Service exports 12 percent down in Q2

In Q1 2020, service exports and imports still rose by 3 and 5 percent year-on-year, respectively. This increase was considerably smaller than in previous years. From 2017 to 2019 inclusive, international service trade still rose by an average of 13 percent per year.

Largest decline in travel

The travel industry accounted for the sharpest drop in both service imports and service exports. In Q2 2020, foreign travellers in the Netherlands spent over 75 percent less than one year previously, while spending by Dutch travellers abroad dropped by approximately 90 percent. Transport services, too, are affected by the lower number of (international) travellers in particular. Transport service exports were down by around 18 percent in the second quarter, while imports fell by 14 percent. The decline in exports of other business services was mainly on account of travel service providers.

More trade in digital activities

Not the entire service trade was affected by the COVID-19 crisis in Q2. There were also enterprises that started trading more services internationally. An increase in online expenditure benefited service exports by payment companies. In addition, Dutch companies received approximately 13 percent more for the use of intellectual property in the second quarter, equivalent to nearly 2 billion euros. This is largely attributable to the distribution of audiovisual products such as streaming services of films, TV series and music. The companies supporting these digital activities saw their imports and exports increase as well. For example, there was a higher demand for computer software and games during the coronavirus crisis; the export of user licences was 20 percent up in Q2 year-on-year. Exports of telecommunications services increased as well, by 15 percent. However, the declining trade in other information services offset the growth in computer and telecommunications services within this service type. The decline in travel also played a role in this respect, because mediation websites (platforms) provide their services via databases.

Service traders are mainly independent SMEs

The latest Internationalisation Monitor, which focuses on international service trade, describes the features of service traders. In 2018, the vast majority of international service traders were independent SMEs: over 93 percent. Of this group, 74 percent were only service importers, mostly small companies. Nowadays, companies can easily turn to other countries for services such as internet advertising, licencing, hosting a website or subscribing to an online accounting service. Only 6 percent of the international service traders were multinationals.

90 percent of service trade value on account of multinationals

Although the group of independent SME service traders is relatively large, they only make a limited contribution to the value of total service exports and imports. In 2018, multinationals exported nearly 90 percent of the total export value of service traders in the Dutch business economy and imported 92 percent of the total import value. For both independent SMEs and multinationals, most imports and exports are realised by companies that trade in both goods and services.

Do you want to learn more about international trade in services and R&D? Go to the Internationalisation Monitor 2020, third quarter. This edition of the Internationalisation Monitor looks at a number of elements: combining goods and service trade, the export behaviour of service traders, the role of distance and size (GDP) of foreign markets for service exports and the relationship between R&D and exports.