Improving and expanding the role of backbone services in global manufacturing supply chains can sharpen the competitive edge of Asia-Pacific economies, according to a new policy brief released by the Asia Pacific Economic Cooperation (APEC).
The report by the APEC Policy Support Unit highlights the importance of services to manufacturing industry performance and competitiveness.
“If APEC economies want to be competitive in exporting goods, their services sectors must be efficient,” said Alan Bollard, executive director of the APEC Secretariat. “Manufacturing performance depends greatly on the competitiveness of the services sector.”
“Telecommunications, financial services, transport, and distribution—all backbone services sectors—underpin supply chains,” added John Larkin, Chair of the APEC Committee on Trade and Investment. “Collectively, these support most segments of the production process.”
Other services sectors are likewise important, including research and development, branding and design, advertising, retailing, and repair.
“The ‘servicification’ of the manufacturing sector has taken hold, resulting in the integration of services in manufacturing businesses,” Larkin explained. “Advances in communications and transportation have made services more tradable and facilitated their incorporation in cross-border supply chain production.”
Services is the largest economic sector in most APEC member-economies. It accounts for 68 percent of total gross domestic product across the region as a whole and 90 percent of gross domestic product in service-based economies such as Hong Kong.
“Services have increasingly become a way for businesses to differentiate their products in competitive markets,” noted Gloria Pasadilla, senior analyst at the APEC Policy Support Unit. “These are often packaged as part of a final goods sale, for example, repair and maintenance as part of a warranty agreement or recycling services as part of the sale of an electrical appliance.”
Services exports as a share of APEC economies’ total exports was 19 percent in 2009. When measured in value-added terms, the figure nearly doubles to 39 percent.
The APEC plans to enhance the APEC Services Trade Access Requirements Database, APEC Business Travel Card, APEC Cross-Border Data Privacy Rules System, and APEC Investment Facilitation Action Plan to boost trade in the services in the region.
Further measures include regulatory and structural reform programs that involve services sectors such as energy, financial services, telecommunications, and transport.
“Services agreements are important components of any 21st century bilateral, regional and plurilateral trade negotiations,” Pasadilla concluded.
Photo: Jordanhill School D&T Dept