Measuring International Services

In this video, Prof. Czinkota introduced the significance of international services in the United States and world economic activities.

Services: Performance of the Future

Services have outperformed the economic leverage of manufacturing. The growth not only changes the structure and composition of economic activities in both the United States and the world but also leads to a more integrated future. Both legislators and negotiators must pay more attention to the service components of international exchanges if they are to achieve long-term change.

Worldwide, services contributed more than 60 percent of total value added in most major economies in 2017. China and India were the exceptions. For world trade, the value of services exports grew 5.1 percent per year between 2006 and 2016 with a rising tendency. 

U.S. services now account for over two-thirds of GDP. The U.S. companies achieved more than $2.2 trillion in recorded international services sales In trade, services deliver a large surplus. Four out of five new private-sector jobs in the U.S. are created by services. In 2015, the Peterson Institute estimated that the elimination of global barriers to trade in services would increase the U.S. service exports by $300 billion and create 3 million jobs when fully implemented.

There is more to services than meets the eye. Services come in different categories and at different, often opaque international levels. Examples are varied performances in fields such as telecommunications, financial services, computer services, retail distribution, environmental services, education and express delivery.

Manufacturing strength increasingly comes from strong and tailor-made services which enable manufacturing to be more effective and competitive. Current cars are service driven and updated with sophisticated navigation systems. TVs have to connect to streams in order to be smart. iPhone sales rely on Apple’s support services, including troubleshooting and retailing. Even a traditional aerospace exporter like Boeing uses cloud services to manage inventory, optimize maintenance, and minimize the costs of system malfunctions.

Service performance at high has typically been greatly underestimated due to insufficient measurement insight. For example, if a person travels abroad for medical tourism, such value generating activity is hardly recorded. A local session of advice with a financial expert may create high value. However, poor valuation and insufficient recordation lead to only little understanding of current account impact.

Services and manufacturing are not at opposite ends of a scale. Rather, services strengthen the performance of manufacturing and are enhanced by the application of technology. Through its investment in the services sector, China has greatly improved the capabilities of its logistics, transport and infrastructure conditions. China can now demonstrably use its newly generated logistics expertise to outperform its competitors. For example, due to its service investments, the transport time of persons and goods via the new Hong Kong-Zhuhai-Macao Bridge has diminished from 4 hours to 30 minutes since the end of 2018. What a time wharp, yielding clear insights into shifting capabilities. Many will be the companies and countries which sign up to exchange raw materials for infrastructure. 

The integration between services and manufacturing will relegate entire supply chain conditions, which have been laboriously created, to a mere blur. Today, most apparel manufacturers own retail stores. Many store brands like Target build up their own manufacturing, controls, and retail distribution. Apple manufactures its own chips, fingerprint sensors, and other custom components. Concurrently, its retail stores flourish and allow it to control its direct distribution and sale to customers.

Services growth promotes new types of manufacturing. Printing technology gives new meaning to scale economies. Services, combined with flexibility and adjustment bring opportunity and vitality to the global economy. In terms of innovation and employment, strong services are no less important for a country than a strong manufacturing sector. U.S. legislators and negotiators must place growing emphasis on services and their links, both direct and indirect, with manufacturing. A more integrated economy will provide all with a significant payoff.

Professor Czinkota (czinkotm@georgetown.edu) teaches international marketing and trade at Georgetown University and the University of Kent in Canterbury. His latest book is ‘In Search for the Soul of International Business’ 2019, Businessexpertpress.com

History does not always tell the Future

Historically. increased international trade activities are often linked to the growth of a country. National power in the world was often the result of creating new markets and trade. For example, the Roman Empire achieved immense growth through the linkages of business rather than the marching of legions and warfare. Many economic successes also occurred when previously closed economies embraced international trade like South Korea in 1960s and China in 1980s.

So far, in this century, more than a billion people around the world have been lifted out of poverty by the power of international trade. International competition has greatly stimulated innovation and productivity. 

However, world trade is in flux today. Conflicts have emerged over market instabilities and insecure trade structures which have led to major inequities.  No longer are societies certain that an increase in trade resolves current economic and societal shortcomings. Will a better life result from simply doing more of what was done in the past?  

Globally some policymakers intend to ride inequities to the hilt. They  give preference to the continuity of rules over the adjustment to reality. For them tradition is the overriding decision tool. 

But, what happens when the fundament has changed? When a volcano erupts and sends a stream of glowing lava flowing down the mountain,  the affected villages are no longer fit for shelter. Today, President Trump reflects the need for new actions in a new era. He is positively  willing to disregard the past when its performance distorts the playing field. The consequences have been important. 

In 2017, the U.S. started to renegotiate its trade agreements with Canada,  Mexico, and with South Korea. It questions the World Trade Organization (WTO) and  challenges the whole trade administration system. In addition, a series of import tariffs came into effect. All these steps indicate a better understanding of shortcomings in trade and a quick-footed willingness to precipitate a curative impact. President Reagan already indicated that “all politics are local”. That principle is expanded into a new approach which states “timing matters for change”.

Continuing large trade imbalances and growing foreign investment control are sources of dissatisfaction. Domestic producers fear to be

squeezed  by global rivals. New production technology, such as product printing, makes manufacturing history obsolete. Processes also matter. China has taken full advantage of the trade infrastructure built by the U.S. and the EU only to subsequently challenge the status quo. The United States’ share of world exports has declined precipitously from 25 percent in the 1950s to less than 9 percent in 2017. The U.S. share of world imports now accounts for 13 percent of world imports. When compared to its exports, the United States clearly has an excess import consumption.  

Reshaping a global system is tough work. Since 1945, the United States has been at the center of the global economy. In its competition with the socialist system market orientation has clearly been won by America. Encouraging now other nations to also help guide the world to better lives does not represent an abdication of leadership. The United States’ willingness to let others participate  in the design and implementation of crucial adjustments demonstrates a willingness to permit others to learn, an encouragement of  self determination, and a great spirit of security and comfort with  change 

The debates over international trade might rumble on for years. But we already know that trade policy must become more domestically oriented while domestic policy must become more international in vision. Doing so, must shape the future.

Professor Czinkota (czinkotm@georgetown.edu) teaches international marketing and trade at Georgetown University and the University of Kent in Canterbury. His latest book is ‘In Search for the Soul of International Business’ 2019, Businessexpertpress.com 

Cambridge/Kent/Czinkota Competition for excellence in International Business Case writing

INVITATION TO PARTICIPATE

Cambridge/Kent/Czinkota Competition

for excellence in International Business Case writing

Applying:

Case submitted by faculty and students, can cover the entire spectrum of the International Business sphere, covering, for example, but not limited to, Trade and Investment Policies, the International Business Environment or Strategy and Operations. The deadline for submission of the previously unpublished final case, including instructor’s solution materials, is April 15, 2019.

Length of submission: Less than 3,000 words (the solution material does not count against this limit)

Please submit to Prof. Michael Czinkota M.Czinkota@Kent.ac.uk

Cases will be evaluated and selected by an international Jury whose decisions are final.

Prizes:

Winners receive a Certificate and will be entered in the Kent Business School Book of Honor

Prizes are:

🏆 First Prize: £ 500

Second Prize: £ 250

Third Prize: £ 125

Prizes 4-12: £ 50

Winning cases are also eligible for publication in the forthcoming Cambridge Press book by Prof. Michael Czinkota, Prof. Ilkka Ronkainen and Prof. Suraksha Gupta

If you have any questions, comments, or concerns, please contact M.Czinkota@Kent.ac.uk

Making the World & Ourselves Better

In this video I speak a little bit about my new book.

It’s available now at Amazon. https://www.amazon.com/?fbclid=IwAR0IIHpntZ-p3Q8C9XbkIaW_BaUKv9U7j3cz2MiVgBtMrImI5iarvBfbH3M