International Provision of Trade Services, Trade, and Fragmentation

The author examines the special role that trade liberalization in services industries can play in stimulating trade in both services, and goods. International trade in goods requires inputs from such trade services as transportation, insurance, and finance, for example. Restrictions on services across borders, and within foreign countries add costs, and barriers to international trade. Liberalizing trade in services could also facilitate trade in goods, providing more benefits than one might expect from analysis merely of the services trade. To emphasize the point, the author notes that the benefits for trade are arguably enhanced by the phenomenon of fragmentation. The more that production processes become split across locations, with the fragments tied together, and coordinated by various trade services, the greater the gains from reductions in the costs of services. The incentives for such fragmentation can be greater across countries, than within countries, because of the greater differences in factor prices, and technologies. But the service costs of international fragmentation can also be larger, especially if regulations, and restrictions impede the international provision of services. As a result, trade liberalization in services can stimulate the fragmentation of production of both goods, and services, thus increasing international trade, and the gains from trade even further. Since fragmentation seems to characterize an increasing portion of world specialization, the importance of service liberalization is growing apace.

Bibliographic Details

Main Author:	Deardorff, Alan V.
Language:	English en_US
Published:	World Bank, Washington, DC 2001-02
Subjects:	AIRCRAFT, AIRLINES, APPROPRIATE TECHNOLOGY, CARGO, CARRIERS, COMPARATIVE ADVANTAGE, CONSTRUCTION SERVICES, CONSUMER SURPLUS, CONSUMERS, COST SAVINGS, COUNTRY OF ORIGIN, CURRENCY, DEMAND CURVE, DOMESTIC FIRMS, DOMESTIC MARKET, DOMESTIC PRODUCERS, DOMESTIC PROVIDERS, DOMESTIC REGULATIONS, DOMESTIC SUPPLIERS, ECONOMIES OF SCALE, ECONOMISTS, EQUILIBRIUM, FACTOR ENDOWMENTS, FINANCIAL CRISIS, FINANCIAL INSTITUTIONS, FINANCIAL SERVICES, FIXED COSTS, FOREIGN COMPANY, FOREIGN EXCHANGE, FOREIGN MARKETS, FOREIGN PROVIDERS, FOREIGN SERVICE PROVIDERS, FOREIGN SERVICES, FOREIGN SUPPLIERS, FREE TRADE, GATS, GATT, IMPORTING COUNTRY, IMPORTS, INCREASING RETURNS, INCREASING RETURNS TO SCALE, INSURANCE, INSURANCE COMPANIES, INSURANCE SERVICES, INTERNATIONAL EXCHANGE OF GOODS, INTERNATIONAL TRADE, INTERNATIONAL TRANSACTIONS, LIBERALIZATION OF TRADE, LIBERALIZATION OF TRADE IN GOODS, LIBERALIZING TRADE, LOADING, MARKET ACCESS, MULTILATERAL TRADE, MUTUAL RECOGNITION, NATIONAL SUPPLIERS, OPENNESS, PRICE OF IMPORTS, PRODUCER SURPLUS, PRODUCERS, PRODUCTION PROCESSES, PROFESSIONAL SERVICES, PROPERTY RIGHTS, PROVISION OF SERVICES, RECOGNITION AGREEMENTS, SERVICE ACTIVITIES, SERVICE PROVIDER, SERVICE SECTORS, SERVICE TRANSACTIONS, SERVICES, SERVICES INDUSTRIES, SERVICES LIBERALIZATION, SERVICES PROVIDERS, SERVICES TRADE, SHIPMENTS, SHIPPING, SHIPPING COSTS, SPECIALIZATION, TARIFF BARRIERS, TARIFF REDUCTION, TARIFF REVENUE, TRADE, TRADE AGREEMENT, TRADE BARRIERS, TRADE COSTS, TRADE IN SERVICES, TRADE LIBERALIZATION, TRADE NEGOTIATIONS, TRADE POLICY, TRADE SERVICES, TRADE THEORY, TRANSPORT COSTS, TRANSPORT SERVICES, TRANSPORTATION SERVICES, TRAVEL SERVICES, TRUCKS, URUGUAY ROUND, VERTICAL SPECIALIZATION, WAGES, WELFARE EFFECTS, WORLD PRICES, WORLD TRADE, WORLD TRADE ORGANIZATION, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2001/02/1121177/international-provision-trade-services-trade-fragmentation https://hdl.handle.net/10986/19703
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