That’s no small mercy. We have heard little from the White House about a fast-growing part of international trade: the buying and selling of services. Long may that remain the case. Services account for more than one-fifth of global export earnings and show little sign of slowing down. The US runs a surplus in this arena, which could account for Washington’s lack of attention. It’s also hard to measure and has no imagery that can provide political punch. It’s not like pointing to a car, whose manufacturer may be headquartered in South Korea, or the school that couldn’t have been erected without cement from Vietnam or Turkey.
Services are a vast area, covering everything from insurance, the securities industry, entertainment and cloud computing — sectors of the world economy dominated by the US. (Seeking to strike back at the duties imposed by Trump, China is limiting access to Hollywood films, and some European countries want a crackdown on American tech giants.) They are deeply ingrained in the global economic order.
While the burgeoning exchange of services has been very profitable for the US — exports topped $1 trillion last year — it’s also been a boon for some emerging markets. The business process outsourcing, or BPO, industry is a good example. It’s grown from next-to-nothing to accounting for about 10% of gross domestic product in the Philippines and has been an important driver of India’s economic progress, in addition to holding costs down for American firms. Performing tasks for other businesses, such as payroll maintenance, software development and translation, has been particularly lucrative.
BloombergIt’s fashionable to assert that globalization has been in retreat roughly since the subprime meltdown of 2008. This is incomplete: Goods exports as a share of world GDP did peak around the time of the Global Financial Crisis. They underwent a revival of sorts when the economy began growing again, but didn’t regain their prior verve, according to the Bank for International Settlements. Services, however, have gone from strength to strength, aided by advances in digital technology and artificial intelligence. The last factor can cut both ways. Call-center workers in the Philippines performing basic tasks have suffered job losses, while there’s plenty of demand for people doing more sophisticated tasks while Americans sleep, such as real estate appraisal, and the design of everything from engines to kitchen counters.
It’s not that Trump wouldn’t kill this growth area if he turned his attention to it. Never mind factories leaving for less expensive locations, the departure of offices for cheaper countries is no small issue.
A study of 200 college-educated participants from the US and South Africa, half of whom used generative AI on a range of tasks, found that cost effectiveness, combined with gen AI’s leveling-up effect, made foreign teleworkers increasingly attractive substitutes. The shift will drive corporations to expand their talent search beyond borders, Michael Wade, Richard Baldwin and Benjamin Bjerkan-Wade of the International Institute for Management Development in Lausanne, Switzerland, wrote in The Harvard Business Review. When I get down about the damage done to American prestige since Trump’s Liberation Day effort to vandalize commerce, I try to reach for histories that remind us that trade flows have always been subject to change — and that globalization isn’t exclusively a thing of our lifetimes.I spoke recently to Roger Crowley, author of Spice: The 16th-Century Contest That Shaped the Modern World. By his reckoning, one of the most significant events in world economic history was a journey by Andres de Urdaneta, who found a return route to Mexico from the Philippines, both of which were claimed by Spain. “The Pacific was the last great blank,” Crowley told me. “People knew about the Indian Ocean, they could sail back and forth across the Atlantic. The size and scope of the Pacific was baffling. It was the final linkage and really important.”
Urdaneta was a priest, as well as a navigator. If alive today, he might have wondered why services get so little attention. He might also pray that Trump doesn’t start trying to figure out how to reshape the sector.
