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International specialization: a focus on services

The specialization of countries in international trade reveals their comparative advantages and disadvantages. The CHELEM database which provides complete and consistent statistics classified by country in the long term is used to analyze the structural aspect of the competitiveness of nations in all economic sectors, namely the primary sector, industry and services.
Par Colette Herzog, Deniz Ünal
 Faits & Chiffres du 19 décembre 2011

This is a valuable tool since in most databases trade in goods and services are rarely available in a common classification and over a common time period. The chart below shows the contribution of three sectors to the trade balances of the United States, the EU-27 and Japan (the Triad) and those of three major emerging economies (Brazil, China, India) between 1995 and 2009. It is an indicator of specialization in international trade (see box).
The graphs for countries in the Triad show that developed countries are in a process of specialization in which they are gradually phasing the industry and engaging increasingly in services. The service sector dominates the specialization of the United States over the whole period. While industry sector remains its strength, the EU is heavily involved in services in the 2000’s and the service sector now contributes as much as industry to the trade balance. Manufactured goods are still the only strengths in Japan. But the Japanese economy has virtually eliminated its great disadvantage in the service sector since the mid-1995.

In the major emerging countries, services are not a source of trade surplus, with the notable exception of India. Thus, since the early 2000s, while services have always been a strong comparative disadvantage of the Brazilian economy, the great emerging American country has been increasingly involved into the production of the primary sector and disengages from industry. Manufactured goods are the base of huge surpluses in China. India is the only country that shows a surplus as large in services than in industry. Its special feature is that this surplus comes from the information technology services rather than from tourism, as it is the case in many other countries (Table).
The details of the five strengths of each country / area are shown in the table which appears to better distinguish their specializations:
         - financial services for EU-27 and
        - industry (aerospace products), followed by four strong advantages in services (including patents and royalties) for The US.
The 2008 financial crisis has questionned not only the macroeconomic management of the developed countries but also their mode of integration to international trade. The strong comparative advantage in the European Union in the financial products may raise concerns about future growth.

Specialization in three sectors: Triad and major emerging countries

Source : CEPII, CHELEM International Trade and CHELEM Balance of payments, authors’ calculations

The five strengths of specialization (average 2006-2008)
(contributions to the balance, thousandth of total trade)

Source: CEPII, CHELEM International Trade and CHELEM Balance of payments, authors’ calculations


The CEPII Newsletter N° 48, 4thQ 2011

Panorama de la spécialisation européenne, par Colette Herzog et Deniz Ünal, CEPII, janvier 2012

La Lettre du CEPII n°317, “ Industrie ou services : le dilemme de la spécialisation européenne”, Colette Herzog et Deniz Ünal, le 22 décembre 2011.

Report of the Commission on the Measurement of Economic Performance and Social Progress, J.E. Stiglitz, A. Sen, J.P. Fitoussi, September 2009 (availaible online at: www.stiglitz-sen-fitoussi.fr)
Commerce & Mondialisation  | Compétitivité & Croissance 
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