A Study On The Pattern Of International Trade In Services

A Study on the Pattern of International Trade in ServicesThis study uses an analysis model formed from the combination of product differentiation model, factor endowments model and new technology trade model to analyze international trade patterns in service, so as to provide the basic theory of the development of international trade patterns in service.In order to achieve the purpose, this study uses normative analysis, empirical analysis, qualitative analysis, quantitative analysis and comparative analysis. It uses bilateral international trade in services as research object through129countries from1999to2008. According to the classification of United Nations Conference on Trade and Development (UNCTAD), this study includes developed countries (36countries), developing countries (93countries) and11industries such as transportation services, travel services, communications services, construction services, insurance services, financial services, computer and information services, royalties and license fees services, other business services and personal cultural and recreational services. The statistical data analysis uses the UN Service Trade Statistics Database and UN Commodity Trade Statistics Database, OECD, UNCTAD, IMF, UNESCO, IBRD and WIPO(The World Intellectual Property Organization). Statistical package used for quantitative analysis is Stata/SE11.0for Windows.First of all, this study collected statistics of trade in services by all the countries in30years to analyze the treunds of all industry on trade in services. Moreover, this study. through market share, calculated the comparative advantage index, export similarity index and MSER-ESDR index to analyze level of economic development and advantage of the trend of all industries on trade in services. The result of this study is that although the scale and comparative advantage of trade in services to developing countries continues grow, the comparative advantage of developed countries still occupies a high position.This study uses the generalized gravity model to analyze the characteristics of trade in services patterns and the results can be summarized as follows.First, compared to GDP in the home country, the international service pattern is affected by per capita GDP in the trading country. Compared with per capita pattern in trading country, international trade in services follows the characteristics of the size of the market by exporting country (GDP pattern).Second, countries with large market size become net exporters with home market effect that is the same as prior studies, based on the object of the world trade in services. However, if there is difference in level of economic development between partner countries, the export in home country has home market effect by considering the model on the level of economic development. Compared with domestic market, if there is similar level of economic development, there is an inverse effect of the home market effect by the size of overseas markets.Third, under trade in services between the developed countries, the services' production of home country shows the characteristics of labor-intensive, the exporting services are necessities from home country to trading partners. In contrast, under trade in services between the developed and developing countries, the exporting services are luxuries from home country to trading partners.Fourth. In order to examine the interconnectedness between the home market effect and factor endowment effect on trade in services, the result of Spearman's rank correlation coefficient between variables was that, when compared to the home market effects of the greater industry capital investment, showed an increase in the labor input ratio.Fifth, the result of comparative analysis on Representatives of cultural equality and market access about the effect of other dummy variables on trade in services is that, the gravity model represents negative effect of variable of physical barrier on the distance and border and compared with trade in goods, the negative effect of trade in services is smaller. Relatively speaking, border trade in services shows a smaller impact on the constraint of distance. On the contrary, transaction forms affected by a larger impact on the constraint of distance are the trade in services on physical proximity between producers and consumers. Moreover, compared to trade in goods, a positive effect showed up on cultural equality due to trading partners of trade in services.In summary, conclusions of this analysis of the effect on technical elements to pattern of international trade in services are as follows. First, a positive effect that was observed on the technological level of the home country and trading partner was the enlargement of trade in goods and services trade.Second, based on consideration of technical elements in Krugman's intra-industry trade theory, the analysis showed the effect of technology gap on international trade patterns in service among financial services, computer and information services, transportation, travel and other business services. If the technology gap between the trading partners is large, a marked decrease in bilateral trade volume between them is seen.Third, the analysis result shows the effect of proliferation of Internet use in relation to travel, other business services, transportation, royalties and license fees, financial services and construction services. If Internet usage level is high, it will show up as a trade promotion effect as the increase of import and export. On the contrary, if the usage of internet in insurance services, communications services, personal and recreational services is higher, the home country's exports will increase or imports will show the import substitution effect of substantial reduction.Fourth, the proliferation of Internet has the effect of reducing the negative effects of distance on trade in goods and services. Moreover, compared with trade in goods, there is greater positive effect of the proliferation of Internet among computer and information services, financial services, other business services, royalties and license fees and transportation. However, with proliferation of Internet, the bilateral trade volume in communications services between the two countries gets reduced.In terms of the effect on trade liberalization to pattern of international trade in services, a summary of the conclusions of the analysis can be given as follows.First, compared with trade in goods, trade creation effect of regional trade agreements on trade in services is apparently relatively larger. Although trade diversion effect does not show reduction in volume of trade in services between member state and non-member state under service trade agreements, the trade diversion effect shows up under trade in goods agreement.Second, although trade patterns show that developing countries get interests of regional trade agreements under trade in goods, developed countries get the interests of regional trade agreements under trade in services. Based on knowledge services competition, this result shows reason of the developed countries which are dominating the world strongly advocating market liberalization under WTO multilateral trade agreement or trade in services.Third, the analysis result on the representation of actual economic freedom of market access on the impact of international trade in services pattern is that, even if two countries are of the same level of economic development, the trading partner will benefit by improvement of economic freedom. If the two countries are not the same level of economic development, relatively speaking, the trade pattern will show that developing countries will get the benefits. However, if economic development between trading partners is of the same level, the trading partner will get the benefits by improvement of economic freedom. If economic development between trading partners is not of the same level, relatively speaking, the developed country will get the benefits.Fourth, if economic freedom is improved in other business services and royalties and license fees, the exporting competitiveness of developing countries will deteriorate. Although export from developing countries to developed countries is increasing under the trade liberalization policy, in order to ensure the comparative advantage of the strategic industries in developing countries in the long term, developing countries must have the capability of technology development and support of overseas markets, which will destroy the basis of services' industry. In future, the gap between developed and developing countries will possibly be even bigger.The conclusion is that international service trade obviously shows differences in the level of economic development between trading partners and trade in service industries. Therefore, when establishing policies for the development of international service trade we must consider the characteristics in trade in services and the level of economic development gap between the trading partners.