The Soaring Trade in "Nontradables"

by Norman S. Fieleke
November/December 1995

In recent years international trade has flourished in a category heretofore considered largely nontradable. Services are being exchanged across national boundaries in unprecedented volumes, with growth rates exceeding those for trade in merchandise. In addition to cross-border trade, foreign direct investment and sales by foreign affiliates are also growing rapidly. The phenomenon has attracted growing attention both from impartial analysts and from government officials seeking to expand their countries’ exports.

This article examines the nature of this trade and considers which countries compete most effectively. Among the various types of services traded, the most dynamic growth has occurred in private sector activities such as advertising, accounting and finance, legal services, and computer and data processing services. Obstacles to the trade, such as government barriers, are explored, and the efforts of the Uruguay Round of trade negotiations to reduce them are evaluated.

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