Mar 11, 2015 - 11:00am

The Open Door of Trade: The Trade in Services Agreement

Senior Vice President for International Policy

Tenth in a series

Previously: The Transatlantic Trade and Investment Partnership

What are the benefits of America’s free trade agreement (FTAs)? With debate over the renewal of Trade Promotion Authority (TPA) now underway in Washington, the Chamber is publishing this series of blog posts examining the benefits of the trade agreements that TPA makes possible. Here is the full report on the benefits of America’s free trade agreements.

How can America seize more of the benefits of FTAs? While it hasn’t made national headlines, the United States has joined with more than 50 other countries to launch negotiations for a high-standard trade agreement in services dubbed the Trade in Services Agreement (TISA). This exciting new accord, covering about two-thirds of the global market for services, has the potential to ignite economic growth and job creation in the United States and abroad.

Services are a clear strength for the United States, which is by far the world’s largest exporter of services. U.S. services exports reached $682 billion in 2013, and the U.S. services trade surplus reached $232 billion. In addition, services sales by foreign affiliates of U.S. multinational corporations topped $1 trillion. Combined, total sales of U.S. services abroad reached approximately $1.7 trillion in 2013.

Even so, the potential for service industries to engage in international trade is almost untapped. One in four U.S. factories exports, but just one in every 20 providers of business services does so. Just 3% of U.S. services output is exported, according to the Peterson Institute for International Economics.

The chief goals of the United States in TISA are to expand access to foreign markets for U.S. service industries and prohibit discrimination against American service providers in foreign markets. In addition, the TISA will put in place rules to prevent regulations from being used as disguised trade barriers that shut out U.S. services exports.

The TISA also aims to safeguard cross-border data flows. In today’s global economy, companies often move data across borders as they create new products, enhance productivity, deter fraud, protect consumers and grow their business. This is particularly important for services, many of which were considered “non-tradeable” before the advent of the Internet. Recent studies estimate that within ten years products and services reliant on cross-border data flows will add over $1 trillion annually to the global economy, with the United States at the fore. To seize these benefits, the TISA should prohibit restrictions on legitimate crossborder information flows and bar local infrastructure mandates relating to data storage.

Finally, the TISA should include rules to ensure that private companies are not put at a disadvantage when they compete with state-owned enterprises (SOEs) and other national champions. It should guard against anti-competitive behavior by SOEs and ensure a level playing field.

The payoff from the TISA could be huge. Eliminating barriers to trade in services could boost U.S. services exports by as much as $860 billion — up from 2013’s record $682 billion — to as much as $1.4 trillion, according to the Peterson Institute. Such a dramatic increase could create as many as three million American jobs.

The TISA may not be making headlines anytime soon, but its potential to drive economic growth and job creation in the United States and beyond is significant. The American business community is committed to working closely with U.S. negotiators, foreign governments and Congress to press for a strong agreement that translates this potential to reality.

Next time: The Imperative of Trade Promotion Authority

About the Author

About the Author

Senior Vice President for International Policy

Murphy directs the U.S. Chamber’s advocacy relating to international trade and investment policy.