T C S

TRAINING COURSE ON
TRADE IN SERVICES NEGOTIATIONS
31 March-1 April 2016
Session 5: Trade in services and global value chains:
opportunities, challenges and stakes
Dr. Witada Anukoonwattaka, TPAS, TIID, ESCAP
(presented by Mia Mikic, Chief, TPAS, TIID, ESCAP)
[email protected]
Outline
• Roles of services in GVCs
• Tracking servicification
• Servicification in exports by Asia and the
Pacific
• Policy implications
Roles of services in GVCs
Dual roles of services in GVCs
“Embodied” and “embedded” services
Source: Adapted from ABAC (2011)
Why do services matter for development?
• Efficiency and availability of services is an important factor for
competitiveness and the opportunity to enter to GVCs
– Communications, insurance, finance, logistics, etc.
– GVCs increase the demand for “coordination services”
•
Services tasks are often the links in GVCs that create high
value-added.
– A path for upgrading GVC participation
Servicification
• “Servicification” is most simply defined as a rapidly
increased use of services in manufacturing process.
– Manufacturing firms always need services as
integrated or accompanying parts of their goods.
– Their importance appears to have grown due to
GVCs (specialization, outsourcing and off-shoring,
global market integration) and more sophisticated
customer demand.
Hidden service exports
• Service exports can be invisible since many services are sold in a
package with a good – thereby regarded as a good in trade
statistics
Ex1. Automotive GVCs
Value added of a typical US car (services are highlighted)
1. R&D (Japan)
17.5%
2. Design (US)
about 3%
3. Assembly (ROK)
30%
4. Assembly (US)
37%
5.Supply of minor parts (TW)
4%
6. Advertising & marketing (UK)
2.5%
7. Data processing (Ireland & Barbados)
2%
8. Transport and insurance (US)
about 4%
Source: WTO (1998)
Contribution
of services =
30%
7
i-phone 4 cost breakdown
Source: The Economist (2011).
Tracking servicification
Measuring servicifciation from trade in value-added
Service x
Country A
Service y
D
Service x
Country A
Service y
F
D
Country A
Country B
Country A
F
Country B
Good a
D
Service x
Country A
Service y
F
D
Country A
Good b
Good a
Country B
Good b
Good a
Good b
Good a
Good b
Country A
F
Country B
Servicification
Trade in services: decomposition
Source: Lanz and Maurer (2015)
•TiVA database was first released in May 2013 and it has been
updated in June 2015.
• Now it includes:
 61 economies covering OECD, EU28, G20,…
34 industrial sectors including 16 manufacturing and 14 services
sectors
Years: 1995, 2000, 2005, and 2008 to 2011.
I-O tables allow to measure value added by source
industry and exporting industry Source industry
Exporting
industry
Services content in gross vs value-added
• Based on gross terms,
services seem to play a
minor role on exports
of developing countries
in general.
Services shares in gross and value added exports
(2009)
• However, the value
added by services
provides as an input to
the production of goods
are actually substantial.
Source: WTO-OECD TIVA database
Servicification in exports by Asia and the Pacific
Service content in industrial exports by the region
• Value created by services amounts to 33% of the gross industrial
exports of Asia-Pacific economies
o The share of service content is considerably predominant in
high-technology sectors
• Services inputs to the production of goods are provided by both
domestic and foreign service providers.
Services content in gross industrial exports of Asia-Pacific economies, 2009
30
25
16.0
11.3
9.4
8.5
10.7
11.7
9.3
9.5
20
7.3
4.3
19.5
21.1
21.9
19.3
18.2
18.0
17.2
17.9
Food
products
16.5
Textiles &
apparel
15
10
Foreign services value-added
5.2
17.5
5
Domestic services value-added
13.4
Agriculture
Mining and
quarrying
Wood &
paper
Manufacturing
Chemicals &
minerals
Basic metals
Transport
equipment
Machinery
0
Electrical
equipment
Percentage of global export value
35
Source: Anukoonwattaka et.al. 2015
16
15%
15.9%
17.7%
19.7%
17.5%
15.0%
16.5%
Mining and quarrying
14.64%
Agriculture, h unting, forestry
and fishing
18.8%
12.41%
Other transport equipment
35%
Other non-metallic mineral
products
16.0%
19.0%
Fabricated metal products
18.6%
10.28%
Coke, refined petroleum
products and nuclear fuel
23.4%
14.08%
Food products, beverages and
tobacco
22.2%
13.04%
Wood and products of wood
and cork
18.79%
Machin ery and equipment, nec
16.03%
Pulp, paper, paper products,
printing and publishing
25%
Rubber and plastics products
22.6%
12.38%
Electrical machinery and
apparatus, nec
22.17%
Basic metals
21.3%
13.91%
Motor vehicles, trailers and
semi-trailers
10%
13.95%
Textiles, textile products,
leather and footwear
16.47%
Manufacturing nec; recycling
30%
Chemicals and chemical
products
Computer, Electronic and
optical equipment
% of Asia-Pacific industrial exports
Services content in exports, 2011
40%
FOREIGN
DOMESTIC
12.49%
15.66%
10.43%
12.60%
20%
22.6%
19.1%
5.38%
3.73%
5%
13.3%
14.5%
0%
-2.00%
-4.00%
-6.00%
-8.00%
Machinery and equipment, nec
Chemicals and chemical products
Motor vehicles, trailers and semi-trailers
Mining and quarrying
Textiles, textile products, leather and footwear
Coke, refined petroleum products and nuclear fuel
Agriculture, hunting, forestry and fishing
Food products, beverages and tobacco
Other non-metallic mineral products
Manufacturing nec; recycling
Fabricated metal products
Other transport equipment
Wood and products of wood and cork
Basic metals
Rubber and plastics products
Electrical machinery and apparatus, nec
Pulp, paper, paper products, printing and publishing
-10.00%
Computer, Electronic and optical equipment
Percentage change 1995-2011
Changes in sources of services content in exports by
Asia-Pacific economies, 1995-2011
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
FOREIGN
DOMESTIC
Key services inputs to industrial exports of Asia-Pacific economies, by industrial sector, 2011
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Electricity, gas and water supply
Wholesale and retail trade; repairs
Transport and storage
Financial intermediation
Renting of machinery and equipment
R&D and other business activities
Construction
Hotels and restaurants
Post and telecommunication
Real estate activities
Computer and related activities
Public administration and defence; compulsory and social security
Rising of intraregional imports of services
• The rising demand for imported services has been increasingly met by services
(exports) from (developing) Asia-Pacific economies.
• Rise of China and decline of Japan
Percentage of imported service inputs
Sources of intraregional imports of services inputs in Asia and the
Pacific 60
50
40
30
2.8
0.9
1.2
4.9
2.4
5.1
1.9
2.6
2.2
2.4
4.6
3.2
6.0
6.5
9.1
8.3
20
10
20.4
2.3
2.6
2.8
4.0
4.0
Hong Kong, China
India
Russian Federation
5.3
Taiwan Province of China
6.7
Russian Federation
8.4
Republic of Korea
China
16.1
14.2
2009
2011
0
Other Asia-Pacific countries
Japan
2000
Path of servicification: China vs Japan
Percentage of total service value added in
gross exports
Service value added in gross exports, by source region, 1995
-2011
100
90
80
6.1
3.2
28.6
10.3
9.3
30.8
70
60
50
46.1
34.3
Rest of the world
90.7
40
80.4
30
Domestic
20
10
Asia-Pacific economies
25.4
34.9
0
1995
2011
China
1995
2011
Japan
A decrease of domestic services: is it bad?
• Japan has increasingly off-shored, China has increased the
share of value added created domestically. This is particularly
true for high tech sectors.
Change of source in selected industrial sectors, by source region, 1995 -2011
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
China
Japan
Transport equipment, 2011
Transport equipment, 1995
Electrical equipment, 2011
Electrical equipment, 1995
Agriculture, 2009
Agriculture, 1995
Transport equipment, 2011
Transport equipment, 1995
Electrical equipment, 2011
Electrical equipment, 1995
Agriculture, 2011
Agriculture, 1995
Rest of the world
Asia-Pacific
Domestic
Policy implication
Barriers to trade in services are difficult to quantify
• “At the border”: restrictions on commercial presence or FDI (mode 3),
visa restrictions on inwards movement of natural persons (mode 4)
• Much of the barriers occure “behind the border” in the form of regulatory:
–
–
–
–
Overregulation
Absence of (transparent) regulation
Discretionary authority.
Major departure from the commonly accepted international practice
Source: Gootiiz and Mattoo (2009)
Integrated policy framework
Source: ABAC (2011)
A holistic approach in trade policy is required.
• Efficient access to services is critical for the improvement of productivity, growth,
and jobs. , especially in hi-tech industries.
• Policy formulation needs to treat goods and services together, and not separately.
– Removing obstacles for both goods and services.
– Defensive positions on certain goods or services sectors could have greater
consequences than expected.
• Manufacturing companies are key stakeholders in services negotiations both as
users and producers.
– Need to be consulted on the formulation of services trade policy.
• Servicification strengthens the case for unilateral, comprehensive liberalisation of
services.
– Modes of supply often complementary – trade in one mode stimulates trade
in others.
– Liberalisation across sectors and modes.
Thank you!
Q&A
http://www.unescap.org/our-work/trade-investment