This post is being written as I prepare to take a well-needed vacation. Thinking about my upcoming vacation made me think about tourism, which led me to trade in services. Hopefully you followed this train of thought, as it has made me decide to update and share an earlier post that discusses the key role of the service sector in today’s globalized economy.
The service sector has been described as “the grease” that links the different parts of the production processes. 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 around the world 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.
Some Legal Do’s & Don’ts
Despite their unique characteristics, service providers nevertheless need to pay just as much attention to the rules of doing business internationally:
- Don’t conduct business in the wrong country – trade embargoes and sanctions that forbid or restrict trade are in place against countries such as Russia and Syria, for example.
- Don’t conduct business with the wrong persons – the S. list of Specially Designated Nationals and the EU list of persons subject to its financial sanctions should be checked when doing business with an unknown person or entity.
- 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 restrictions and penalties 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 Service Providers (if already in place). You may also want to take note of the upcoming 2015 Global Services Summit scheduled for Washington, D.C. on October 21.
- Do use contracts and get proper legal advice when doing so. This is even more important when entering into deals with new partners or clients on the other side of the globe.
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