U.S. Services Trade, Employment, and Competitiveness
NBR Analysis vol. 17, no. 5

U.S. Services Trade, Employment, and Competitiveness

by Brett Theodos and Robert Bednarzik
December 1, 2006

This study examines the changing nature of U.S. trade, focusing on cross-border services trade and corresponding job trends and implications for U.S. global competitiveness.

Trade has been an increasingly important element in driving the growth of the U.S. economy. The United States is the world’s largest exporter of services and enjoys a large trade surplus in services. Output of services in the United States for the first time exceeded the output of goods in the late 1960s, and the gap continues to widen. The U.S. economy is now clearly a service economy. Yet currently there is little understanding of the role of trade in services in overall U.S. employment trends. The purpose of this paper is to explore the connection between U.S. services trade and both employment trends and U.S. competitiveness.

Understanding the links between U.S. services trade and employment is critical because of political concern, that has clearly grown as the trade deficit has reached record levels, over the effects of international trade on U.S. industries and workers over the past ten years. Moreover, the anxiety of service industry workers has converged with the anxiety of factory workers fearful of losing their jobs due to imports or the moving of their jobs offshore. The growing integration of the United States with the world economy is broadening rapidly beyond manufacturing to the service sector as well. For the United States and U.S. companies to remain internationally competitive requires accepting this inescapable trend. Given the growing importance of services in U.S. global competitiveness, as well as concerns over services offshoring, services trade is a vital issue that researchers and policymakers need to understand more thoroughly.

Due to the lack of systematic data of services trade by industry, however, literature linking trade in services and employment is sparse. This study seeks to make maximum use of the existing services trade data by connecting service type to service industry, constructing a list of trade sensitive industries, and by tracking overall job trends in trade–intensive industries. The essay also profiles these industries’ workforces with a special emphasis on skill, earnings, and educational levels.

The research presented here draws three key findings. First, the private services industries heavily involved in trade have been concentrated in transportation and travel–related services and increasing in professional– and financial–related services. Overall service industries have been more apt to be involved in exporting than importing, reflecting the competitiveness of U.S. service exports. Both exports and imports of private services are growing, yet in recent years, imports have advanced at a greater rate. Second, in…