have a number of trade agreements to consider and that
services will be an important part of the deliberations. An overview of barriers, of
the disputes in services trade and of the rapidly changing characteristics of the
services sector, all suggest that the negotiations and the agreements they produce will
become increasingly complex. With the passage and enactment of the Bipartisan
Trade Promotion Authority Act of 2002, these agreements are expected to be
considered by Congress under “fast-track”procedures involving limited debate and
no amendments, but with considerable executive branch consultation with Congress
as the negotiations proceed.30
The United States presses its trading partners to liberalize their services sector
as much as possible, because U.S. services providers are very competitive in world
markets. However, to accomplish its objectives, the United States is pressed by its
partners to make concessions that adversely affect “import-sensitive” industries in
the United States. U.S. negotiators and, ultimately, the U.S. Congress will have to
judge whether the agreements strike an appropriate balance for U.S. interests.
30 Contained in Title XXI of P.L. 107-210, the Trade Act of 2002, which was signed on
August 6, 2002.