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PPI | Trade Fact of the Week | February 28, 2007
The U.S. 'Commercial Services' Trade Surplus Reached $100 Billion Last Year


Editor's Notes: The PPI "Trade Fact of the Week" is a weekly email newsletter published by PPI's Trade & Global Markets Project. To sign up for a free subscription, click here. (Just make sure to check the box next to "Trade & Global Markets.")

Original links are included though some may have expired.


The Numbers:

Number of U.S. workers in diagnostic imaging centers:

December 2001: 47,500
December 2006: 63,400

What They Mean:

As two or three new communications satellites reach their orbits each month, and fiber-optic submarine cables replace old copper wires, long-distance banking, news and entertainment broadcasts, accounting, telemarketing and telemedicine grows cheaper and easier each year. WTO reports reflect this: services trade grew by 81 percent between 2000 and 2005. Manufacturing trailed at 58 percent and agricultural at 52 percent. A natural result is a debate over "globalization" of services industries and "offshoring" of services jobs. Equally naturally, since Internet-based trade is quite new, the debate is often spiced up by hype, single-entry accounting, and big leaps to conclusions. Some general data on services trade, plus looks at two industries often given starring roles in the offshoring debate, provide a bit of context:

General: The United States is more a seller than a buyer of services. As of 2005, the United States supplied about $190 billion of the world's $1160 billion in commercial services exports. (The United Kingdom is second at $60 billion; fast-rising India is eighth at $44 billion.) American statistics, a bit more up-to-date than the WTO's, show exports and royalties rising by $84 billion between 2001 and 2006. (From $156 billion to $240 billion.) Meanwhile, commercial-services imports rose by $66 billion, from $74 billion to $140 billion. Thus a $76 billion commercial-services trade surplus in 2001 grew to $100 billion by 2006.

IT firms: A PPI paper published last month, by former Clinton Commerce Department official Doug Karmin, looks at offshoring patterns in U.S-based information technology firms. Karmin notes that the apparent effect is to speed up specialization in software engineering, as firms keep high-value work in the United States but use offshoring to save costs on routine "context" work.

"From 2002 to 2005, the three years following the dot-com bust, overall employment in the U.S. computer sector grew a modest 6.5 percent. But this number masks changes in the composition of computer-related employment. Relatively low-paying occupations like database administrators saw employment numbers shrink by 2.7 percent over those three years, while relatively high-paying occupations like software engineers experienced an amazing 27 percent increase in overall employment."

Radiology: Radiology services -- the reading of America's 150 million annual X-ray photos, CT and CAT scans, mammograms, MRIs, etc. -- get attention as a very high-wage business well suited to long-distance services. Remote readings have in fact become common since 2001. The typical buyer is a smaller hospital or clinic, often in a rural district, with a budget too small to afford a 24-hour radiology staff. Clinics like these can save money, and also speed up treatment of patients, by contracting with outside labs or larger hospitals for remote readings of night-time X-rays or MRIs. But the vast majority of readings like these are done at American labs and hospitals, because, as teleradiology-researcher Dr. Frank Levy of MIT notes:

"to be allowed to legally read images generated in the United States, a radiologist must have completed his/her medical residency in a U.S. program, passed U.S. medical board examinations, be licensed in the state where the image was taken and have privileges in the hospital where the image was taken."

Potential overseas X-ray readers, therefore, are American physicians who have moved abroad. This is a small population, but a few exist and provide night-time readings for U.S. clinics. Most are U.S.-trained doctors living in Australia or Europe; Levy found "about fifteen" in India too. Offshoring of radiology, therefore, is minimal and likely to remain so. And as with software engineering, U.S. employment in radiology is growing rather than shrinking: While overall American private-sector employment has grown by 5 percent since 2001, imaging lab employment is up 34 percent.

Further Reading:

Doug Karmin -- "How the Information Technology Sector Adapts to Offshoring,":
http://www.ppionline.org/ppi_ci.cfm?contentid=254161
&knlgAreaID=107&subsecid=175

Dr. Frank Levy of MIT looks at radiology offshoring in the United States, India, Singapore, and the United Kingdom (scroll down to "Offshoring Radiology Services to India"):
http://web.mit.edu/flevy/www/

The American College of Radiology: www.acr.org

Rediff.com reports enthusiastically from India on teleradiology potential, and -- suggests that "five more" U.S.-trained doctors might join Levy's 15. Also, more interestingly, notes the potential of teleradiology to improve emergency services in lower-income Indian provinces:
http://inhome.rediff.com/money/2006/mar/28bpo.htm

World services trade data from the WTO (see part V.3), complete to 2005:
http://www.wto.org/english/res_e/statis_e/its2006_e/
its06_bysector_e.htm

U.S. services trade, from the Bureau of Economic Analysis, by country and service type through 2005:
http://www.bea.gov/international/intlserv.htm

In general terms (at exhibits 3 and 4) for 2006:
http://www.census.gov/foreign-trade/Press-Release/2006pr/12/





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