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February 4, 2009
TRADE POLICY ALALYSIS
Removing Barriers to Services Trade Will Bring Significant Gains

WASHINGTON – Although not as high profile as other areas of world trade, removing barriers to services trade will likely lead to lower prices, improved competition and choice for consumers, and improved productivity, according to a new Cato Institute Trade Policy Analysis released today.

In "A Service to the Economy: Removing Barriers to ‘Invisible Trade’,” Cato’s Center for Trade Policy Studies analyst Sallie James points out that “an inefficient and inadequate services sector is a de facto tax on production. Because many services are an input to the production of other goods and services, the indirect effects or lowering barriers can be especially pervasive.”

According to recent international studies, the global benefits from freeing trade in services would vastly eclipse the gains from liberalizing trade in manufactured and agricultural goods. And, while developing countries have much to gain from opening their services markets to foreign competition, developed countries will gain from their own reforms.

“While American banks, telecommunications, logistics and express delivery firms are world-class, U.S. rail, road, air and maritime transport industries remain protected, with a predictable effect on costs and competitiveness,” writes James. “While exports of services will likely continue to grow despite the remaining obstacles abroad, American consumers and firms can still benefit from further reforms at home.”

Trade Policy Analysis #38

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January 13, 2009
FREE TRADE BULLETIN

"Shipping Jobs Overseas” or Reaching New Customers? Why Congress Should Not Tax Reinvested Earnings Abroad
by Daniel Griswold

Politicians are making a huge mistake by targeting alleged “tax breaks to corporations that ship jobs overseas.” In a new Free Trade Bulletin, the Cato Institute’s Daniel Griswold finds that U.S. corporations that invest in overseas production are actually more likely to increase employment and production at their U.S.-based facilities. “Investing abroad is not about ‘shipping jobs overseas,’" Griswold writes. “In fact, the evidence and experience of U.S. multinational companies points in the opposite direction: foreign and domestic operations tend to compliment each other and expand together.”

Investing in foreign affiliates has become the primary way that U.S. companies sell their goods and services abroad, according to the new Cato study. For every $1 billion in goods that U.S. producers exported in 2006, they sold $6.2 billion through majority-owned foreign affiliates. Close to 90 percent of the goods and services produced by those affiliates were sold to customers either in the host country or exported to consumers in third countries outside the United States. Griswold concludes that repealing the current deferral for foreign earnings would cripple the ability of U.S. corporations and their workers to compete in foreign markets. [more]