Implications for 21st Century Trade and Development of the Emergence of Services Value Chains

Date period
1 October 2012

Services  industry  groups  have  identified  services  supply  chains  as  a  “21st century”  issue demanding specific attention in the WTO and in bilateral, regional and plurilateral trading arrangements.  This  is  an  issue  for  which  the  trade  policy  community  seems  relatively  ill-prepared  at  present,  there  being  a  dearth  of  knowledge  and  policy  research  on  services value chain issues. Although there has been much attention devoted in trade discussions recently  to  the  issue  of  global  value  chains  for  goods,  the  authors  highlight  the  fact  that the concept is as relevant to services activities as it is to merchandise production. In new business  models,  enterprises  are  outsourcing  not  only  the  assembly  of  goods,  but  also many  increasingly  fragmented  services-related  tasks.  Thus  there  is  a  strong  need  to understand  better  the  role  that  services  are  playing  in  the  new  21st century  patterns  of trade that are emerging.

This  paper  aims  to  make  a  contribution  to  the  discussion  of  services  value  chains.  As background,  the  authors  highlight  the  growing  importance  of  services  in  world  trade; discuss the  limitations in being able to measure the contribution of services to trade in an adequate  manner,  and  the  growth  of  ‘offshoring/on-shoring’,  intra-firm  and  intermediate trade in services. The authors consider how services are embodied in and indeed “enable” value  chains  in  manufactures  through  providing  the  links  that  combine  the  production processes  in  diverse  geographic  locations.  Going  further,  examples  of  services  value chains  on  their  own  are  provided.  Lastly  they  draw  out  some  of  the  implications  of  the phenomenon  of  services  value  chains  for  21st century  trade,  industry  and  development policy. The authors also touch upon the question of how to make the world trading system under the WTO, conceived for the 20th century pattern of trade, more relevant to the new patterns of services trade and investment that have recently emerged.