Trade in Services part 1

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Ever wonder if what you do can be exported? When we think about exporting, we typically focus on physical products, however, many companies providing services such as marketing, design, consulting and more are increasing their sales and presence overseas.

According to the Bureau of Economic Analysis, services are the engine of U.S. growth. Their statistics show that information, professional and business services, education, healthcare, social assistance and finance are the leading categories for growth. In 2019, services represented 69% of U.S. Gross Domestic Product, 82% of the private sector employment and 65% of global private economic activity, yet only made up 25% of trade.

Many of my clients are excited about their prospects of selling their services to foreign buyers. They add that it is all about creating a value proposition, “…this is why we are unique, and you can’t find our service in your local market.” – Virtual Office Assistant, Milwaukee.

That same office assistant also goes on to add that she had to overcome some barriers to trade including professional licensing in the foreign country (meeting qualification requirements), visa/work permits, local labor protections, rules for establishing partnerships, tariffs/taxes and data privacy laws.

Even with some local trade barriers in play, current trends almost guarantee growing opportunities in the export market. Consider, for example, the proliferation of cloud-based services, including Bluetooth technologies, wearables and the Internet of Things. Additionally, the continued rapid growth of global e-commerce and exploding middle classes in emerging markets will mean more disposable income for products, but also services. Furthermore, developing economies with growing populations will require massive infrastructure investments leading to many service opportunities. Lastly, technology developments such as 3-D printing, telemedicine, artificial intelligence, robotics and others likely to emerge will drive cross-border services in ways we cannot yet even imagine.

How to think about exporting services:

The basics of an export strategy are similar for services and goods, but, in general, services are easier to export because they don’t have to pass through as many procedures such as customs, transportation, regulation, labeling, etc.

Exporting services requires a fine understanding of your target market’s culture and business savvy. Take these thoughts into consideration:

  • Know who your clients are. This applies to exporting both goods and services, but it takes on extra importance with services because what you are selling is at least partly you.
  • Focus on adapting your sales and marketing materials to your targeted market.
  • Ask yourself, ‘how does your service differ from services currently available?’
  • Explore if your product or service stands out in real added value from what is being offered by your competitors.
  • Prepare project summaries or testimonials (translated, if required) to lend credibility to what you are offering.
  • Consider partnering with local resources, channel partners or hiring local employees.
  • Understand tax implications. Depending on which country you are selling your services in, you may need to pay taxes on your profits and sometimes pay a value-added tax (VAT), as is the case in the EU. It is not always clear how your exports should be categorized and taxed.
  • Anticipate risk. If you or your employees expect to physically deliver services in another country, make sure you are aware of all the physical or political risks before you go.
What’s next?

Look for Trade in Services part 2 next month. I will cover the practicalities of selling services overseas as well as offer some key considerations a business needs to make when selling a service overseas that they wouldn’t make selling domestically.

In the meantime, please reach out to me if you have any questions or would like to explore how the SBDC and our rich ecosystem of export assistance can help you export your service.