U.S. Plans to Negotiate Services Trade Pacts with EU, Japan, 18 Others

By Doug Palmer | January 16, 2013
US and Japanese trade

The United States said on Tuesday it plans to negotiate an agreement with the European Union, Japan and 18 other economies to remove trade and investment barriers in services ranging from finance to express delivery.

Washington, the 27-nation EU and a mix of other developed and developing countries have been exploring the idea of launching talks on an International Services Agreement for nearly a year.

Big emerging countries like China, India, Brazil and Russia have shunned the talks. They say services negotiations should be part of a bigger discussion that includes agriculture and manufacturing trade barriers.

The Doha round of world trade talks, which began in 2001 and includes all three components, remains hopelessly deadlocked. That has prompted the United States to explore other options.

“Every $1 billion in U.S. services exports supports an estimated 4,200 U.S. jobs in America,” U.S. Trade Representative Ron Kirk said in a letter notifying Congress of U.S. plans to launch services talks. “If business services achieved the same export potential as manufactured goods globally, U.S. exports could increase by as much as $800 billion.”

Services account for about 80 percent of U.S. employment and the United States is already the world’s largest services exporter, with international sales of about $1.7 trillion annually, an amount equal to about 11 percent of U.S. gross domestic product.

Even so, “international services markets remain heavily restricted and U.S. service suppliers face a wide range of barriers to doing business in overseas markets,” said Mike Ducker, president of international operations for FedEx Express.

Senior congressional lawmakers also welcomed the launch of talks. “As the global economy evolves, services exports like tourism and transportation must be an important part of our trade agenda to create jobs and strengthen our economy here at home,” Senate Finance Committee Chairman Max Baucus said.

The Geneva-based services negotiations will include Australia, Canada, Chile, Colombia, Costa Rica, the EU, Hong Kong, Iceland, Israel, Japan, Mexico, New Zealand, Norway, Pakistan, Panama, Peru, South Korea, Switzerland, Taiwan, Turkey and the United States, Kirk said in the letter to Congress.

The group represents nearly two-thirds of global services and the United States hopes other countries will eventually decide to join the talks, Kirk said.

Washington intends to begin talks on the pact within the next 90 days and will press for rules to promote services trade over the Internet as part of the talks, he said.

The Peterson Institute for International Economics conservatively estimated in April that the proposed agreement could increase annual services exports among 16 core members by $78 billion. Since that study, four more countries have expressed interest in joining the talks.

“In absolute terms, the United States and the European Union would see the largest export gains, around $14 billion and $21 billion, respectively,” the Peterson report said.

If Brazil, China and India were to join the talks, the trade gains would expand by about 30 percent, the report said.

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