U.S. BALANCE OF TRADE IN GOODS AND SERVICES

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U.S. Balance of Trade in Goods and Services

Trade generates demand for transportation and transportation makes trade possible by making local markets accessible and linking demand and supply that are separated in space. As transportation has become cheaper, faster, safer and more reliable, more goods and services- both variety and quantity- have been traded among regions and nations.

The commodity components of a countrys international trade reflects the countrys comparative advantages. The balance of trade of a country is an aggregate measure of its industries comparative advantages at the industry level. The positive balance of trade, exporting more than importing, shows that an industry is relatively competitive, while a negative balance of trade shows that an industry is at a relative disadvantaged position in terms of competitiveness.

The U.S. balance of trade has been negative for many years. This has mainly been because of the negative balance in trade of goods. After reaching an all-time low at the end of 2000, the U.S. balance of trade in goods has been improving. The U.S. balance of trade in services has always been positive. In September 2001, there was an unusually large spike in the balance of services, which was primarily caused by a sharp drop in imports of services. Services imports decreased $13.5 billion from August to September, while services exports decreased only $3.2 billion. The sharp drop in imports of services was mainly caused by hefty cuts in U.S. payments for foreign insurance services. Decreases in foreigners travel and passenger fares in the U.S. accounted for the large decrease in services exports.

SOURCE: U.S. Department of Commerce, Bureau of the Census, Foreign Trade Division; December 4, 2002; available at: http://www.census.gov/foreign-trade/balance/index.html