The annual Global Services Summit recognizes the role of services in today’s global economy. The annual one-day event convenes senior trade officials, policymakers, and business leaders from around the world to discuss issues related to international trade in services. At this year’s staging, US Under Secretary For Economic Growth, Energy, and The Environment, Jose W. Fernandez, described the services sectors as vital for domestic and international economic growth and employment. In honor of this summit, this article discusses the key role of services in today’s global economy.
The service sector has been described as “the grease” that links the different parts of the production processes. Services include transportation and travel, communication and construction, financial and insurance, computer and information, cultural, entertainment, and recreational, and a host of business and government services not captured in the above areas. Service providers are not just your servers at restaurants and gas stations or even your lawyers and doctors. Service providers include highly skilled high-wage earners or entrepreneurs such as engineers, researchers, designers, logistics providers, marketing and sales professionals, and of course information technology (IT) providers.
Advances in technology and transportation have essentially “shrunk” our world, making these skills more and more easily transferrable and tradable across borders. As a result, services play an increasingly important role in international trade.
International trade in services
Services are exported or imported across borders using these four delivery modes:
Cross-border trade: The web developer who is building websites or the engineer who constructs designs for clients worldwide while seated at his/her computer.
Consumption abroad: Hotels are the most obvious examples; but so are the hospitals and schools in emerging markets that provide access to highly skilled doctors or educators for patients and students from developed countries.
Commercial presence: The local affiliates of multinational and other corporations established in a given country to provide better access to locals.
Movement of natural persons: The US-based trade attorney who is hired to conduct workshops in Nigeria and South Africa on how to effectively access the US market under AGOA.
The Organization for Economic Cooperation and Development (OECD) describes trade in services as the driver for the exchange of “ideas, know-how and technology”. It also acknowledges the restrictive role of domestic regulations in placing barriers to services trade. Examples include countries’ immigration restrictions on the movement of natural persons and the often burdensome licensing requirements placed on already-qualified professionals seeking to enter a new market. The Coalition of Services Industries, which hosts the Global Services Summits, advocates for fair and transparent international rules and works to eliminate barriers to market access.
Some legal do’s & don’ts
Despite their unique characteristics, service providers nevertheless need to pay just as much attention to the legal rules of doing business internationally:
- Don’t conduct business in the wrong country – sanctions against Russia (imposed in 2014 and intensified because of the 2022 invasion of Ukraine) provide just one example of the need for caution.
- Don’t conduct business with the wrong persons – countries maintain lists of persons and entities subject to sanctions which should be checked when doing business with an unknown individual or company.
- Don’t import or export the wrong services – use caution when dealing with software or technology that the U.S., the EU, or other countries consider dual-use or controlled items.
- Don’t pay bribes to get contract awards – anti-bribery laws also apply to trade in services.
- Do protect your intellectual property – this is especially important because of the intangible nature of services.
- Do find and join your local Coalition of Services Providers.
- Do use contracts, even more so when entering into deals with new partners or clients on the other side of the globe.
- Do get proper trade and legal advice when entering into contracts with your customers.
There are more practical tips for global traders in our free ebook, which you can download here. If you are interested in expanding your knowledge on trading globally or have a question send me an email via our Contact Us page or Book a Consultation here.
I am a seasoned international trade and customs attorney, and policy adviser for various companies and governments with a demonstrated history of successfully developing and implementing sustainable and dynamic trade programs. I am experienced in creating partnerships with various business-support organizations to drive compliance and growth in the international market.