If the U.S wishes to maintain its global stature, it needs to support its service exporters more as they compete in international markets. Traditional federal and state export assistance programs need to acknowledge the economic shift in favor of services and adapt their resources and activities to support the growing number of U.S. service companies that are looking to export. This blog series will discuss the different resources service exporters need compared to manufacturing exporters and will make suggestions on how U.S. state export development programs can address the exporting needs of service firms.
The U.S. service sector now accounts for 2/3 of gross domestic product. Equally important, the service sector in the U.S. accounted for 90 million out of 146 million jobs, equivalent to 60% of all jobs (Bureau of Labor Statistics, 2016). Today, the U.S.A. is the world’s largest exporter of services, exporting more than $710 billion in services a year.
Reflecting their economic weight, service companies are increasingly looking to grow beyond the U.S. borders. Numerous studies have debated the drivers that have precipitated the increasing globalization of services, most notably:
- The shift to services in the economies of most developed countries as manufacturing activity has shifted to low-wage economies.
- Service providers have followed manufacturing firms as they have gone global.
- Technology has had a globalizing effect, making national boundaries less significant than in the past.
These trends have resulted in a dramatic change in the composition of global exports of goods and services over the past generation. In 1980, of the $2.3 trillion total global trade in goods and services, less than 15 % ($0.31 trillion, or 13.5%) was in services, according to the World Bank. By 2016, the total global trade of goods and services amounted to $21 trillion, 9 times the amount traded in 1980, and services accounted for $5 trillion, or 21% of the total trade: this means that the export of services increased by a factor of 16 over this time period.
The U.S. however, did not join in this global increase in service exports until the late 1970s/early 80s (White, Ariguzo and Curran, 2013), but once they did join, service exports surged. Between 1980 and 2015, the United States increased its total exports by 807% from $280.7 billion to $2.26 trillion, according to U.S. government statistics (Exports of goods and services, 2017). However, U.S. services accounted for over 30% of total U.S. exports compared to the global average of 21%.
Historically, U.S. export development programs were created to help U.S. manufacturing firms become more competitive on the global market. As a result, these export development programs, focused their resources on providing and developing export assistance activities that were geared towards manufacturing firms. However, as the U.S. economy has seen and will continue to see a significant growth in the number of service exporters, it is imperative that U.S. state export development programs discover ways in which to assist the exporting needs of service firms better.
The next chapter in this blog series will discuss how service exporters differ from manufacturing exporters in their exporting needs.
