TradeVistas | services trade during the coronavirus pandemic

With Zoom, We Are All Trading in Services

New Modes of Living and Working

As we struggle to maintain continuity in our work and school lives during the pandemic, technology has come to our aid.

Those of us who work on teams spread throughout the country or the world have already unlocked the secrets of online collaboration platforms like Slack and Quip. (We use Quip at TradeVistas for project management.) Others are quickly moving to them or discovering functionality they previously overlooked in Microsoft Teams or similar business software.

“Zoom” has become a verb for online video conferencing the way Skype had been for years for international communication. The class I teach at Georgetown is completely online. (We were already extensively using the learning management system called Canvas). The university reported last week they reached a high of 1,459,100 minutes of instruction on Zoom in just one day.

Biggest Week Ever in Business App Downloads

Video conferencing apps Google Hangouts, Houseparty, Microsoft Teams and ZOOM Cloud Meetings saw major jumps in use in the United States and Europe. According to App Annie, during the week of March 15-21 alone, business apps surpassed 62 million downloads worldwide across iOS and Google Play, apparently the biggest week ever.

With the exception of middle and high schoolers hanging out on Houseparty, many of us working online are exchanging professional, technical, business and other commercial services. If your client or customer is overseas, you are likely delivering what’s called a cross-border service. No better time to appreciate this major component of global trade.

The WTO Modes of Services

In the World Trade Organization (WTO), negotiators divided up services trade into four “modes of delivery” related to where the supplier and consumer are located at the time of the transaction. In Mode 1, known as cross-border trade, the parties are in separate countries and the service is most likely provided digitally via email or through an online platform. One example is consulting services – perhaps a report delivered over email.

In Mode 2, known as consumption abroad, the consumer travels to another territory to receive the service. Examples include hospitality services associated with tourism, medical treatment, or a “semester abroad” at a foreign university. Mode 3 involves putting out a shingle to provide services in another country, known as commercial presence. Finally, in Mode 4, the service provider travels to the customer such as a software engineer working on a project overseas on a temporary visa.

Ascendant Modes of Trade in Services

Every day we engage in or benefit from some form of globally traded services, though we rarely think of it. Among the biggest traditional components of global trade in services are transport and travel – including the trains and ships that move cargo, and the planes that move people across international borders for work and tourism. We’ve written before about how important the tourism is to the global economy – global travel exports were worth $1.7 trillion in 2018.

But other less obvious components of globally traded services have grown larger in recent years. According to the WTO’s 2019 World Trade Statistical Review, the “use of intellectual property” as a service exceeded $3.1 trillion in 2018. The most dynamic services sector continues to be telecommunications, computer and information services (or ICTs), which grew more than 15 percent in 2018.

The Multiplier Effect of Digital Technologies

Telecommunications, computer and information services offer multiplier effects – they create efficiencies and infrastructure that enable new products and new services. Financial technologies bring about cashless payment systems, online platforms like Spotify enable music streaming, technologies embedded in your thermostat promote smart energy use through an app on your phone, sensors on machines inform computers when repairs may be needed. Micro-entrepreneurs sell their products globally through Etsy, eBay or Amazon Web Services.

Enterprise software, cloud computing, data processing and analytics services can help make any business more productive and profitable. They are the backbone of production, distribution and marketing of many physically traded goods while facilitating trade with customers anywhere in the world digitally.

Eighty percent of all U.S. jobs are in services-providing industries. The definition of a “tradable service” is constantly changing and expanding. In 2018, U.S. exports of ICT services alone were valued at $71.4 billion while service exports enabled by ICTs added another $451.9 billion. The U.S. Bureau of Economic Analysis estimates that services potentially enabled by ICTs accounted for 55 percent of total U.S. services exports. Yet the United States is fourth in globally exported ICT services, narrowly behind China, India and far behind the European Union.

Growth in ICT enabled services

The Doctor Will “See” You Now

The scourge of the COVID-19 pandemic, with its prolonged and widespread “stay at home” restrictions, is forcing all of us to shift or accelerate our digital habits. We have no choice but to buy non-essentials online. Our kids are e-learning. Doctors are seeing patients online when not critical. Graduating students will have virtual commencements. And most of us are forced into video conferencing all…the…time.

And while many people will be binge watching or gaming (WarnerMedia, Disney Plus, Netflix and Hulu all reported 65 and 70 percent jumps in number of streaming hours), some of us are trying to continue working online, despite these bandwidth hogs. Some businesses have no choice but to cope by providing virtual services – tax advisors are using secure document portals and phone consultations while fitness instructors check your form by webcam. These are stopgap measures now that might augment their businesses when things go back to “normal”.

LinkedIn With One Another

Recently, I decided to join a LinkedIn Live presentation by one of my favorite business gurus. I was astounded at the scrolling list of locations from where viewers were joining: United Kingdom, South Africa, Romania, Tunisia, Qatar, Poland, Pakistan, Jamaica, India, Colombia, Sudan, Turkey, Lebanon, Yemen and Afghanistan. On and on it went – I stopped writing them down. Nearly the entire world is experiencing the effects of the pandemic in some way, but through modern telecommunications and information technologies, we stay connected.

Those of us who can provide our global services online are the lucky ones. Our appreciation goes out to those workers who are keeping factories running to make essentials, who drive trucks and who staff pharmacies and grocery stores to ease our ability to work and learn from home, out of harm’s way.