Trade in Nontradables: Proximity Requirements and the Pattern of Trade in Services

One of the important differences between goods and services is that, unlike goods, services must be used as they are produced. This often requires direct interaction between user and pro vider. In this paper, I discuss the implications of proximity requirements for the establishment of service exporters in import markets, the pattern of trade, and for the pricing behavior of inter national service firms. This approach allows us to focus on how the determinants and implications of trade in services differ from those associated with trade in goods. It is demonstrated that prox imity requirements have significant implications for the pattern of trade.