Abstract:

The saying “hearing is unreliable, seeing is believing” reflects the fact that the movement of natural persons (Mode 4 of trade in services) serves as a crucial channel for information flow in goods trade. Due to the incomplete information inherent in goods trade contracts, importing countries must dispatch personnel to exporting countries for “in-process and post-delivery” inspections. This drives demand for service trade in the form of the movement of natural persons. Drawing on data for international natural person flows in China from 2010 to 2016, this paper examines the impact of goods exports on the movement of natural persons. Empirical results indicate that a 10% increase in exports of differentiated products leads to an additional 88,000 inbound travelers, equivalent to about 1,500 more Boeing 777 passenger flights. The findings suggest that if geopolitical factors keep natural person flows at a persistently low level, industries reliant on information input may trend toward “localization”, “shortening of supply chains” and “clustering”.

Key words: goods exports, service imports, incomplete contract, information input products, movement of natural persons, international flights