Trade Affected Workers in the Service Sector: 1987 and 1990

I Introduction At the urging of the United States government, services have become prominent on the agenda of negotiators of multilateral trade liberalization. The primary example of their province was furnished by the Uruguay Round multilateral trade negotiations. Underlying the U.S. initiatives is the presumption that US comparative advantage has shifted to service transactions (Bhagwati, 1987). This shift raises an obvious question regarding the distribution of trade-related gains and losses among various groups in the country. An analysis of the gains and losses is of paramount importance since policymakers have rarely been confronted with the possibility of trade-related adjustment pressures in services. To date, however, few empirical studies(1) have examined the domestic impact of liberalized service trade. Using input output analysis, this study identifies the characteristics of workers most likely to bear the brunt of trade-related employment displacements in the service industry.(2) The demographic profile of three categories of service industries are examined: a) industries which experienced positive net trade-related employment in 1987 and 1990 with a positive trend, b) industries which generated positive net trade-related employment in 1987 and 1990 with a negative trend, c) industries which suffered net trade-related employment losses in 1987 and 1990, albeit at a declining rate.(3) Table 1 SERVICE INDUSTRIES WITH INCREASING (POSITIVE) NET TRADE EMPLOYMENT 1987 1990 Mean Air transport 235.6 465.6 350.60 Computing & data 78.4 96.7 87.55 processing services Gas utilities 49.9 54.19 including combined services Retail trade 30.6 57.2 43.90 except eating & drinking Miscellaneous equipment 13.9 15.13 14.515 rental & leasing Miscellaneous repair shops 6.4 7.7 7.05 Total 414.8 696.5 555.7 A domestic coefficients based input-output model is used to estimate total (direct and indirect) net trade-related employment for 1987 and 1990, the years for which such data are available. Current Population Survey (CPS) data for the 1987-1990 period, is used to identify worker characteristics in the three industries categories. II International Trade in Services To the extent that services are intangible and nonstorable, they can only be traded if applied to (embodied in) objects, information flow, or persons, and these, in turn, must be transported from one country to another (Feketekuty, 1988). Despite the peculiarities of services, most scholars agree(4) that the notion of comparative advantage is central to predicting both the pattern and the consequences of service trade. According to the theory of comparative advantage, countries will expand exports in services which enjoy low opportunity costs, and expand imports of services characterized by relatively high opportunity [TABULAR DATA FOR TABLE 2 OMITTED] [TABULAR DATA FOR TABLE 3 OMITTED] [TABULAR DATA FOR TABLE 4 OMITTED] costs. The resulting gains from trade derive from asymmetries in the conditions of production across nations such as differences in relative factor abundance, differences in access to technology, or differences in the scale of production. Most research on trade in goods has focused on disparities in relative factor endowments. As applied to services, this strand of trade theory predicts that skill-abundant countries such as the U.S. will export skill-intensive services and will import services requiring large amounts of less-skilled labor. Consequently, trade-related output and employment gains will tend to be concentrated in skill-intensive service industries. …