I have often seen surprise on the face of an entrepreneur when I tell him or her that they are in international marketing as soon as they put up a website. A website can most likely be seen anywhere in the world, and it usually isn’t long before a new, small company gets its first electric inquiry from a different country. Sadly, the initial response is too often to simply delete the inquiry. Some eventually learn that having customers in another market is probably a good idea.
While this scenario generally involves digital marketing and selling, the product usually moves physically to the foreign market. But trade is changing and we see more products being moved digitally. Just think about the software, films or music you purchase online and simply download to your computer. There’s a good chance that neither you, nor the software vendor, really think of this as products moving in international trade, but it is. (I can quickly think of software on my computers that was created and sold from England, Germany and Luxembourg. I’ve got music from Italy, Indonesia and Germany. There is probably a lot more.) All that has really changed is that software is delivered digitally now, not so much on physical disks that must cross borders.
Digital trade goes far beyond software or music, and now encompasses such digitally-delivered services as legal advice, accounting and other back-office services, a lot of today’s architectural and engineering services, financial services, airline tickets, call centers and much more. In fact, we don’t really have a good handle on the value of all this digital trade, but I suspect it is enormous.
The Economics & Statistics Administration at the U.S. Department of Commerce is trying to figure out the dimensions of digital trade for the United States. ESA issued a report last month entitled Digital Economy and Cross-Border Trade: The Value of Digitally-Deliverable Services. Using 2011 data and an involved definition process to identify digitally-deliverable services, ESA’s initial findings are stunning:
• The United States exported $357.4 billion in digitally-deliverable services. This represented over 60 percent of U.S. services exports and about 17 percent of total U.S. goods and services exports.
• The United States imported $221.9 billion in digitally-deliverable services. This represented 56 percent of U.S. services imports and about 8 percent of total U.S. goods and services imports.
• The United States had a digitally-deliverable services trade surplus of $135.5 billion.
The best markets for U.S.-produced digitally-deliverable services in 2011 were the United Kingdom, Canada, Ireland and Japan. We imported digitally-deliverable services mainly from the United Kingdom, Bermuda, Switzerland and Canada.
The services that ESA considers to be digitally-deliverable include business, professional and technical services (such as computer and information services, legal services, architectural and engineering services, and advertising services), royalties and license fees (such as intellectual property, franchises, e-books, music, movies and software), financial services (such as electronic banking and investing, financial planning), insurance services and telecommunications. The United States runs a trade surplus in all of these except for insurance services.
We are just beginning to understand the impact of digitally-delivered services on our economies and on world trade. The ESA study is a great beginning, but much more needs to be done worldwide before we can really understand what is happening.