US Trade Surplus in Services

As the world’s premier producer and exporter of services, the US has been running a trade surplus in services for the last few decades, and it’s getting larger. The service sector comprises a broad array of industries and segments, such as financial services, travel and tourism, retail and wholesale trade, healthcare, entertainment and education. The service sector accounts for 90 million jobs, which is nearly 80 percent of the private-sector gross domestic product (GDP). In the future, the service sector will loom even larger in the US economy. The dominant role that services play throughout the US economy translates into leadership in technology advancement, as well as growth in skilled jobs and global competitiveness.

U.S. service exports more than doubled between 1990 and 2000—increasing from $148 billion in 1990 to $299 billion in 2000. Growth continued to $404 billion in 2006, $632 billion in 2012, and $682 billion in 2013. Major markets for U.S. services include the European Union, Japan, and Canada. Mexico is the largest emerging market for U.S. service exports, according to the International Trade Administration. The U.S. has had a trade surplus in services since 1971 and in 2015 the trade surplus continued to grow, reaching $262.2 billion, led by a $5.9 billion increase in the surplus of travel services, largely due to an increase in the trade surplus of education-related travel. In 2015, travel services surpassed charges for the use of intellectual property to be the largest contributor to the U.S. services trade surplus, according to the ITA’s Office of Trade and Economic Analysis.

The US exported $750 billion in services in 2016, while importing only $502 billion. That created a trade surplus of $248 billion in exports of services like education, banking and software. The largest single category was travel services, at $293 billion. Computer and business services export $178 billion. The next category was royalties and license fees, at $120 billion. Other private services, such as financial services, added $120 billion. Government and military contracts added $20 billion, according to the data from U.S. Census.

Economist Tim Taylor questions:

I wonder how many of those who think that trade deficits are a result of unfair trade practices by other countries are willing to stick to the logic of their position when it comes to US trade surpluses in services. If trade surpluses are a sign of unfair trade practices, then doesn’t the ongoing US surpluses in services trade prove that the US is using unfair trade practices in services?