What is an Invisible Trade
An invisible trade is a business transaction that occurs with no exchange of tangible goods. An invisible trade involves the transfer of non-tangible goods and/or services, such as customer service, intellectual property and patents. The items involved in an invisible trade are associated with a value and can be exchanged for tangible goods.
BREAKING DOWN Invisible Trade
By contrast, visible trade involves the exchange, or the import and export, of tangible goods. Examples of invisible trade include consulting, income from foreign investments, shipping services, insurance, banking and tourism. Invisible trade represents an increasing percentage of world trade.
What Constitutes Invisible Trade
Other forms of invisible trade can include the access to passenger and freight transportation, as well as technology exchanges that allow for the development of new services and goods. The concept of invisible trade is used to frame intangible activity that involves monetary exchange, such as the purchase of an insurance policy from a firm in one country by a company in another country. This can also include a bank doing business overseas with branches and offices outside of its home nation.
Education and medical care can also be seen as forms of invisible trade. Students might travel to other nations to gain access to learning at institutions that are renowned for their expertise in particular academic concentrations. Once they have completed their training, the newly graduated students might consider remaining in the country where they learned their skills or return to their native state. That would transfer their knowledge and expertise across borders in an intangible exchange.
Such activity may become a point of contention and competition among nations as they seek to attract professionals with in-demand skills. Incentives might be offered to sway their decisions. The expectation is that professionals who are trained in promising industries will contribute to the growth and expansion of the industries and services where they reside. For example, technologists with training from the Silicon Valley area might be offered resources and funding to move to another nation to launch their startup companies and trigger a new wave of economic growth.
Patients in need of specialized medical procedures or a higher quality of healthcare may travel to other countries as well to gain access to the treatment they require. This may be due to the rarity of the condition that needs to be treated, the severity of the ailment, or there could be restrictions on the types of medical procedures that may be performed in one nation compared with another. The ability to travel to a country where the procedure can be done is a form of invisible trade.