Service Exports

Service industries span a wide variety of enterprises from

hamburgers to high technology. The service sector accounts

for about 70 percent of the U.S. GNP and 75 percent of

employment. In 1988, the service sector also accounted for

slightly more than two-thirds of all self-employed persons.

Internationally, a similar change has taken place. World

trade in services grew in the past decade at an average

rate of 5 percent a year to constitute approximately 20

percent of overall world trade today. In some countries,

the share is much higher. Spain reports a 39 percent share;

Austria, 36 percent. The leading exporter of services, the

United States, shows services accounting for 18 percent of

all merchandise and services trade and, unlike the

situation with trade in goods, has had a surplus in

services trade for decades.

The income generated and the jobs created through the sale

of services abroad are just as important to the U.S.

economy as income and jobs resulting from the production

and export of goods. In view of the shift toward services

both domestically and internationally and the substantial

competitive advantage of the United States in the services

field, those who have services to offer can become major

participants in world trade.

TYPICAL SERVICE EXPORTS

The service sector accounts for a great share of the U.S.

economy, although some services are not easily exported. It

would be very difficult to export most personal services,

such as the service performed by waiters in restaurants;

but most business services can be exported _ especially

those highly innovative, specialized, or technologically

advanced services that are efficiently performed in the

United States. The following sectors have particularly high

export potential:

*    Construction, design, and engineering. The vast

experience and technological leadership of the U.S.

construction industry, as well as special skills in

operations, maintenance, and management, frequently

give U.S. firms a competitive edge in international

projects. Some U.S. firms with expertise in

specialized fields, such as electric power utilities,

also export related construction, design, and

engineering services, such as power plant design

services.

*    Banking and financial services. U.S. financial

institutions are very competitive internationally,

particularly when offering account management, credit

card operations, collection management, and other

services they have pioneered.

*    Insurance services. U.S. insurers offer valuable

services ranging from underwriting and risk evaluation

to insurance operations and management contracts in

the international marketplace.

*    Legal and accounting services. Firms in this field

typically aid other U.S. firms operating abroad

through their international legal and accounting

activities. They also use their experience to serve

foreign firms in their business operations.

*    Computer and data services. The U.S. computer services

and data industries lead the world in marketing new

technologies and enjoy a competitive advantage in

computer operations, data manipulation, and data

transmission.

*    Teaching services. The vast U.S. education sector

offers substantial new services for foreign

purchasers, particularly in areas such as management,

motivation, and the teaching of operational,

managerial, and theoretical issues.

*    Management consulting services. Organizations and

business enterprises all over the world look to the

United States in the field of management. U.S.

management consulting firms as well as other U.S.

firms that are willing to sell their particular

management skills find great potential overseas for

export of their services.

EXPORT SERVICES VERSUS PRODUCTS

There are many obvious differences between services and

products.  Consequently, important features differentiate

exporting services from exporting products:

*    Services are less tangible than products, providing

little in terms of samples that can be seen by the

potential foreign buyer.  Consequently, communicating

a service offer is much more difficult than

communicating a product offer. For example, brochures

or catalogs explaining services often must show a

proxy for the service. A construction company, for

instance, can show a picture of a construction site,

but a picture of the finished building communicates

the actual performance of the service more

effectively. Much more attention must be paid to

translating the intangibility of a service into a

tangible and saleable offer.

*    The intangibility of services also makes financing

more difficult.  Frequently, even financial

institutions with international experience are less

willing to provide financial support for service

exports than for product exports, because the value of

services is more difficult to monitor. Customer

complaints and difficulties in receiving payments can

also appear more troublesome to assess.

*    Services are often more time dependent than products.

Quite frequently, a service can be offered only at a

specific time, and as time passes, the service

perishes if it is not used. For example, to offer data

transmission through special telephone lines may

require providing an open telephone line. If this line

is not heavily used, the cost of maintaining it may

not be covered.

*    Selling services is also more personal than selling

products, because it quite often requires direct

involvement with the customer. This involvement

demands greater cultural sensitivity when services are

being provided, since a buffer of indirect

communication and interaction does not exist.

*    Services are much more difficult to standardize than

products.  Service activities must frequently be

tailored to the specific needs of the buyer. This need

for adaptation often necessitates the service client's

direct participation and cooperation in the service

delivery.

Demand for certain services can derive from product

exports. Many of our merchandise exports would not take

place if they were not supported by service activities such

as banking, insurance, and transportation.  Services can be

crucial in stimulating product export and are a critical

factor in maintaining such exports. However, in such cases,

services follow products rather than taking the lead over

them.

MARKETING SERVICES ABROAD

Since service exports are often delivered in the support of

product exports, a sensible approach for some beginning

exporters is to follow the path of relevant product

exports. For years, many large accounting and banking firms

have exported by following their major multinational

clients abroad and continuing to assist them in their

international activities. Smaller service exporters who

cooperate closely with manufacturing firms can also

determine where these manufacturing firms are operating

internationally and aim to provide service support for

these manufacturers abroad.

For service providers whose activities are independent from

products, a different strategy is needed. These individuals

and firms should search for market situations abroad that

are similar to the domestic market.

Many opportunities derive from understanding the process

and stage of development of relevant trade activities

abroad. Just as U.S. society has undergone change, foreign

societies are subject to changing economic trends. If, for

example, new transportation services are opened up in a

country, an expert in the area of containerization may

offer services to improve the efficiency of the new system.

Leads for service activities can also be gathered by

staying informed about international projects sponsored by

organizations such as the World Bank, the Caribbean

Development Bank, the Inter-American Development Bank, the

UN, and the World Health Organization. Very frequently,

such projects are in need of service support.

The Eximbank has introduced a new program to assist U.S.

design, engineering, and architectural firms with foreign

contracts. For information on this program, contact the

Eximbank's Engineering Division (202-566-8802).