The United States is the largest services trading country in the world, with $1 trillion worth of two-way trade in 2011 and a services trade surplus of $179 billion (up 23% from 2010). The Bureau of Economic Analysis’ data shows that in 2010, the U.S. had a trade surplus of $57 billion with Asia-Pacific region, of $44 billion with the European Union, and of $35 billion with the countries covered by NAFTA (Canada and Mexico).
The service sector accounts for about 70 percent of the U.S.’ GNP and 75 percent of overall employment, which validates the importance of service exports to the whole U.S. economy. In 2011, American exports of services in technology and entertainment, including tourism to this country, were worth $604.9 billion. Exportable services such as education, insurance, telecommunications, and business, professional, and technical services have also performed very well and have even expanded since the second quarter of 2008.
Much of America’s service success comes from the market-access provisions negotiated in bilateral trade agreements. Because the U.S. has few barriers to the import of services, a huge benefit comes from provisions in new trade agreements providing American firms access to overseas services markets. For example, the U.S.-South Korea pact signed by President Obama recently entered into force, giving the U.S. access to South Korea’s $580 billion services market. American firms are already benefiting in sectors ranging from legal services to information and communications technology. The Columbia and Panama agreements will open those countries’ services markets wider as well.
There are several important features that differentiate exporting services from exporting products:
- Services are more intangible than products; therefore, communicating a service offer is much harder than presenting a product offer. Suppliers of services need to pay special attention to how they present a service offer to the prospective buyer.
- Selling services requires personal interaction with the buyer, and the seller has to be knowledgeable about cultural differences and nuances of the country.
- Services are much harder to standardize than products. Service activities need to be adjusted to the needs and expectations of the customer.
Since the majority of service exports are meant to act as a support system for product exports, service businesses can pair up with product exporters to take bundled goods/services to the international marketplace. Service companies that are independent from products may need to look to export markets that are similar to ones in the U.S., or customize their services for that particular foreign market. For example, the Eximbank has expanded their services to service exporters and has large scale programs that are aimed at U.S. construction, design, engineering, and architectural firms to assist in getting foreign contracts.
The United States is a services trading powerhouse, and we need to embrace these dynamic new opportunities to continue building our existing services surplus.