Comparative Advantages in U. S. Bilateral Services Trade with China and India Part 2

Figure 1. Kernel density distributions of the RSCA index for U.S. services trade with China and India. Table 1. Major services trade items between the U.S. and China/India, 2011 U. S. export items % share in total service exports U. S. imports items % share in total service imports Panel A: Services trade between the U.S. and China Education 19 Travel 28 Travel 17 Transportation of goods 26 Royalties and license fees 14 Computer and data processing services 10 Transportation of goods 11 Research, development, and testing services 9 Panel A: Services trade between the U.S. and India Education 32 Computer and data processing services 44 Travel 26 Travel 19 Other business, professional, and technical services 13 Research, development, and testing services 12 Management, consulting, and public relations services 10 Source: Authors’ calculation from BEA data Table 2. Panel A: Bilateral revealed symmetric comparative advantage (RSCA) in U.S. services trade with China Year Travel Passenger Freight Port fares transportation services Royalties and Education license fees Financial services Computer Research and Installation, Management Insurance Telecommand development Construc- maintenance, Legal and Advertising services unications information and testing tion and repair services consulting services services services 1 2 3 4 5 6 7 8 9 10 11 12 1992 -0.30 -0.31 -0.62 0.22 0.24 0.25 0.23 -0.06 -0.25 0.13 -0.41 0.13 1993 -0.26 -0.61 -0.62 0.22 0.09 0.25 0.23 -0.70 -0.31 0.15 1994 -0.22 -0.63 -0.47 0.23 0.22 0.26 0.20 -0.54 -0.37 0.21 0.00 0.07 1995 -0.22 -0.47 -0.39 0.20 0.25 0.25 0.19 0.04 -0.45 0.20 0.07 0.05 1996 -0.08 -0.12 -0.53 0.18 0.23 0.18 0.18 -0.29 0.15 0.19 0.04 1997 -0.06 -0.12 -0.36 0.09 0.23 0.22 0.24 -0.45 0.17 0.00 1998 -0.07 -0.10 -0.37 -0.04 0.11 0.22 0.22 -0.41 0.13 1999 -0.17 -0.07 -0.44 -0.01 0.22 0.24 0.25 0.14 -0.44 2000 -0.11 0.04 -0.54 0.08 0.23 0.23 0.23 0.24 2001 -0.14 0.02 -0.52 0.09 0.24 0.24 0.23 2002 -0.12 -0.15 -0.52 0.10 0.25 0.25 0.24 2003 -0.19 -0.08 -0.48 0.10 0.21 0.24 2004 -0.23 -0.22 -0.52 0.16 0.26 2005 -0.23 -0.16 -0.48 0.06 2006 -0.10 -0.12 -0.58 2007 -0.09 -0.08 2008 -0.07 2009 2010 14 15 16 0.22 0.25 0.11 0.25 0.25 -0.09 0.24 0.26 0.02 0.24 0.25 0.07 -0.30 0.23 0.22 0.08 0.07 -0.37 0.23 0.22 0.06 -0.19 0.05 -0.38 0.22 0.22 0.01 0.11 0.07 -0.54 -0.23 0.25 0.22 0.11 -0.11 0.11 0.10 -0.36 -0.36 0.24 0.19 0.09 0.21 0.01 0.14 0.18 -0.03 -0.29 0.24 0.21 0.12 0.23 -0.01 0.20 0.12 0.11 -0.37 0.25 0.16 0.10 0.21 0.22 0.03 0.19 0.00 0.08 -0.20 0.24 0.18 0.06 0.25 0.25 0.26 0.04 0.22 0.21 -0.14 -0.34 0.27 0.21 0.13 0.25 0.24 0.23 0.26 0.04 0.22 0.14 -0.27 -0.25 0.26 0.17 0.17 0.18 0.28 0.27 0.28 0.27 -0.11 -0.31 0.02 -0.35 -0.19 0.26 0.21 0.22 -0.55 0.16 0.26 0.25 0.25 0.22 -0.16 -0.42 -0.04 -0.74 -0.24 0.27 0.20 0.20 -0.05 -0.34 0.07 0.21 0.20 0.16 -0.06 -0.17 -0.52 -0.08 -0.75 -0.35 0.21 0.15 0.13 -0.09 -0.01 -0.30 0.00 0.18 0.17 0.16 0.10 -0.24 -0.52 -0.12 -0.79 -0.46 0.19 0.14 0.09 -0.07 0.01 -0.35 0.02 0.17 0.16 0.15 0.06 -0.27 -0.54 -0.12 -0.78 -0.59 0.18 0.08 0.07 Source: Authors’ calculation from BEA data 13 0.20 -0.40 Table 2. Panel B: Bilateral revealed symmetric comparative advantage (RSCA) in U.S. services trade with India Year Travel 1 Computer Research and Installation, Royalties Management Passenger Freight Port Financial Insurance Telecommand development Construc maintenance, Legal and license Education and Advertising fares transportation services services services unications information and testing -tion and repair services fees consulting services services services 2 3 4 5 6 7 8 9 10 11 12 0.09 -0.32 0.23 0.22 0.19 -0.27 -0.24 0.14 0.16 -0.67 13 14 15 16 0.23 0.23 0.23 0.23 0.23 0.24 0.24 -0.10 0.24 0.24 -0.10 1992 -0.11 1993 -0.13 0.08 -0.18 0.23 0.23 0.18 -0.24 -0.27 0.15 0.16 -0.43 1994 -0.12 -0.62 -0.15 0.14 0.22 0.24 0.19 -0.46 -0.36 -0.05 0.04 0.24 1995 -0.08 -0.69 0.09 -0.05 0.23 0.24 0.14 -0.08 -0.41 0.08 -0.02 0.05 1996 -0.05 -0.38 0.12 -0.24 0.22 0.27 0.08 0.06 -0.59 0.23 0.16 -0.07 -0.27 0.27 0.27 -0.21 1997 -0.05 -0.35 0.21 -0.19 0.20 0.27 0.09 0.08 -0.57 0.16 0.14 0.00 -0.48 0.28 0.23 -0.06 1998 -0.06 -0.29 0.20 -0.12 0.25 0.29 0.13 0.15 -0.58 -0.33 0.13 0.12 -0.47 0.27 0.27 -0.24 1999 -0.03 -0.43 0.17 -0.19 0.26 0.27 0.16 0.13 -0.48 -0.37 -0.24 -0.13 -0.27 0.22 0.24 -0.07 2000 -0.01 -0.40 0.18 -0.29 0.27 0.27 0.11 0.27 -0.65 -0.19 -0.38 -0.10 -0.27 0.24 0.25 -0.03 2001 -0.03 -0.10 -0.04 -0.01 0.21 0.23 0.11 0.09 -0.58 -0.32 -0.19 -0.30 0.03 0.06 0.20 0.03 2002 -0.03 -0.45 0.01 -0.03 0.17 0.22 0.03 0.12 -0.50 -0.52 -0.11 -0.51 -0.32 -0.05 0.17 -0.02 2003 -0.03 -0.66 0.02 -0.17 0.16 0.21 0.05 -0.13 -0.34 -0.38 -0.28 -0.45 -0.13 0.05 0.15 0.07 2004 -0.05 -0.64 0.00 -0.02 0.21 0.24 0.06 0.07 -0.35 -0.54 -0.16 -0.41 0.01 0.14 0.22 0.04 2005 0.00 -0.19 -0.05 -0.03 0.30 0.32 0.19 0.03 -0.21 -0.47 -0.21 -0.28 -0.05 0.30 0.27 0.11 2006 -0.01 0.25 0.24 0.17 0.33 0.36 0.23 -0.03 -0.34 -0.82 -0.57 -0.77 -0.04 0.26 0.31 0.14 2007 0.09 0.30 0.26 0.13 0.30 0.35 0.15 0.24 -0.22 -0.86 -0.64 -0.92 -0.46 0.29 0.33 0.19 2008 0.10 0.28 0.24 0.17 0.33 0.37 0.12 0.23 -0.22 -0.87 -0.63 -0.95 -0.54 0.25 0.24 0.12 2009 0.08 0.30 0.29 0.15 0.32 0.38 0.14 0.19 0.07 -0.83 -0.58 -0.90 -0.47 0.20 0.32 0.17 2010 0.14 0.33 0.25 0.19 0.32 0.39 0.17 0.10 0.03 -0.84 -0.62 -0.92 -0.51 0.20 0.36 0.16 Source: Authors’ calculation from BEA data 0.24 Table 3. Panel A: Trade balance index (TBI) in U.S. services trade with China Year Travel Computer Research and Installation, Royalties Management Passenger Freight Port Financial Insurance Telecommand development Construc maintenance, Legal and license Education and Advertising fares transportation services services services unications information and testing -tion and repair services fees consulting services services services 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1992 -17.09 -1.17 -13.24 9.64 2.30 15.53 0.20 -0.03 -2.19 0.12 -0.21 0.12 -0.05 1.33 1.78 0.05 1993 -13.73 -2.55 -13.36 8.70 0.05 14.07 0.30 -0.17 -3.50 0.13 0.16 -0.04 4.10 1.57 -0.02 1994 -11.55 -1.76 -12.00 9.64 1.44 13.50 0.13 -0.14 -5.10 0.34 0.00 0.03 -0.08 2.97 1.44 0.01 1995 -10.62 -1.54 -12.98 8.54 2.13 9.96 0.35 0.02 -5.63 0.39 0.06 0.01 -0.06 4.75 2.03 0.07 1996 -5.82 -1.11 -11.58 5.60 8.06 0.46 0.03 -5.93 0.23 0.12 0.01 -0.07 2.38 2.01 0.11 1997 -5.08 -1.30 -8.21 2.11 7.99 0.87 0.05 -5.59 0.29 0.00 0.02 -0.08 2.20 1.02 0.08 1998 -5.27 -1.03 -7.39 -0.90 1.98 8.19 0.57 -4.70 0.22 -0.15 0.02 -0.08 2.47 1.04 0.01 1999 -9.50 -0.78 -10.73 -0.09 4.83 9.75 0.77 0.06 -3.29 0.15 0.04 -0.36 -0.05 4.14 1.20 0.22 2000 -6.91 0.61 -15.87 1.82 4.65 8.33 1.14 0.09 -0.54 0.13 0.04 -0.28 -0.06 3.14 1.09 0.14 2001 -7.65 0.32 -17.38 2.40 5.08 9.26 1.06 0.11 0.06 0.18 0.09 -0.02 -0.04 1.37 1.31 0.19 2002 -5.48 -1.61 -18.73 2.93 6.21 9.52 1.03 0.25 -0.02 0.27 0.05 0.06 -0.07 0.81 0.97 0.16 2003 -6.80 -0.63 -18.94 2.45 5.95 10.34 1.08 0.13 0.09 0.24 0.00 0.04 -0.06 1.56 1.01 0.10 2004 -8.38 -1.93 -18.28 4.15 6.96 8.08 1.76 0.24 0.09 0.33 0.29 -0.07 -0.11 2.06 1.03 0.23 2005 -9.85 -1.82 -14.25 1.09 6.49 8.12 1.69 0.21 0.10 0.40 0.21 -0.11 -0.06 3.08 0.95 0.36 2006 -3.75 -1.19 -20.23 3.91 6.89 6.95 2.97 0.21 -0.30 -0.91 0.10 -0.34 -0.06 1.01 0.99 0.61 2007 -3.49 -0.87 -17.34 3.57 6.86 6.34 3.16 0.16 -0.46 -2.02 -0.30 -2.03 -0.12 1.46 1.11 0.71 2008 -3.14 -0.73 -9.52 1.34 6.50 6.39 1.88 -0.07 -0.42 -3.55 -0.75 -2.79 -0.18 1.57 0.96 0.51 2009 -4.69 -0.15 -6.46 0.07 5.45 7.40 2.97 0.10 -0.50 -4.06 -1.16 -4.00 -0.26 2.05 1.15 0.32 2010 -3.42 0.19 -8.19 0.25 6.10 7.09 3.36 0.05 -0.39 -3.78 -1.07 -3.96 -0.22 1.65 0.69 0.19 Source: Authors’ calculation from BEA data Table 3. Panel B: Trade balance index (TBI) in U.S. services trade with India Year Royalties Passenger Freight Port Travel and license Education fares transportation services fees 1 2 Financial services Computer Research and Installation, Management Insurance Telecommand development Construc maintenance, Legal and Advertising services unications information and testing -tion and repair services consulting services services services 3 4 5 6 7 8 9 10 11 12 13 14 15 16 1.60 -1.83 1.79 16.41 0.29 -0.05 -4.17 0.14 0.23 -0.47 -0.07 1.19 0.60 0.04 1992 -11.52 1993 -12.36 -4.69 1.24 -1.24 0.12 18.47 0.32 -0.04 -5.06 0.14 0.18 -0.16 -0.07 0.54 0.87 1994 -9.55 -5.35 -2.32 2.43 1.85 17.31 1.05 -0.05 -6.64 -0.09 0.06 0.08 0.04 0.81 0.50 -0.02 1995 -7.02 -6.87 1.54 -0.43 1.92 16.23 0.66 -0.02 -7.70 0.22 -0.05 0.02 1.05 0.47 -0.02 1996 -4.60 -3.97 2.15 -1.43 1.84 14.42 0.34 0.02 -11.67 0.63 0.31 -0.04 -0.06 0.98 0.42 -0.12 1997 -4.63 -3.88 3.43 -0.89 1.82 13.76 0.40 0.02 -10.81 0.59 0.26 0.00 -0.13 0.06 0.24 -0.02 1998 -5.56 -2.77 2.08 -0.40 1.47 13.49 0.45 0.05 -9.26 -2.21 0.13 0.09 -0.10 0.68 0.47 -0.08 1999 -3.40 -2.88 2.18 -0.57 1.70 14.08 0.77 0.04 -8.33 -3.20 -0.25 -0.07 -0.04 0.20 0.39 -0.04 2000 -0.94 -2.19 2.23 -0.73 1.75 13.33 0.65 0.02 -11.69 -1.86 -0.44 -0.09 -0.03 0.26 0.37 -0.02 2001 -2.41 -1.23 -0.46 -0.05 1.45 15.13 0.61 0.02 -9.67 -2.30 -0.22 -0.29 0.01 0.06 0.39 0.03 2002 -2.43 -3.45 0.06 -0.15 1.14 17.42 0.12 0.17 -7.75 -4.39 -0.12 -0.33 -0.07 -0.03 0.31 -0.01 2003 -2.37 -3.53 0.30 -0.64 1.15 17.39 0.18 -0.08 -3.31 -6.12 -0.35 -0.34 -0.03 0.03 0.21 0.05 2004 -4.04 -2.34 -0.02 -0.08 1.90 17.62 0.30 0.02 -2.51 -5.03 -0.24 -0.66 0.00 0.90 0.53 0.03 2005 -0.09 -0.92 -0.32 -0.06 2.07 19.34 0.84 0.01 -0.98 -3.45 -0.34 -0.30 -0.01 0.46 0.27 0.07 2006 -0.37 4.01 0.98 0.53 2.88 15.17 1.59 -0.01 -1.76 -17.68 -4.53 -2.65 -0.01 0.73 0.34 0.08 2007 4.60 5.28 1.13 0.31 3.56 12.88 1.18 0.12 -0.97 -20.42 -4.92 -4.57 -0.19 0.93 0.59 0.12 2008 5.06 4.84 1.03 0.31 3.97 12.98 0.92 0.07 -0.64 -19.23 -4.66 -5.84 -0.27 0.62 0.41 0.11 2009 3.34 4.15 0.89 0.21 3.59 15.49 1.19 0.06 0.25 -21.08 -4.29 -5.20 -0.19 0.33 0.59 0.15 2010 6.02 4.63 0.84 0.27 2.81 15.62 1.23 0.03 0.10 -23.55 -3.66 -5.76 -0.21 0.29 0.58 0.14 Source: Authors’ calculation from BEA data Table 4: Transition matrices for U.S. comparative advantage over different time horizons U.S. RSCA over China U.S. RSCA over India 3-year transitions CDA CA CDA 81.7 18.3 CA 12.3 87.7 CDA CA CDA 77.6 22.4 CA 13.9 86.1 5-year transitions CDA CA CDA 80.8 19.2 CA 15.8 84.3 CDA CA CDA 68.9 31.1 CA 15.8 82.5 10-year transitions CDA CA CDA 80.0 20.0 CA 15.7 84.3 CDA CA CDA 50.0 50.0 CA 26.3 73.7 Note: Each number represents the probability (in %) that the U.S. moves from an initial state (far left column) to a final state (top row) of comparative advantage over a given time horizons (3, 5, or 10 years). Source: Authors’ estimation using the RSCA measures calculated from the Bureau of Economic Analysis (BEA) international trade data Table 5. Probit estimates of comparative advantage in U.S. services trade with China and India U.S.-China U.S.-India (1) (2) (1) (2) -0.839*** (0.191) -1.157*** (0.235) -0.001 (0.0003) 0.00007 (0.0004) Relative capital per unit of output -0.147 (0.091) -0.306*** (0.115) -0.0001 (0.003) 0.0002 (0.0003) Relative labor per unit of output 0.143 (0.091) 0.302*** (0.115) 0.908*** (0.209) 1.418*** (0.248) Relative output Relative FDI per unit of output 0.001*** (0.0004) 0.0002 (0.0003) Relative schooling 11.523** (5.199) 8.076*** (1.753) Information services dummy 0.821* (0.433) 0.712* (0.431) -0.785*** (0.304) -0.399 (0.348) Log likelihood value -63.977 -57.377 -111.01 -96.757 McFadden Pseudo Rsquared 0.252 0.329 0.199 0.302 Nr. of service categories 16 16 11 11 Nr. of obs. 131 131 209 209 Partial Effects Relative output -0.229*** -0.283*** -0.0002* 0.00002 Relative capital per unit of output -0.040* -0.075*** -0.00002 0.00005 Relative labor per unit of output 0.039 0.074*** 0.273*** 0.378*** Relative FDI per unit of output Relative schooling Information services dummy 0.183** 0.0003*** 0.00005 2.822** 2.153*** 0.151** -0.268** -0.114 Note: Dependent variable is a dummy variable that takes the value of 1 if U.S. has CA over China or India and 0 otherwise. All independent variables are expressed as the logarithm of the ratio of the U.S. level to that of its Asian trading partner. Standard errors are in parenthesis. *** p<.01; **p<.05; *p< .10 Appendix 1 Table A.1. Summary statistics of services trade data (Millions of dollars) Mean St. Dev. Import from China St. Mean Dev. Mean St. Dev. Import from India St. Mean Dev. 7.69 7.27 16.32 19.38 5.25 4.96 18.82 28.70 Construction 311.53 219.54 8.76 8.61 57.74 62.00 22.31 23.52 Education 1319.16 944.76 69.26 87.78 1329.05 988.37 16.16 19.07 Freight 450.95 346.50 1612.00 1257.75 159.05 64.56 67.32 42.22 Comp Info 71.84 76.71 187.32 341.04 86.58 77.21 Installation 221.37 186.84 41.35 49.67 45.05 44.41 8.29 12.29 Insurance 25.05 24.53 6.47 12.37 8.21 8.66 4.63 5.00 Legal 83.26 95.17 22.68 22.38 17.72 21.18 12.00 14.13 Management 137.68 218.50 123.89 202.41 46.47 58.95 314.53 525.14 Passenger 327.53 339.72 286.42 225.92 316.94 464.40 149.32 58.60 Port 708.42 362.52 245.95 162.98 61.79 38.21 48.05 15.00 RD 20.84 23.75 156.84 296.72 11.26 10.35 334.00 582.51 Royalties 931.26 935.37 57.76 55.75 253.37 297.67 35.47 49.07 Telecom 95.16 31.64 160.42 96.96 94.63 45.21 271.11 113.57 1263.95 944.00 1368.95 709.15 1301.37 885.14 1108.47 745.54 Export to China Trade category Advertising Travel Export to India 1388.11 2281.08 Source: Authors’ calculations from the Bureau of Economic Analysis (BEA) international trade data Appendix 2 Definitions and Coverage Travel: covers purchases of goods and services by U.S. travelers abroad and by foreign travelers in the United States. Unlike most other services categories, travel is not a specific type of service but an assortment of goods and services purchased by travelers. Passenger fares: cover fares paid by residents of one country to airline and vessel operators (carriers) resident in other countries. Freight transportation: charges are recorded in the U.S. international transactions accounts when shipping services are performed by the residents of one country for residents of other countries. Port services: exports are the value of the goods and services procured by foreign carriers in U.S. ports (excluding purchases of fuel, which are included in the goods exports account); imports are the value of goods and services procured by U.S. carriers in foreign ports (excluding purchases of fuel, which are included in the goods imports account). Royalties and license fees: cover transactions with foreign residents in rights to various types of intellectual property not included elsewhere in the accounts. Education: exports measure foreign students’ education expenditures in the United States. Foreign students are defined as individuals enrolled in institutions of higher education in the United States who are not U.S. citizens, immigrants, or refugees. Imports measure U.S. students’ expenditures abroad. Students consist of U.S. residents who receive academic credit for study abroad from an accredited institution of higher education in the United States, and students who enroll directly with foreign institutions, including medical students, and receive no academic credit from U.S. institutions. The total of U.S. students’ expenditures abroad is the sum of the estimates for the two groups of students. Financial services: gross receipts (exports) and gross payments (imports) for financial services, primarily those for which an explicit commission or fee is charged; implicit fees for bond transactions are also included. Insurance services: receipts (exports) and payments (imports) for both reinsurance and primary insurance. It consists predominantly of premiums, premium supplements in the form of investment income, and claims payable. A small amount is added to these estimates to cover auxiliary insurance services. Telecommunications: measures gross receipts (exports) and gross payments (imports) for international telecommunications services; transactions are separated into those with unaffiliated entities and affiliated entities. Included are receipts and payments for (1) message telephone services, telex, telegram, and other jointly provided basic services; (2) private leased channel services; (3) valueadded services such as (a) electronic mail, voice mail, code and protocol processing, and management and operation of data networks, (b) facsimile services and video-conferencing, (c) Internet connections, including online access services, Internet backbone services, router services, and broadband access services, (d) business communication and paging services provided by satellite connection, (e) telephony, interactive voice response, virtual private networking, remote access services, and voice over internet protocol, and (f) other value-added (enhanced) services; (4) support services related to the maintenance and repair of telecommunications equipment and ground station services; and (5) reciprocal exchanges such as transactions involving barter. Computer and information services: includes both (a) computer and data processing services, such as data entry processing; computer systems analysis, design, and engineering; custom software and programming services; and (b) database and other information systems, such as the provision of business and economic database services, including business news, stock quotation, and financial information services; medical, legal, technical, demographic, bibliographic, and similar database services; general news services, such as those purchased from a news syndicate; and reservation services and credit reporting and authorization systems. Management and consulting services: includes management, consulting, and public relations services, and amounts received by a parent company from its affiliates for general overhead expenses related to these services. Research, development, and testing services: includes commercial and noncommercial research, basic and applied research, and product development services. Advertising: includes sale or leasing of advertising space or time; planning, creating and placement services of advertising; outdoor and aerial advertising and delivery of samples and other advertising materials. Construction and related services (includes installation, maintenance, and repair services): includes construction work for buildings and civil engineering, installation and assembly work, building completion and finishing work. Installation, maintenance, and repair series: covers maintenance and repair services by residents of one country on goods that are owned by residents of another country. The repairs may be performed at the site of the repair facility or elsewhere. Maintenance and repair of transport equipment, constructions, and computers are currently included each of the corresponding service categories. Legal services: includes advisory and representations services for host country law, home country and/or third country law, international law, legal documentation and certification, other advisory and information services.