Wednesday, October 29, 2003


In any economy there are a number of services that can be classified as “knowledge services”. These might include education, medical diagnostic and prescriptive services, consulting services, programming, management services, etc.

Generally these have been seen as “non-tradable”. If you think of the model of the school as a log, with the teacher at one end and the student at the other, the teachers services were limited by the length of the log. Clearly developed nations have been selling educational services to developing nations since hundreds of thousands of developing nation students are in universities in Europe and the United States. But generally international sale of these services required international travel of the teacher or of the students. So too for many of the other knowledge service sectors.

The revolution in information and communications technology and the massive investments in ICT infrastructure have outmoded this limitation. Distance education allows student and teacher to be in different countries. Indeed, surgery has been conducted with the patient in Europe and the surgeon in the United States. Thus many formerly “non-tradable” knowledge services are now “tradable”.

The argument for international trade is based on the idea of “comparative advantage” (as distinct from “competitive advantage”). Essentially it benefits two countries to exchange services, where each is providing the service in which it has comparative advantage. Opening trade in formerly untraded “knowledge services”.

Thus one might find one Central American country trading graduate courses in civil engineering for graduate courses in electrical engineering, both delivered via computer conferencing. Or one might offer medical consultation in oncology in return for consultation in neurology, both done over the Internet. One might offer consulting services in management in exchange for consulting services in industrial engineering, all via electronic media.

This will not happen without a lot of work by a lot of people. The barriers to trade in knowledge services seem likely to be formidable. Still, the fundamental economics suggest that there would be large gains in the development of such trade. And the more important aspects of the trade might well be trade between and among developing nations themselves – South to South trade.

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