Services in the Domestic Economy and in World Transactions

A new interest in the role of services in world transactions has been generated by the current efforts of the U. S. Government to reduce barriers to international trade in services.The paper distinguishes four different classifications of economic activities between services and corrmodities.Service industriesthose producing non-storable outputshave been growing in nost domestic economies relative 1-o corrirodity-producing industrIes, though ah)ut half the growth in their share in GDP is attributable to relative price increases.The U.S. policy effort focuses on a somewhat different set of services which are referred to as "private nonfactor services".Exports of such services have not expanded relative to comrrodity extorts.However, their sales by U.S. affiliates abroad are much larger than exports from the tJ.S. and have been growing uor rapidly than affiliates' corrmdity sales.It will not be easy to obtain the consent of foreign countries to a general easing of restrictions on direct foreign investment in service sectors.Also, it may be asked why, if growth is to be the criterion of special negotiating effort, the coimodity-service dichotomy is relevant.Wiy not search for fast qrowing sectors anonq carrodities as Fbever, a successful effort to reduce some foreign barriers ann the compensatory reductions in U.S. barriers that this would entail might provide a mDdest counterweight on the side of liberalization in a world in which restrictions are growing.