Trade in services (also known as invisible trade) refers to the export and import of intangible services between a country and the rest of the world.

Key characteristics:

• Involves non-physical, intangible activities provided across borders
• Cannot be seen or touched like goods
• Often called invisible trade because the services are not physically observable

Types of services traded:

• Transportation: shipping, airline, and logistics services
• Tourism and travel: spending by foreign visitors and domestic tourists abroad
• Financial services: banking, insurance, and investment services
• Consulting and professional services: legal, accounting, and management advisory
• Education services: tuition fees from international students
• Communication services: telecommunications and postal services

Balance of trade in services:

• Calculated as: Exports of services − Imports of services
• A country with higher service exports than imports runs a services surplus
• A country with higher service imports than exports runs a services deficit
• Many developed economies run a surplus in services but a deficit in goods