The Geography of International Trade in Services: Australia and the APEC Region

Abstract

This paper develops a new perspective to describe and account for the geography of trade in advanced services. The authors begin by acknowledging the national and global significance of trade in advanced services within national economic change and also global trade policy. They find current approaches to this issue, based on firm decisionmaking, are narrow, and seek out a broader perspective. The foundation for that perspective incorporates established research on the preconditions necessary for the growth of advanced services in a modern economy. The authors argue that the presence or absence of these preconditions in trading nations shapes the likelihood of service firms creating imports or exports of services. Hence the framework focuses on home-country and host-country conditions as explanatory factors of service trade. The framework is illustrated by an analysis of the trade in advanced services from Australia, especially with its northern Asia Pacific neighbours which now figure as the main destinations for Australia's goods trade. This analysis shows that Australia does have a well-developed advanced producer services sector, but only a small part of its trade involves these activities. The explanation is found in the lack of the appropriate host conditions in the markets that are important in its goods trade. That interpretation is confirmed by the fact that the United States and United Kingdom (with favourable host–market circumstances) remain much more important destinations for Australia's small advanced producer service export activity. A policy implication is that the long-term growth of Australia's service exports to its Asia-Pacific neighbours will depend upon institutional change within those markets.