The Services sector has been steadily rising in relative ...

[amal]

The Services sector has been steadily rising in relative importance in GDP of the United States, as well as elsewhere around the world. Since services have been identified as non-tradable
 
  (e.g., it is difficult to export haircuts), it may be argued that this trend will likely slow the rapid growth in international trade. Discuss.

Question 2

The study of factors that influence both international and interregional trade is referred to as
 
  A) accidents of history.
  B) economic geography.
  C) factor abundance theory.
  D) weather analysis.
  E) centralized optimization.

[mtmmmmmk]

Answer to Question 1

This argument stands on questionable logical foundations. The past half century has seen a steady growth in the absolute and relative importance of international trade. This trend has been reversed only by global conflicts, i.e. the two World Wars. This trend has remained steady and robust despite major compositional shifts (e.g., from primary to manufacturing), and location shifts (e.g., the sudden rise of NICs as significant group of exporters). The trend will probably continue into the reasonable future, fueled by both super-regional preferential trade regions and a growing impact of the multilateral forces, represented institutionally by the World Trade Organization (WTO)as illustrated by the recent abolishment of the epitome cartelized trade, the world trade in textiles. Driven by technologyespeciall y in the areas of communication and transportationa reversal of the growing trade trend is not likely in the near future. In any case, many services are in fact quite tradable. Examples would be financial services, long-distance teaching, help-desk outsourcing, consulting and management services and others. In fact, when a tourist gets a haircut, we see that even haircuts become a tradable service.

Answer to Question 2

B

[amal]

Excellent

[mohan]

Gracias!