![](media/image1.png){width="0.9902777777777778in"
height="1.0277777777777777in"} *[Trade and Services]{.underline}*

**Office of the United States Trade Representative www.ustr.gov**

**Benefits of Trade -- January 2007**

**Services Trade Fuels Growth of U.S. Economy**

**The United States Is a Service Economy**

The United States has the world's largest economy and the highest
per-capita Gross Domestic Product (GDP) among major countries. Corn and
cars may be iconic symbols of American prosperity, but the dominant
sector of the U.S. economy is services.

Today, services are the essential infrastructure of a modern economy.
Telecommunication networks, computer networks, distribution networks,
and other technology-rich inputs underpin a new kind of business
reality. Services businesses are "force multipliers" that expand
opportunities and increase productivity across other sectors of the
economy.

-   In 2005, services industries accounted for 68 percent of U.S. GDP
    and 79 percent of real GDP growth (Fig. 1).[^1] Even in traditional
    industrial and breadbasket states, services provide most of the
    economic activity: In Michigan and South Dakota, for example,
    services industries account for two-thirds of state GDP.[^2]

-   The size of U.S. economy has doubled since 1990, driven mainly by
    the growth of the services sector. Information services,
    professional and business services, and finance and insurance made
    up 21.6 percent of GDP, yet accounted for 38.2 percent of GDP growth
    in 2005 (Fig 2). [^3]

> ![](media/image2.wmf)

-   Eight of every 10 U.S. jobs are in the services sector. Services
    industries provide more new jobs than the rest of the U.S. economy
    combined.

-   Over the past two decades, the services sector has created almost 40
    million new jobs across the full range of services:  software
    engineers, nurses, mortgage specialists, lawyers, instructors,
    mutual fund managers, film and television technicians, insurance
    agents, tour operators, and many others.

-   What has been true for the United States has been true for countries
    around the world: a rise in per-capita incomes is associated with
    the growth of the services sector (Fig. 3).[^4]

![](media/image4.wmf){width="6.643055555555556in"
height="3.457638888888889in"}

This growth is driven by both business and consumer demand. Businesses
demand ever-more efficient communication, finance, energy,
transportation, and distribution services as essential inputs into their
production of goods and other services. Innovation in these critical
"infrastructure" services boost productivity and growth throughout the
economy. Indeed, overall U.S. manufacturing output has increased 57
percent since 1991.[^5]

For consumers, as incomes grow, demand expands for services such as
banking, telecommunications, tourism, and entertainment, and expands
more rapidly than demand for manufactures or agricultural products.

Expanding our service economy, in part through rules-based trade and
investment liberalization, will help sustain and create high quality
jobs for Americans.

**As a Services Economy, Boosting Trade in Services is Essential to U.S.
Economic Growth**

> *One proposition commands almost unanimous assent within the economics
> community. That proposition is that free trade among nations promotes
> economic prosperity.* Benjamin Bernanke, Chairman of the Federal
> Reserve Board

Trade liberalization has contributed an additional \$1 trillion, or
\$9,000 per household, to U.S. annual incomes since 1945.[^6] Trade
lowers costs for consumers and businesses, enhances competition and
innovation, improves choice, quality, and diffusion of technology,
attracts investment, and allows for efficient allocation of resources.
This is no less true for services than it is for goods.

-   International services markets offer huge opportunities for U.S.
    firms and their employees, accounting today for nearly one-third of
    total U.S. exports. The U.S. provides many high-value services to
    users abroad, including financial, legal, engineering,
    architectural, and software development services.

-   The United States is the world's leading services-exporting nation,
    and services exports have nearly doubled since 1994. The demand for
    high-quality services at home contributes to a global comparative
    advantage in the delivery of many different services overseas.

-   While the United States runs trade deficits in goods, it enjoys
    large trade surpluses in services. In 2005, the U.S. recorded a \$66
    billion surplus on services exports totaling \$381 billion. This
    surplus was 22 percent higher than in 2004.[^7]

-   Sales through U.S. services companies operating abroad reached \$490
    billion in 2004.[^8] These international transactions support
    high-paying jobs across the United States.

-   Total elimination of global barriers to trade in services, by one
    estimate, would raise U.S. annual income by over \$460 billion, or
    \$6,830 per family of four.[^9]

[^1]: Bureau of Economic Analysis (May, 2006), Annual Industry Accounts.

[^2]: Bureau of Economic Analysis (November, 2006), Survey of Current
    Business, Regional Data.

[^3]: Bureau of Economic Analysis (May, 2006), Annual Industry Accounts.

[^4]: Bailey, M., D. Farrell, and J. Remes (2006) *The Hidden Key to
    Growth*, The International Economy, Winter.

[^5]: Bureau of Economic Analysis (October, 2006),
    Gross-Domestic-Product-by-Industry Accounts, 1947-2005.

[^6]: Bradford, S.C., P.L.E. Grieco, and G.C. Hufbauer (2005), "The
    Payoff to America from Global Integration." *In*: The United States
    in the World Economy, Institute for International Economics.

[^7]: Bureau of Economic Analysis (November, 2006), Survey of Current
    Business, Transaction Tables.

[^8]: Bureau of Economic Analysis (November, 2006) Survey of Current
    Business, Operations of U.S. Multinational Companies.

[^9]: Stern, R. (2005), The Place of Services in the World Economy, RSIE
    Discussion Paper No. 530.