Global Trade in Services: Global Trade in Services: Fear, Facts, and Offshoring Fear, Facts, and Offshoring J. Bradford Jensen J. Bradford Jensen McDonough School of Business, Georgetown University McDonough School of Business, Georgetown University Peterson Institute for International Economics Peterson Institute for International Economics Peterson Institute for International Economics Peterson Institute for International Economics Georgetown Center for Business and Public Policy Georgetown Center for Business and Public Policy NBER NBER Otb 18 2011 Otb 18 2011 October 18, 2011 October 18, 2011
57
Embed
Presentation: Global Trade in Services: Fear, Facts, and Offshoring … · 2011. 10. 18. · 55 Management of companies and enterprises 2,915,644 2.2% 11% 56 Administrative and support
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Global Trade in Services: Global Trade in Services: Fear, Facts, and OffshoringFear, Facts, and Offshoring
J. Bradford JensenJ. Bradford Jensen
McDonough School of Business, Georgetown UniversityMcDonough School of Business, Georgetown University
Peterson Institute for International EconomicsPeterson Institute for International EconomicsPeterson Institute for International EconomicsPeterson Institute for International Economics
Georgetown Center for Business and Public Policy Georgetown Center for Business and Public Policy
NBERNBER
O t b 18 2011O t b 18 2011October 18, 2011October 18, 2011
Why?
Retail trade12%
Transportation and warehousing
3%
Wholesale trade5%
Manufacturing10%
Services50%
Mining0%
Utilities0%
Construction5%
0%
Federal Government2%
State and Local Government12%
Source: 2007 Economic Census, Census of Governments and 2006 Occupational Employment Survey
Why?
Retail trade12%
Transportation and warehousing
3%
Business Services25%
Wholesale trade5%
$56,000$56,000
Manufacturing10%
$46,000$46,000
Construction5%
Utilities0% Mining & Ag. Personal Services
Federal Government2%
State and Local Government12%
0%1%
Personal Services25%
Source: 2007 Economic Census, Census of Governments and 2006 Occupational Employment Survey
51 Information 3,428,262 2.5% 12%52 Finance and insurance 6,562,546 4.9% 12%53 Real estate and rental and leasing 2,249,353 1.7% 32%54 Professional scientific and technical services 8 121 171 6 0% 51%54 Professional, scientific, and technical services 8,121,171 6.0% 51%55 Management of companies and enterprises 2,915,644 2.2% 11%56 Administrative and support and waste remediation services 10,153,833 7.5% 38%
61-81 Personal Services 34,595,857 25.6% 23%61 Educational services 562,210 0.4% 75%62 Health care and social assistance 16,859,513 12.5% 24%71 Arts entertainment and recreation 2 070 524 1 5% 30%71 Arts, entertainment, and recreation 2,070,524 1.5% 30%72 Accommodation and food services 11,587,814 8.6% 23%81 Other services (except public administration) 3,515,796 2.6% 8%
Federal Government 2,462,000 1.8% --State and Local Government 16,400,000 12.1% --
S U S CSource: U.S. Census Bureau
What is Trade in Services?What is Trade in Services?
• Modes of service trade:
• Mode 1 – Cross‐border provision, e.g. software produced in one region and shipped via internet to another region
• Mode 2 – Consumption abroad, e.g. consumer travels to resort to consume service
• Mode 3 – Commercial presence in foreign region, e.g. restaurant opens local branch to serve foreign demand
• Mode 4 – Temporary movement of natural persons, e.g. consultant travels to customer to deliver services
Travel Costs
U.S. International Passenger Air Fare Price Trends
Insurance services 6 ……………………………………………………Telecommunications 7…………………………………………………Business, professional, and technical services 16…………………
Computer and information services 8 16……………………………Management and consulting services 9Management and consulting services ……………………………Research and development and testing services 9………………Operational leasing 16…………………………………………………Other business, professional, and technical services 10 16………
Accounting, auditing, and bookkeeping services……………….Advertising……………………………………………………………
Data AvailableArchitectural, engineering, and other technical services………Construction …………………………………………………………Industrial engineering………………………………………………Installation, maintenance, and repair of equipment……………Legal services………………………………………………………
Insurance services 6 ……………………………………………………Telecommunications 7…………………………………………………Business, professional, and technical services 16…………………
Computer and information services 8 16……………………………Management and consulting services 9Management and consulting services ……………………………Research and development and testing services 9………………Operational leasing 16…………………………………………………Other business, professional, and technical services 10 16………Data Available
11Medical services 11…………………………………………………
Other services………………………………………………………….Film and television tape rentals……………………………………
Other…………………………………………………………………
1997Travel 2 ………………………………………………………………
Data AvailablePassenger fares 3 …………………………………………………Other transportation………………………………………………Royalties and license fees…………………………………………Other private services 4 15…………………………………………
Other services………………………Film and television tape rentals
Other……………………………
A new approach
Empirical Approach: Geographic Concentration
Industrial Concentration: Seattle
16
18
20
12
14
Quo
tient
6
8
10
Loca
tion
Q
0
2
4
0Aircraft and
partsAerospaceproduct and
parts
Ship and boatbuilding
Fishing, hunting,trapping
Toys,amusements,and sporting
goods
Empirical Approach: Geographic Concentration
Industrial Concentration: Seattle
16
18
20
12
14
Quo
tient
6
8
10
Loca
tion
Q
0
2
4
0Softwarepublishing
Aircraft andparts
Aerospaceproduct and
parts
Ship and boatbuilding
Fishing, hunting,trapping
Toys,amusements,and sporting
goods
Otherinformation
services
Electronicshopping and
mail-orderhouses
Geographic Concentration of Industries
Geographic Concentration of Industries
0.7
0.8
0.9
Mfg EMP –86% T
Ag/Min EMP –100% T
0.5
0.6
Coe
ffici
ent
Bus Svc EMP –70% Tradable
100% T
0.2
0.3
0.4
Gin
i C
Ed/Health EMP –98% N‐TOth Svc EMP –80% N‐T
0
0.1
0 100 200 300 400 500 600 700 800 900 1000
NAICS Industry
Ag Mining Utilities Construction Manufacturing Wholesale Retail Transportation Services Public Admin
Source: Jensen and Kletzer (2006)
Geographic Concentration of Occupations
Geographic Concentration of Occupations
0.7
0.8
0.5
0.6
ffici
ent
Comp/Math EMP –100% T
Scientific EMP –84% T
0 2
0.3
0.4
Gin
i Coe
f
Social Svc/Ed EMP –100% N-T
0
0.1
0.2
010 15 20 25 30 35 40 45 50 55 60
SOC Occupation
High-End Services Other Services Legal Other Services Production Related Military Specific
Mgt, Bus/Fin Ops, Arch/Eng EMP –65% T
Prod EMP – 80% N-T
New insights
Employment Shares for Tradable Industries
Manufacturing10%
Wholesale Trade
Ag, Forest, Fish1%
Retail Trade2%
Trans/Warehouse3%
2%
Business Services14%
Personal Services3%
Public Administration2%
Non-Tradable Industries63%
S A h ’ l l i 2007 A i C i SSource: Author’s calculations, 2007 American Community Survey
Tradable Services are Different
Worker Characteristics for Select Industries
Non-tradable Industry Tradable IndustryNumber of Workers 2,235,432 12,994,490Average Earnings $44,014 $49,952Share with B.A. 16% 24%
Manufacturing (NAICS 30s)
Share with B.A. 16% 24%Share with Advanced Degree 3% 7%Share in Tradable Occupations 26% 34%
Non-tradable Industry Tradable IndustryProfessional Services (NAICS 50s)
Non tradable Industry Tradable IndustryNumber of Workers 8,038,246 18,430,199Average Earnings $42,226 $66,454Share with B.A. 29% 50%Share with Advanced Degree 7% 17%Share in Tradable Occupations 31% 60%pSource: Author's calculations, 2007 American Community Survey
Source: Author’s calculations, 2007 American Community Survey
Tradable Services are Different
25%
Average Earnings Differentialswith Demographic, Industry, and Occupation Group Controls
20%
15%
5%
10%
0%All Workers Prof. Service Industries High-End Service Occupations
Average Compensation Differences between Non‐VI and VI Affiliates within Sectors
40%
20%
‐20%
0%Manufacturing ‐‐ No Controls Manufacturing ‐‐ Industry and Country
ControlsServices ‐‐ No Controls Services ‐‐ Industry and Country
Controls
‐40%
‐60%
Opportunities?
Impediments to Trade in Services
11 7 illi
14.1 million
Total Employment
11.7 million
Probability of Exporting: 1/4 Probability of Exporting: 1/20
Even controlling for “tradability” i t bli h t h lfservice establishments half as
likely to export
For exporters, exports/sales ratios lower in business
Employmentt E t
6.5 million
ratios lower in business services than manufacturing
at Exporters
1.2 million
Manufacturing Business Services
Source: Author’s calculations from 2002 Economic Census; Manufacturing (NAICS Industries 31-33), Business Services (NAICS Industries 51, 54, 56)
Impediments to Trade in Services
• Requirements for and restrictions on commercial presence
• Economic needs tests• Quotas on number of producers• Requirements for local joint ventures• Licensing/accreditation• Regulation• Differential tax treatment• Government procurement practices
Impediments to Trade in Services
Source: Gootiiz and Mattoo (2009)
Labor Market Impact
Potential Labor Market Impact
100%
Tradable Manufacturing (NAICS 30s) Tradable Business Services (NAICS 50s)
Source: Author’s calculation using 2007 County Business Patterns data.
Labor Market Impact
8,000,000
Net Change in Employment, 1998‐2007 by Sector
6,000,000
2,000,000
4,000,000
of Jo
bs
0Business Services ‐
Non‐tradableBusiness Services ‐
TradableManufacturing ‐Non‐tradable
Manufacturing ‐Tradable
Personal Services Other
Num
ber o
‐4,000,000
‐2,000,000
‐6,000,000
Source: Jensen (2011), Author's calculations, County Business Pattern Data, 1998‐2007
Distribution of Tradable Service JobsTradable Business Service Industries Tradable Business Service Occupations
0.25
0.3
Share of Workforce in Low-wage Tradable Professional Service Industries
0.1
0.15
0.2
0
0.05
10 11 12 13 14 15 16 17
ln(Workforce)
Source: Author’s calculations, 2007 American Community Survey
Concluding Observations
Concluding Observation 1
• US has much to gain and risks limited dislocation from liberalization in services trade– Tradable services skill intensive
– US (still) relatively skill abundant
Concluding Observation 2
• Intellectual Property important for export intensive industries in US– Software
– Audio/visual arts
– Engineering servicesg g
Concluding Observation 3
• Large and fast growing economies impose high barriers to trade in services
Concluding Observation 4
• Huge infrastructure boom coming – big opportunity for tradable service firms/workers– $40 Trillion, most outside of US,
– Architecture, financing, engineering services, water treatment, project management services…
Concluding Observation 5
• These are likely to be (at least partially) government projects and large, fast‐growing economies are not participants in GPA– Interactions between GATS and GPA make liberalization difficult
– Should work with EU and other developed economies to liberalize
Concluding Observation 6
• Education Matters
14
16
Average Years of Schooling by Age Cohort, 2010
KOR RUS BEL
JPN
FIN
DEUAUS
CAN
USA
10
12
CHN MEX
ESPITA
GBRAUT FRA
6
8
IND
IDN
EGY
TUR BRA
2
4
0
yr_sch 60‐64
Concluding Observation 6
• Education Matters
14
16
Average Years of Schooling by Age Cohort, 2010
CHN
EGY
KOR
MEXESP
ITAGBR
AUT BEL
JPN
FIN
FRADEU
AUS
CANUSA
KOR RUS BEL
JPN
FIN
DEUAUS
CAN
USA
10
12
IND
IDN
EGY
TUR
BRA RUS
CHN MEX
ESPITA
GBRAUT FRA
6
8
IND
IDN
EGY
TUR BRA
2
4
0
yr_sch 25‐29 yr_sch 60‐64
What is the potential?
• Thought experiment:– Increase exports/sales ratio in tradable business services to same level as manufacturing
– Many reasons to question this number, but a place to start…
• “Back‐of‐the‐envelope” numbers:Additional Service Exports Jobsp