Trade in Services
Services now account for the majority of GDP in most countries, but trading them across borders remains far more complex than shipping goods.
The Services Revolution
Services account for roughly two-thirds of global GDP and over half of employment in most developed economies, yet they make up only about 25% of measured trade flows. This gap exists because services are inherently harder to trade than goods. You cannot put a haircut in a shipping container. A lawyer's advice is governed by the laws of the jurisdiction, not international trade rules. An architect must understand local building codes.
The WTO's General Agreement on Trade in Services (GATS), signed in 1995, established a framework for services trade built around four 'modes of supply.' Mode 1 is cross-border supply -- like an Indian IT firm providing software to a US client. Mode 2 is consumption abroad -- a British patient traveling to Thailand for surgery. Mode 3 is commercial presence -- a US bank opening a branch in Brazil. Mode 4 is movement of natural persons -- an accountant from Kenya working temporarily in London.
