LOS ANGELES—Scott Johnson, cofounder of the firm Johnson Fain, is a trim gentleman who sports a white plastic wristwatch and eyewear with oversized clear frames. His company employs 50 workers in a former Chrysler showroom just north of Chinatown, an upmarket presence in a neighborhood where nearby garment factories still scrape by on quick-turnaround sewing and embroidery jobs.
Johnson Fain contributes to the construction of objects as gigantic as office towers in China, but what the company sells isn’t so tangible. “We are purveyors of intellectual content,” Johnson said of his architectural firm. “We don’t build the buildings; we don’t supply the nails or the concrete. People make buildings from our drawings.”
In an airy workroom where young architects labor amid miniature cityscapes and building models, Johnson examined a small replica of central Dallas and then moved on to rows of glossy printouts affixed to a wall. “This is some of our presentation in Taipei last week,” he said, pointing to five versions of a pair of 45-story residential towers slated for construction in Taichung, a city in central Taiwan. “This building is like a kind of jewel—it’s faceted,” he explained, singling out one version. “This is actually the one we’re proposing and studying. It would have a beveled-glass system, and it would reflect light.”
Johnson Fain has worked with international clients for more than 20 years, outrunning a succession of economic upheavals: the collapse of Japan’s property market in the early 1990s; the Asian financial crisis of 1997; and the continuing housing slump in the United States. But the firm’s expansion abroad has been steady. When it won a commission to draw up a master plan for the central business district of Beijing 10 years ago, an estimated 6 percent of its revenue came from work overseas. Today, thanks to an expansion of international business—especially in China—the proportion has quadrupled to about 25 percent.
The architectural firm’s business is the archetype of white-collar service: brainwork that can fetch a high price from customers both at home and abroad. If more U.S. companies resembled Johnson Fain, the service-economy dream—in which globalization enriches us all so that fancier and nicer workplaces can replace the U.S. tube-sock mills already lost to lower-wage countries—might come true. It’s a vision that would also help the nation meet President Obama’s stated goal of doubling U.S. exports over the next five years.
But how realistic is this vision?
Undeniably, the United States has been losing countless jobs to other countries—notably, to China and India—not only in manufacturing but increasingly in the service sector as well. Precise estimates of outsourced service jobs are hard to come by (unlike goods, services don’t pass through a physical port of entry), but experts figure that a few million have left American shores for cheaper locations. And no wonder. In India, call-center employees and software programmers cost, at most, half as much to hire.
However, we still sell more services abroad than we import, thanks largely to U.S. exports of higher-end, white-collar services. The balance of trade in manufacturing has been awful for decades; last year, the United States imported $507 billion more in goods than it sold abroad. For services, the opposite is true; the U.S. trade surplus is well in the black—and growing.
According to the Commerce Department’s Bureau of Economic Analysis, the United States exported $132 billion more in services than it imported in 2009, up from $80 billion in 2006. Judging by the first half of 2010, the United States will record its largest surplus ever this year, exceeding $140 billion. Most of this surplus is presumed to be in high-end, white-collar services—knowledge-based, easily portable brainwork (architectural blueprints, for instance) rather than fixed-location handiwork (such as computer repair or massage therapy). In the upper echelons of the service sector, the future looks especially agreeable.
WHAT FOREIGNERS WANT
These trends have left many trade enthusiasts bullish. “Exporting high-end services is definitely one of our comparative advantages, and it’s a part of our export mix that has unlimited upside,” said Dan Griswold, director of trade-policy studies at the libertarian Cato Institute. “As the global middle class grows, their appetite for U.S. services is just going to grow and grow.”
To anticipate what foreign customers may want, it’s useful to look at what they’ve bought so far. In 2009, travel ($94 billion) and passenger fares ($26 billion) accounted for a quarter of this country’s service exports. Not all of that was white-collar, given the many low-skill services that tourists require. Still, this inflow can be expected to continue as long as the dollar remains weak—say, whenever a Belgian flies to Seattle on Delta, stays at a Marriott, buys breakfast at the Pike Place Market, and flies home.
This article appears in the December 11, 2010 edition of National Journal Magazine.