Quantifying the trade costs of U.S. exporters in the service sector

Using novel data on U.S. services exports, this paper calibrates trade costs for services exporters, showing that firms in services face higher variable and even larger fixed trade costs than manufacturers. The trend in those costs has been influenced by an expansion in U.S. FTAs with provisions on services trade. In particular, I find that services FTAs had limited effects on variable costs but significantly lowered fixed export costs, with proportional welfare implications. These results highlight fixed trade costs as a key margin for expanding services trade and underscore the role of trade agreements in reducing them.