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Services Trade Balance Experiences Important Decrease In 2002
Feb 22, 2003

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    The U.S. trade deficit continued to grow in 2002 after the goods deficit increased from $427 billion in 2001 to $484 billion in 2002 and the services surplus decreased by almost $20 billion in year 2002. This represents a 28% drop in 2002 with respect to 2001.

    The important decrease in the Services trade balance was due to the fast growth in services imports which increased by nearly 15% in 2002, while services exports experience a moderate 4% increase.

    By the end of 2002 Services exports contributed to nearly 30% of total U.S. Exports while Services Imports contributed to nearly 17% of total U.S. imports.

    The growth in services export during 2002 can be explained by the 11,65% growth rate in Royalties and License Fees and a 9,2% increase in Other Private Services, which account for 15% and 41 % of total U.S. Services Exports respectively. Although exports of Travel and Passenger Fares continued to decrease in 2002 by 3,5% and 3,1% respectively, this drop was considerably less than the 12% decrease in 2001.

    The significant increase in U.S. services imports in 2002 was due to the a 45% increase in imports of Other Private Services, which include professional and other business services, and an increase of 24.5 % in Royalties and License Fees and 27.6% in Direct Defense Expenses. The significant increase in imports of other private services may be reflecting a fast growing trend in international trade in business services after new information technologies have made cross border delivery cost-efficient. Thus, a number of U.S. firms and multinationals have began to outsource back office support services to developing countries such as India and the Philippines where costs are considerably lower.

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