ABSTRACT
With the service sector now accounting for the largest part of both employment and output in advanced industrialised countries, the question arises as to whether trade and FDI in services will come to dominate international economic activity. As demonstrated in the previous chapter, international service transactions already make up a significant and expanding share of total international transactions. Which countries and which companies will succeed in securing a share of the evolving global market for services? How can countries best prepare themselves for future prosperity based as it may be upon successful service sector export performance? In order to address these questions it is essential to have an appreciation of the reasons for trade and FDI in services. This chapter will provide such an understanding through a critical exploration of the theories of trade and FDI, and an assessment of their relevance to service transactions. Previous attempts to apply international transactions theory to services will be examined and elaborated upon.
