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US Services Trade by Multinationals
Dec 20, 2000

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  • Comment Board
  • Although many services are exported across-borders, international trade of services by through commercial presence has become an increasingly important mode of selling services abroad and a critical source of foreign direct investment. For instance, affiliates of US corporations sold over $300 billion in 1998, which according to figures published by the Bureau of Economic Analysis in October 2000, was close to $60 billion more than the value of US exports in that same year. In turn, services sold by foreign multinationals through their US affiliates reached $255.1 billion in 1998 and exceed imports of services by over $90 billion. In fact, since 1996 sales by affiliates of majority owned US corporations has been greater than US services exports, and purchases of services by individuals in US markets from affiliates of majority owned foreign corporations has been greater than imports of services since 1989 (Graph No. 1).

    Sales of services by US multinational companies increased by 20% in 1998 while purchases by US persons from affiliates of foreign corporations went up by 15% in that same year. Over the last decade trade through commercial presence has grew at and average 14% for services sold by US multinationals and roughly 12% for sales of foreign multinationals in US markets. A hypothesis worthwhile exploring is whether this strong growth is a direct consequence of growing opportunities that followed the creation of the General Agreement in Trade in Services (GATS) in 1994 and subsequent developments that promoted national treatment for foreign providers of services.

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