U.S. Should Not Fear Services Trade According to New Book

October 28, 2011

“Global Trade in Services: Fear, Facts, and Offshoring” Provides Necessary Research to Develop Future U.S. Trade Policy and Rebalance Global Economy

Because the United States has a strong comparative advantage in the area of high-wage, high-skill service jobs, Georgetown University Professor J. Bradford Jensen argues that the country should adopt policies to remove impediments to global services trade.
In his new book, Global Trade in Services: Fear, Facts, and Offshoring, the McDonough School of Business Professor of International Business and Economics explains the poorly understood phenomenon of services outsourcing, which includes such industries as architecture, engineering, and consulting. He develops the most detailed and robust portrait available on the size, scope, and potential impact of opening trade in services on the U.S. economy.
The common fear is that jobs will be lost to lower-paid workers in other countries. To the contrary, because service-sector jobs require highly skilled workers, the United States is likely to retain these high-wage jobs according to Jensen, who also is a senior fellow at the Peterson Institute for International Economics, which published the book in September 2011. 
“The research presented in Global Trade in Services leads to a specific policy recommendation – that the United States should not fear trade in services,” Jensen said. “In fact, the United States should be pushing aggressively for services trade liberalization.”
He finds that despite U.S. comparative advantage in service activities, service firms’ export participation lags that of manufacturing firms. Jensen evaluates the impediments to services trade and finds evidence that there is considerable room for liberalization – or the easing of rules and regulations that impede services trade – especially among large, fast-growing developing economies like Brazil, Russia, India, and China.
Because other advanced economies have similar comparative advantage in service, he argues that the United States should join with the European Union and other advanced economies to encourage the large, fast-growing developing economies to liberalize their service sectors through multilateral negotiations in the General Agreement on Trade Services and the Government Procurement Agreement.
Jensen notes that the coming global infrastructure building boom is of historic proportions and provides an enormous opportunity for U.S. service firms if the proper policies are in place.
“Increased trade in services might help rebalance the global economy, and both developed and developing economies would benefit from the productivity-enhancing reallocation brought by increased trade in services,” he said.
In addition to his roles at Georgetown’s McDonough School of Business and the Peterson Institute, Jensen is a research associate of the National Bureau of Economic Research and a senior policy scholar at Georgetown’s Center for Business and Public Policy. His work focuses on the relationship between international trade and investment and firm performance.
Jensen’s research has been supported by the National Science Foundation, the Alfred P. Sloan Foundation, and the John D. and Catherine T. MacArthur Foundation. He has authored articles published in such scholarly journals as the American Economic Review, Review of Economics and Statistics, Journal of International Economics, Journal of Monetary Economics, and Harvard Business Review. Jensen’s research has been cited in the popular press, most recently by the Economist, Wall Street Journal, New York Times, Fortune, and Businessweek.
Prior to joining Georgetown in 2007, Jensen served as deputy director at the Peterson Institute. He also has served as the director of the Center for Economic Studies at the U.S. Census Bureau, on the faculty at Carnegie Mellon University, and as a visiting professor at the Tuck School of Business at Dartmouth College.
Jensen received a Ph.D. in economics from Stanford University and a B.A. from Kalamazoo College.