Basic Categories of
International Trade in
Services
Chapter Two
Basic Categories
of
International Trade
in Services
Learning Objective
• Grasp the definition and characteristics of
international trade in services;
• Understand the classifications and features
of international trade in services;
• Familiarize with the statistical methods of
international trade in services.
1. Concept
&
Characteristics
1.1 Concept
▲Traditional definition:
When a labor in one country supplies
service to the service demander (natural
person, legal person and other organization)
of another country to obtain foreign
currency income following a compensated
and voluntary principle, which constitutes
the service export.
Trade in export service
supply
Labor
Service
demander
gain forex income
one country
another country
buy
Labor
pay fees
Trade in import service
Service
demander
On the contrary, the demanders of
one country become the consumers
of the services, supplied by the
service producers of another country,
thus service import has been formed.
The definition involves service
suppliers (labors), nationality,
national border, residents and nonresidents.
So, three fields should be clarified:
(1) Connotation and extension of
“Labor”: all the service suppliers,
including individual suppliers
and group suppliers.
individual supplier
group suppliers
(2) Different nationalities of “labors” and
“services demanders”: direct investment
and local employees
Direct
local
Investment
labors
Local suppliers & local demanders
one country
Ps: Local labors: service suppliers, e.g. foreign investors who
represent the foreign affiliation to supply services.
(3) Whether service crosses border and
whether “national person” moves:
Telecom:
Tourism
service needs to be crossed
national person does not need to be moved
national person needs to be moved
&
medical care
service does not need to be crossed
▲ Definition in
US-Canada Free Trade Agreement:
Service is defined here as an
“appointed service”, provided by a
person representing other contracting
parties in its own territory or into
territory of another contracting party.
Appointed services:
⑴ purchase activities:
production, distribution, sales, etc.
⑵ restrictions of contracted countries:
market permission & distribution systems
⑶ comprehensive process of forming commercial
(business) presence, including distribution, sales
transferring, etc.
⑷ investment or related activities: managing,
organizing, maintaining or transferring, loaning,
etc.
▲ Definition in BOP
BOP :Balance of Payment
(国际收支平衡表)
Service in regular items in BOP refers to the
trade in services between residents and nonresidents.
BOP: currency balance of income and
expense of one economic unity (one
country or one region) to another
economic unity within one year.
＊regular item: non-invested item
＊capital item: capital flow item
＊reserve assets: national reserves
＊errors and omissions: charge standard,
currency translation, exchange rate
▲ Definition in GATS
GATT 《关税与贸易总协定》 & GATS 《服务业贸易总协定》
(1) GATT : 《General Agreement on Tariff and Trade 》
※ Definition: one multilateral international agreement
on the relative regulations on tariff and trade
among different governments.
※ Time: Signed on 30th Oct,1947 in Geneva (日内瓦),
put in trial effect from 1st Jan,1948
※. Goal: to eliminate the different treatment in the trade,
promote the trade liberalization by reducing the
trade tariff and barriers so that the world can
make the best of recourses to enlarge the
production and circulation of products.
Uruguay Round Talk
＊Time: be hold in Sept.1986 by ministries of GATT;
be the largest negotiation so far on trade,
lasting for 7 years and half, with the end in
April, 1994 in Morocco（摩洛哥）.
＊Goal : be a new negotiation to reform the multilateral
trade system;
＊Content: involve almost all the trade in the world,
from toothbrush to yacht, from bank to
telecom, from wild rice gene(野生水稻基因) to
AIDS treatment
＊The number of participants were from 103 to 125.
(2) GATS: 《General agreement on trade in services》
﹟ Definition: the business activities of cross-border
service trade,
﹟ a kind of transaction action by which service
suppliers from one country offer the service to
consumers in another country and gain the foreign
currency income in the form of business or in the
way of commercial presence of natural persons.
﹟ This definition has been accepted popularly by all
the countries, which contains four ways of trade in
services:
⑴ Cross-border supply（跨境交付）:
Suppliers in member country A supply service
from the territory of its own to customers in
the territory of member country B.
supply service
A
by
Service suppliers
member country A
telecom
internet
computer
B
Service demanders
member country B
Eg: audio, broadcasting, stock (share) finance, tele-message
⑵ Consumption abroad（境外消费）:
Suppliers in member country A supply service inside
its own country border to the coming consumers of
member country B.
A
B
Service
go to buy service
Service
demanders
suppliers (reception)
member country A
member country B
Eg: ① tour reception (supply tour service to foreign tourists)
② patient reception (supply medical service & facility to foreign patients )
③ foreign students reception (supple educational service)
⑶ Business presence（商业存在）:
Suppliers in member country B move to set
up constitutions in member country A to
supply service with gaining in country A.
A
B
Move to set up
Service suppliers ★
Service demanders ★
member country A
Eg: joint venture investment:
cooperation:
sole proprietorship:
member country B
★ Service suppliers ( labors):
(1) From homeland
(2) from host country
★ Service demanders (buyers):
(1) From host country
(2) from other countries
⑷ Movement of personnel（自然人流动）:
Individuals in member country A move to member
country B to supply service inside B country to the
consumers, both of Country B and coming from member
country C.
Out
Movement
C
into
B
A
Service consumers
A
Individual service suppliers
member country C
member country B
A
member county A
Individual service suppliers
Move to
A
1.2 Similar concept of international trade
in services
★ International trade in services
&
International trade in goods
★ International trade in services
&
Service industry
★ International trade in services
&
International trade
in invisible services
★ International trade in services
&
International service interflow
★ International trade in services & that in goods
Trade
★Productive
elements:
Visible products
★ Productive elements:
Personnel
capital
Technology
Knowledge
Additional service
★ Trade in services & that in invisible services
• Invisible trade
Direct investment(3/5)
Trade in services
Overseas
Remittance
(侨汇)
indemnity
(赔款)
donation
from the view of statistics
★ Trade in services & service industry
service industry
trade in services
Distribution
service
Consumer
service
Consumer
service
Government
service
Productive
service
Productive
service
Distribution
service
★ International trade in service
&
international service interflow
Service interflow
Government
Job abroad
interflow
Consumption
abroad
Cross boarder
service
Income &
expense
Cross broader
flow
Service trade
1.3 characteristics of
international trade
in services
◆ intangibility(无形性):
Target species of service trade is intangible.
◆ synchronism & internationalism (同步性和国际性):
Productions and consumptions simultaneously
happen
◆ flexibility& elusiveness (隐蔽性):
※ The approach of non-tariff barriers is the way to protect
service trade, which can make different regulations for
different products, such as technical standard,
accreditation (资格认证)
※ The restriction to service trade means market permission
and domestic legislation, which can not be negotiated among
different countries.
◆ complexity:
※ wide range of trade
※ management of nature person movement
※ administrative regulation applying to trade development
2. Classifications
of
international trade
in services
2.1 statistic classification
use: an operatively applicative classification
▲ aim: record and measure the scale and structure of the trade
▲
from one country to other countries, in a certain period of time.
▲
approach:
by the form of regulation and balance of
payment account unified by IMF (International Monetary Fund国
际货币基金组织 )
▲ types:
trade in factor services
trade in non-factor services
(1) Trade in factor services:
※ related capital items in the balance of
international payment account: a trade flow in
services related to international flow of capital or
financial assets.
※ an international transfer in the flow of capital
earnings
※ approach:
A. international investment
B. international credit
A. International investment
★ Direct investment:
＊ international investment to obtain the
control power in the direct management of
capitals
＊ two earning flows:
--- flow of capital elements
i.e. interests and dividends(利息和股息)
--- flow of administrative elements
i.e. profit (利润)
★ Indirect investment
( international
portfolio investment国际证券投资):
＊ international securities investment(国际证券投资) to
gain the interests or dividend yield
financial capitals
(股息收益)
＊in international stock market:
buy stocks or bonds launched by foreign
enterprises
buy government bonds (政府债券) launched by
foreign government
of
B. International credit
Three types of credit:
＊ folk credit: commercial credit & bank credit
＊ international financial institution credit:
global & regional international financial institution
credit, e.g. World Bank, IMF, Asia Development
Bank, Latin-American Development Bank, etc.
＊ inter-government
credit: credit to foreign
government with preferential interest rate
(2) Trade in non-factor services:
●
●
all the trade in services except the one in factor
services
Formula:
Flow of non-factor service trade
﹦flow of international trade in service － flow of trade in factor
service
﹦(flow of regular item － flow of trade in goods － unilateral
transfer payment) － flow of trade in factor service
Illustration and tables are coming:
Balance of payment account (IMF format)
1. Current items (经常项目)
1）visible trade (商品/有形贸易)
2）trade in services (服务贸易)
3）unilateral transfer (单方面转让)
2. Capital items (资本项目)
1）long-term capital (长期资本项目)
2）short-term capital (短期资本项目)
3. Balance or settle accounts (平衡或结算项目)
1）errors and omissions (错误和遗漏)
2）official reserves (官方储备)
illustration
International trade in services
International trade in services
International trade
in factor services:
International direct investment
& indirect investment
international trade in non-factor services
Statistic classification
Transportation/communication 运输、通讯
Non-factor
trade in
services
accounts
非要素服务
贸易项目
International
trade in services
国际服务贸易
Tourism (hotels and restaurants)
旅游（旅馆和餐厅）
Financial service 金融服务
Insurance service 保险服务
Professional services (intellectual property,
consultation, management, technical services)
专业服务（知识产权、咨询、管理、技术服务）
Privileged use items (license)
特许使用项目（许可证等）
Other private services 其他私人服务
Factor
trade in
Services
accounts
要素服务贸
易项目
Dividend (incl. profits) 股息（包括利润）
Interests 利息
Foreign re-investment earnings 国外再投资收益
Other net capital earnings 其他资本净收益
(3) Features of statistic classification
Merits:
★ Make the contents of service
trade comprehensive; The willbe item will be classified either
into factor or non-factor
statistics.
★ Simplify the statistics of capital
flow items (in the international
balance of payment account );
★ Make statistics of investment
earnings relatively independent
(without the interference of
international flow of investment
and credit ).
Demerits:
★ The definition of “factor” is in
narrow sense. It only refers to
capital factor. The labor factor
and land factor are not included.
★ Obscure the demarcation line(分
界线) between the im-export of
service products & transnational
investment ( flow) of productive
elements in service industry. It is
hard to tell the difference
between trade and investment.
Debate on two
(for uttermost economic benefit )
:
(1) Essence of “factor”: investment service
or labor service
※ Developed countries: all the fields around international
investment should be classified into international trade in
services.
※ Developing countries: The flow of cross-border labors is
the basic factor. This should be the core of trade in
services.
(2) Contents of negotiation: cross-border
trade in services or investment trade in
services
※ Developed countries: international trade in services should
include not only cross-border service trade but also
investment which can promote the trade between countries.
※ Developing countries: The above idea shows the developed
countries want to get the national treatment so that they
can permeate into developing countries. The negotiation
should be only limited into cross-border trade.
Statistic classification:
▲ practical classification
▲ more experienced
▲ in lack of theory
Logistic classification:
▲ theoretical classification
▲ more rigorous(严密的) and reasonable
▲ easy to make the research
2.2 logistic classification
(1) By the standard whether trade in services is
accompanied by trade in tangible goods （以是否伴随有形货物
贸易为标准）
(2) By the standard of service industry
（以服务业为标准）
(3) By the standard of factor intensity（以要素密集度为标准）
(4) By the standard of production process（以生产过程为标准）
(5) By the standard of goods（以货物为标准）
(1) By the standard whether trade in
services is accompanied by trade in
tangible goods （以是否伴随有形货物贸易为标准）
★ international trade in additional services
refers to international trade in productive services put into
basic chain of productive management in the enterprises.
E.g.:
① in upstream: feasibility study, risky capital formation,
market research, product conception and design (产品构思与设
计)
② in midstream: quality control and inspection, equipment
leasing and supplying, equipment maintaining and repairing
employee engaging and training, software collection, law, real
estate managing, insurance, security, logistics services
③ in downstream: advertisement, transportation, direction
for use, after-sale services including compensation
★
International trade in core services
refers to service trade irrelative directly to
international trade in goods and investment. In the
trade market, such trade itself is the core demands
and supplies.
① long-distant services
e.g.: international communication, internet, telegram,
fax, audio-service,
② face-to-face services
e.g.: international medical services, international
tour services, third- country trade
(2) By the standard of service industry
（以服务业为标准）
＊ bank and financial services
＊ insurance services
＊ tour services
＊ air parcel and port traffic services
＊ architecture and engineering services
＊ professional services
＊ information, computer and telecom services
(3) By the standard of factor intensity
（以要素密集度为标准）
＊ capital intensive services
e.g.: air parcel, telecom, architecture and engineering
services
＊ technical and knowledge intensive service
e.g.: bank, finance, law, accountant, audit(审计),information
services
＊ labor intensive service
e.g.: tour, construction, repairing, consumption services
(4) By the standard of production
process（以生产过程为标准）
＊ service before the production process
E.g.: feasibility study, risky capital formation, market research,
product conception and design (产品构思与设计)
＊ service in the production process
E.g.: quality control and inspection, equipment leasing and
supplying, equipment maintaining and repairing
employee engaging and training, software collection, law, real
estate managing, insurance, security, logistics services
＊ service after the production process
E.g.: advertisement, transportation, direction for use, after-sale
services including compensation
(5) By the standard of goods（以货物为标准）
＊services expressed by goods or materialization:
e.g.: film, TV, books, computer, etc.
＊
services to supplement goods:
e.g.: storage and transportation, financial management,
advertisement
＊
services accompanying and replacing goods:
e.g.: franchise management, equipment and finance
leasing, equipment repairing
＊service with the function of goods but irrelated to goods:
e.g.: telecom, tour, hotel and restaurant
3. Statistics
of
international trade
in services
3.1 Development of statistics of
international trade in service
＊1987: questionaire
UNSO--United Nations Statistical Office(联合
国统计局)
IMFSO—International monetary Fund
Statistical Office(国际货币基金组织统计局)
＊1988-1989: taking advices and modification
improving the statistics
＊1993: independently listed in
Balance of Payments Manual 5 (BPM5)
BOP statistics (cross-border trade)
＊1995: after the end of Uruguay Round, GAT signed to be
effective (4 ways to supply services)
＊1996 《Manual on Statistics of International Trade in
Services》 drafted by experts from
UN (United Nations联合国)，
EEC (European Economic Community欧洲共同体委员会) ，
IFM (International Monetary Fund国际货币基金组织，
OECD (Organizations for Economic Cooperation and
Development经济合作与发展组织)，
UCTD (United Nations Conference on Trade and
Development 联合国贸易和发展会议)，WTO (World
Trade Organization世界贸易组织)
＊1999，deliberate and seek for opinions get reply
from more than 70 countries
＊2002, be ratified
⊕ range: follow GATS, 4 mode to cross-border trade,
consumption abroad, business presence and
natural person movement
⊕ operation: based on BOP (Services Transactions
between Residents & Non-residents) and FATS
statistics (Foreign Affiliates Trade in Services)
⊕ aim: based on <Manual>, enhance the statistics data
collection and publish
⊕ effectiveness: over 140 countries report the statistics
and 25 countries start FATS statistics
3.2 Statistic System
(1) BOP statistic : Balance of Payment
(2) FATS statistic: Foreign Affiliates Trade in
Services
(3) Simplified statistics: Four modes in GATS
(1) BOP statistics (Balance of Payment):
services transactions between residents and nonresidents
Residents refer to
＊ natural person who lives in the country for over 1 year
＊enterprise legal person with business places to supply
goods and business.
i.e. Cross-border trade: cross-border supply, consumption
abroad, movement of personnel
BOP statistics
①Transportation/communication 运输、通讯
Non-factor
trade in
services
accounts
非要素服务
贸易项目
International
trade in services
国际服务贸易
②Tourism (hotels and restaurants)
旅游（旅馆和餐厅）
③Financial service 金融服务
④Insurance service 保险服务
⑤Professional services (intellectual property,
consultation, management, technical services)
专业服务（知识产权、咨询、管理、技术服务）
⑥Privileged use items (license)
特许使用项目（许可证等）
⑦Other private services 其他私人服务
Factor
trade in
Services
accounts
要素服务贸
易项目
①Dividend (incl. profits) 股息（包括利润）
②Interests 利息
③Foreign re-investment income 国外再投资收益
④Other net capital gains 其他资本净收益
(2) FATS statistics– Foreign
Affiliates Trade in Services
trade in services by investment in
foreign countries: all the affiliates
transactions (goods and services) in
host countries
i.e. transaction with home countries; transaction with other
residents in host countries or from other countries
Core: service trade within the border
Illustration
cross-border trade
Home
country in goods & services
residents
Host
Country
(Affiliate)
residents
cross-border trade
in goods & services
residents
Core :
Non-cross-border
transaction
Other
countries
Two ways of FATS:
＊ Import-FAT(内向统计) : foreign
investment inside home country
＊Export-FAT(外向统计): home investment
in other countries
(3) GATS statistics:
＊ most authoritative definition
＊ combined with BPM5 and FATS
＊ only for the aim of statistics, not for legal
interpretation
＊ the 3rd mode: affiliate ( if it is similar to
commercial presence)
＊ all of the 1st and 2nd transaction between
part of the 4th
residents and non-residents
◆Four modes in GATS
Modes（模式）
Cross-border supply
跨境供应
Scope of statistics（统计范围）
BPM5: transportation (large proportion), communication service, insurance
service, financial service, components of fees for use of franchise and
license 特许使用费和许可费组成部分, computer and information services,
other commercial services, private, cultural and recreational service
Consumption abroad
境外消费
BPM5: travel (not including goods purchased by travelers), repairs of
ships (goods) at foreign ports, part of transportation (support and
auxiliary service for ships at foreign ports) （在外国港口对船只进行支持和
辅助服务）
Commercial
presence商业存在
FATS: all categories in FATS and ICFA（FATS和 ICFA各类别）
BPM5: part of building services
Movement of natural
Persons 自然人流动
BPM5: part of computer and information services; other commercial
services; private, cultural and recreational services; building services
FATS (supplementary information): employments expatriated to foreign
affiliates 外派到国外附属机构的就业
BPM5(supplementary information): flows related to labor
Other sources: statistics from immigration and employment offices
3.3 Statistics of China
International Trade in Service
▲ Background:
＊started late
＊in-normative statistics:
only BOP, no FATS
＊BOP statistics:
not elaborate in data classification,
needs to be consummated
▲ Status quo:
＊ China BOP is institutionalized.
→1982, worked out and published BOP
data
→1996, carried out gradually 《Procedures
Governing the Declaration and Statistics on International
Receipts and Payments》《国际收支统计申报办法》
→So far, set up a data collection
system
＊ mature import FATS and export FATS:
Ministry of commerce has set up different statistics system for
FATS.
＊financial institutions :cover parts of
FATS
中国银行监督委员会： China Banking Regulatory Commission
中国保险监督委员会: China Insurance Regulatory Commission
中国证券监督委员会： China Securities Regulatory Commission
＊lay the foundation: financial FATS
＊ 2008.01.01, put in effect
《Statistic System of International Trade in Services 》
＊ be subject to：
①Foreign Trade Law of The People’s Republic of China
《中华人民共和国对外贸易法》
②Statistics Law of The People’s Republic of China
《中华人民共和国统计法》
＊ be in accord with
①《General Agreement on Trade in Services》
《服务贸易总协定》
②《Manual on Statistics of International Trade in Services》
《国际服务业贸易统计手册》
Chapter Conclusion
(1) International trade in services has different
definitions:
＊ traditional definition,
＊ GATS definition,
＊ <US-Canadian Free Trade Agreement>
definition
(2) GATS has four modes of definition:
＊ Cross-border supply
＊ Consumption abroad
＊ Commercial presence
＊ Natural personnel movement
(3) Compared with trade in goods, international
trade in services has the features such as:
＊ intangibility of trade target;
＊synchronism & internationalism of production and
consumption;
＊ flexibility & elusiveness of trade protection;
＊ complexity of management.
(4) The classifications of international trade in
services are theoretical and logical:
＊ Theoretical classification (practical):
① trade in factor services and
② trade in non-factor services
＊ Logical classification (theoretical): 5 types
① by the standard whether trade in services is
trade in tangible goods
② by the standard of service industry
③ by the standard of factor intensity
④ by the standard of production process
⑤ by the standard of goods
accompanied by
(5) Statistics of international trade in services are
the bases for theoretical research and
information resources for management.
＊BOP statistics: transaction between residents and
non-residents
＊FATS statistics: commercial presence of
affiliates
Chapter Quiz
•
Briefly review the GATS definition of
trade in services.
•
What are the characteristics of
international trade in services?
•
Describe the merits and demerits of
statistically operating classification and
theoretically logical classification.
• What are the characteristics of BOP
statistics and FATS statistics?
• Give a picture of the status in quo
and features of China’s statistics on
international trade in services.