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Open services trade key to robust supply chains

Open services trade key to robust supply chains

Issued by the APEC Policy Support Unit

Ningbo, China, 25 Feb 2014 - The role of services in global manufacturing supply chains is increasing and prompting Asia-Pacific economies to take further steps to facilitate trade in the sector.

Insights from a new APEC Policy Support Unit policy brief on services were examined by APEC trade officials meeting this week in Ningbo. The findings point to 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 Dr 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. Among them include those used in pre-manufacturing such as research and development, branding and design, as well as those related to post-manufacturing like 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, China.

“Services have increasingly become a way for businesses to differentiate their products in competitive markets,” noted Dr 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.

Enhancements to the APEC Services Trade Access Requirements Database, APEC Business Travel Card, APEC Cross-Border Data Privacy Rules System and APEC Investment Facilitation Action Plan are a focus of collaboration between member economies 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 is also a point of emphasis in more free trade negotiations.

“Services agreements are important components of any 21st century bilateral, regional and plurilateral trade negotiations,” Dr Pasadilla concluded.

Download the report: APEC, Services and Supply Chains

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