classification of services, which makes it harder to secure free cross-border trade through the GATS negotiations. One example is cross-border trade of organizational functions like payroll services by both the manufacturing and the services industries, and the ensuing slicing of the core service production into several segments<sup>3</sup> .

**Figure 1: Regional Distribution of Business Services Exports (billion US dollars)**

<!-- Start of picture text --> 600<br>199 0 1995 20 00 2001 531<br>515<br>500<br>400 375<br>300 266<br>200<br>129.6<br>114.1<br>90.6<br>100 58.1<br>11.1 14.0 21.2 18.9 2.9 3.8 14.3 16.9 5.9 10 .7 16.2 15.4<br>0<br>Africa and the M iddle East So uth A sia LA C East As ia and the Pac ific OEC D<br>Source: IMF Balance of Payments Statistics; Note: -The “Business Services” category includes Total<br>Services minus Transportation, Travel and Government Services. Alternatively, Business Services<br>consist of: Communication, Construction, Insurance, Financial, Computer & info, Other business,<br>Personal, cultural and recreational services, as well as Royalties and License fees.<br><!-- End of picture text --> No reliable estimates are available for trade in _business process outsourcing_ services, but the IMF Balance of Payments category _business services_ covers trade in all services other than _transport_ and _travel_ services. As Figure 1 shows, most exports of business services still originate in OECD countries. But Figure 2 reveals that while the exports of the European Union and the United States have grown at respectively 6 and 11 per cent per annum in the second half of the 1990s, the exports of countries like India, Israel, Dominica and Brazil have grown at rates above 20 per cent per annum. Moreover, many other developing countries – including Mauritius, Nicaragua, Barbados and China – have witnessed high rates of growth.

India has unquestionably been the leader, first developing a reputation as a premier location for software development, still its main cross-border IT-enabled service export. Two-fifths of the Fortune 500 companies outsource software requirements to India and work related to the year-2000 problem alone earned Indian companies $2.5 billion<sup>4</sup> . In 2002, India’s IT industry grew 29 percent – faster than the growth of this industry in any other country. More recently, however, BPO services that provide intermediary inputs throughout the production process (for both goods and services) have grown much faster. While classical IT services, such as software development, grew last year by a ‘mere’ 22 percent, IT-enabled services such as outsourcing expanded by 65 percent<sup>5</sup> . The latter typically involve India-based service operations providing an input or support service to the core activity/organizational functions of the importing company - e.g. WIPRO or GE Delhi provide payroll and customer care functions to the headquarters and affiliates of General Electric, GE.

> 3  Database entry or payroll services for instance are support services nearly all manufacturing and service industries draw on.

> 4  "Big companies look to India for software", in: _Financial Times_ , July 3, 2000.

> 5  Financial Times (5 February 2003).

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