The COVID-19 pandemic and digitalization of export promotion services – are changes here to stay?
August 5, 2020
By Katarzyna Rokosz, Ph. D. candidate at the Warsaw School of Economics and Pawel Pietrasienski, Director of International Trade, Governor’s Office of Economic Development, SGH professor
Business leaders, academics and policymakers alike have emphasized over time the challenges of internationalization, and the need for public support in providing better access to foreign markets. Launching in a new market has been a challenge for a number of reasons, from the sheer cost and physical distance, through psychic distance to lack of knowledge and networks in destination markets.
The public sector has come up with several tools for supporting internationalization; European countries have been particularly active in this domain. The key measures include financial support for discovering and pursuing market opportunities, as well as non-financial support, with measures such as issuing publications with market analysis of different foreign markets, as well as advisory and legal services for firms. Most importantly, many trade promotion agencies and programs have relied on overcoming the physical distance by co-organizing and often financing in-person attendance of trade shows, trade missions, acceleration programs (for startups/tech firms), conferences and networking events in destination markets. In the times of the COVID-19 pandemic, these tools have largely become obsolete, as most large-scale events are being cancelled or moved online (Nikkei Asian Review, Bangkok Post, Digital Commerce 360), and travel restrictions make study visits and in-person networking impossible.
With the economic impact of the pandemic, many firms may be limiting their internationalization efforts – the role of the export promotion services is therefore even more important now than before, to help build the resilience of the global economy and ensure availability of products across the global markets. The COVID-19 pandemic, and the resulting digitalization of public services, is having an important impact on how export promotion services are delivered. It is interesting to try and analyze the emerging trends and to ask ourselves the question – are changes here to stay?
Internationalization support and COVID-19 – dedicated support
The COVID-19 pandemic is causing substantial difficulties for many businesses, including (quite substantially) those active in more than one market. On the other hand, this extraordinary situation creates also some business opportunities, notably for firms offering medical supplies, home office gear, or innovative products helping people cope with lockdowns and sanitary measures. The export promotion authorities have caught up, and many of them offer dedicated support for internationalizing firms in the current situation, often with financial support. The measures offered include support in tapping anti-crisis measures offered by foreign governments, facilitation of access to market opportunities created by COVID (also abroad), and virtual support by trade advisors.
As an example - in Poland, PAIH24 tool was launched to provide dedicated support during COVID-19 pandemic. It includes a support hotline available 24/7, support in “navigating” the anti-crisis shield, import/export support for medical supplies, foreign market alerts, request for detailed market information and verification of information/foreign contractors, support in search for foreign customers and in managing the current logistics, as well as interventions in case of conflicts (both B2B and with the public administration) and webinars.
The US Department of Commerce and US Small Business Administration have adapted their regulations to encourage the use of virtual tools to prevent the spread of COVID-19, while also allowing businesses to resume international trade initiatives. This includes virtual service offerings, virtual trade shows, export research tools, online export trainings, market intelligence, virtual matchmaking services, eCommerce innovation lab, design of marketing media, search engine optimization, translation, localization and Rural America Intelligence Service for Exporters.
Understanding difficulties when it comes to COVID-19 travel restrictions, Nevada Governor’s Office of Economic Development (GOED) supports new export opportunities for Nevada small business community and offers financial assistance awards from State Trade Expansion Program (STEP) to enable potential and current exporters’ participation in virtual export promotion events and usage of the whole variety of digital support instruments. GOED has recently awarded 68 federal grants to Nevada small businesses to succeed in the international marketplace. The grant objective is to increase the number of Nevada exporters and increase export sales. A total of $257,914 in federal funding have been available through the program already during COVID-19 and most of the grants will be used by awarded companies to cover costs of virtual - not physical – participation in trade shows and match-making events.
New old instruments – moving the traditional support schemes into the digital sphere
As professional life has largely moved online, so have the tools and support measures offered by trade promotion services. The digitalization of existing instruments has led to creation of “new old instruments”, and it is yet unclear whether this change is temporary or is likely to stick around. Traditionally, trade promotion organizations have frequently shared the knowledge about foreign markets through organization of thematic seminars - mainly physically, in the capital city of either the country of origin or destination. At the moment globally, the physical seminars have been replaced by webinars, which offer a number of advantages - no need to travel, possibility to watch the content from any location, engagement of speakers from different countries, easy access to the recording of the online event, etc. Participants are also able to ask questions via chat box. Also international matchmaking tools have moved online, notably for business and organizations involved in research projects.
An important tool for introducing businesses into the network and the realities of a destination market - conferences - has also moved online during the COVID-19 pandemic. While the knowledge acquisition aspect is easier to replace with online access to talks and discussion panels, the networking aspect is more challenging - however, many conference organizers have found interesting ways to facilitate online networking. This includes, for instance, organization of 1-on-1 virtual meetings, with participants either matched directly or through suggestions by the organizers (based on the background filled in by participants). Some export promotion offices (for instance Innovation Denmark) have offered their firms discount codes for online conferences to allow them to benefit from this solution.
On Tuesday July 27th, the Consumer Technology Association (CTA), owner and producer of CES – the biggest annual trade show ever organized in the world - announced CES 2021 will be a global digital event without a physical Las Vegas presence. Just before the pandemic in January 2020 CES attracted almost 180,000 attendees and a few thousand exhibitors. According to Gary Shapiro, President and CEO at CTA, they “commit to producing the best possible global digital innovation event and … it will be all-digital”.
Beyond COVID-19 – are changes here to stay?
A worldwide discussion about the rise of economic digital diplomacy has already started. Till now economic diplomacy, including export promotion activities, remained largely traditional, based on meetings in person and trade missions rooted in physical travels and trade shows. Everything focused on international expansion of businesses remained physical in nature. However, nothing could have been more disruptive than COVID-19.
COVID-19 has led to the creation of new business models of exporters; changes are therefore expected also on the part of the respective governments supporting them. The current trend of moving all activities online – which could even be entitled “The Virtualization of Everything” is a wide-scale experiment which will have a large impact on the way our lives are organized. Provision of trade promotion activities will also surely experience major and lasting changes; it remains to be seen which of the changes are likely to stick around. Both the practical outcomes and results from research work will determine the overall effectiveness of those new instruments and – ultimately - determine the new mix of instruments.
Numerous positive spill-over effects can take place as and when these changes take effect – the democratization of access to trade promotion instruments is one key possible effect. In the past, internationalization efforts were linked to very high costs – be it travel, access to expertise, etc. Now, many of key services may be accessed online and therefore available to more people. This can in turn lead to optimization of expenditures linked to foreign expansion, with preparatory measures taking place primarily online. It remains to be seen which of the aspects of international expansions will not be permanently replaced by online interactions – some posited elements include high level decisions, executive-level contacts, contract signatures, as well as socializing and networking. Determination of the new mix of instruments, coming out of the current COVID-19 situation, offers an interesting topic for further research.