New Policy Brief on Significance and Policy Implications of EU-U.S. Services Trade

Trade in services is an important component of international trade and is becoming increasingly more important with growth rates exceeding the rates with which goods trade increases. This is also true in the bilateral U.S. – EU relationship: Trade in services, and especially trade in digitally deliverable services, is a highly important element of the economic relations between the U.S. and the EU. And it is growing much faster than goods trade between the two economies. Despite its importance, trade in services has received much less attention in political and public discussions on the transatlantic trade relationship.

Against this background Frank Bickenbach, Prof. Holger Görg, Ph.D. (KCG Managing Director) and Dr. Wan-Hsin Liu (KCG Coordinator) explore major developing trends over time in EU-U.S. services trade in general and EU-U.S. trade in digitally deliverable services in particular in a recently published Kiel Policy Brief. In addition to services trade, the authors also analyze the development of services supplied by affiliates of U.S. multinationals in the EU and of those supplied by EU affiliates in the U.S. They provide policy suggestions based on data-driven insights derived from the analysis.

The study shows that according to Eurostat the value of trade in services – i.e. the sum of imports and exports – between the EU and the U.S. increased by 169 percent between 2014 and 2024, almost tripling. And the EU and the U.S. are each other’s most important trading partners for services. In quantitative terms, trade in services between the U.S. and the EU is thus, by now, almost as significant as the total trade in goods between the two economies. Taking into account both trade in goods and services, the U.S. trade deficit with the EU thus shrinks considerably.

Digitally deliverable services such as fees for the use of intellectual property or digital business services play a prominent role in bilateral services trade. According to Eurostat, their trade value amounted to 77.2% of total trade in services between the EU and the U.S. in 2023. “This reflects the globally dominant role of U.S. tech giants such as Google, Meta and Microsoft,” says Görg.

In light of these developments, Görg argues that “The EU should pursue a carrot-and-stick strategy in its negotiations with the U.S. On the one hand, it should lure the U.S. with the offer to facilitate trade in services by removing trade barriers in the services sector, for example, through standardizing regulations in the EU member states or reducing bureaucracy. On the other hand, it should threaten the U.S. with restrictions on services trade, if the U.S. continues to pursue protectionism in trade in goods.”

The abovementioned Policy Brief “Bickenbach F., Görg, H. and Liu, W.-H. (2025), Transatlantic Ties beyond Goods Trade: Significance and Policy Implications of EU-U.S. Services Trade, Kiel Policy Brief No. 193, Kiel Institute for the World Economy” is available here.

Contact:

Prof. Holger Görg, Ph.D. (holger.goerg@ifw-kiel.de; +49(0)431-8814-258)