Market structure in transport and distribution services, goods trade, and the effects of liberalisation

This paper is concerned with the analytical implications of service-sector liberalization, and in particular the role of market structure in transport services. We focus here explicitly on cross-border trade in services, and the interaction of international trade with market structure and public regulation. Of course, in many ways the insights from the theoretical literature on international trade apply equally to goods and services. This is particularly true for cross-border trade. There are, however, some important differences. One is the role of which has important analytical implications. The significance of proximity for service transactions means that 'trade' in the case of services often requires a mix of cross-border transactions and local establishment (i.e., FDI). The importance of trade through affiliates is illustrated, for the case of the United States. The United States is the leading service exporter, with $245.7 billion in 1998. The level of U.S. service sales through affiliates (establishment trade) is comparable. Establishment sales amounted to $258 billion in 1997, which compares to $240 billion in direct exports.