Servicification of Firms and Trade Policy Implications

Abstract

In the OECD countries, the decline of manufacturing and the employment implications have long been matters of concern. Recently, policymakers in several countries have set out to try and achieve reindustrialization. The servicification of firms is related to these concerns and aspirations. However, servicification, and particularly its role in trade policy, has received limited attention. I review micro-level evidence and discuss its implications. I find that imported, domestic and exported services are all important to contemporary firm competitiveness and participation in international value chains. Therefore, historic policymaking divisions between trade in manufactures and trade in services services, between export and import interests, and among modes of supply are becoming less relevant. I conclude by suggesting potential steps forward.

Servicification in global value chains: Comparative analysis of selected Asian countries with OECD

“…Increasingly from the view of international trade and economic growth, services are observed to be closely linked with the manufacturing activities. As opposed to the traditional belief that the manufacturing sectors are relatively independent of service sectors, the recent trends in OECD countries have revealed that manufacturing industries are increasingly using services in production as well as selling services directly to the consumers (Boddin & Henze, 2014;Lodefalk 2017;OECD 2014). The increasing use, production and sales of services in manufacturing sectors are described as the "servicification" of manufacturing (Elms & Low, 2013;Lodefalk, 2010).…”

“…Servicification is crucial for the manufacturing sectors for multiple reasons. First, as "enablers" of the GVCs, services are increasingly used in developing countries to participate, connect and benefit from the global economy (Lodefalk, 2017). For example, the call centres in India and Philippines provide low-cost services for overseas manufacturing firms in GVCs.…”

“…Thirdly, servicification of manufacturing is also seen as a renewal of industrialisation in OECD countries, which adds value to manufacturing firms with more service workforces (Boddin & Henze, 2014;Kizu et al, 2016). Moreover, servicification enables manufacturing firms of OECD countries to upgrade from low-end fabrication tasks to high-end service jobs (e.g., the factory-less goods producers), which upgrades their positions in GVCs (Lodefalk, 2017). Last but not the least, servicification also improves the performance of manufacturing firms with higher productivity (Anukoonwattaka, Scagliusi, & Mikic, 2015;Nordås 2010) more diversified exporting varieties (Kelle, Kleinert, Raff, & Toubal 2013), better access to foreign market (Lodefalk, 2017) and larger profits (Mastrogiacomo, Barravecchia, Franceschini, 2017).…”

EU trade policy in the twenty-first century: change, continuity and challenges

“…Services are also embedded in goods that are traded internationally (Cernat 2015): they include, for example, logistics, design, engineering or accounting that are necessary inputs in the manufacturing process. This type of trade is referred to as the 'servicification of manufacturing' (Lanz and Maurer 2015;Lodefalk 2017). In Europe, it is estimated to be worth over €300 billion and accounts for about one third of total EU goods exports (Cernat 2015).…”

Migration and servicification: Do immigrant employees spur firm exports of services?

“…Services account for the major share of employment and value added, and this share is continually growing (World Bank, ). However, exports of services are subject to substantially higher trade costs than are merchandise exports (Lodefalk, ; Miroudot, Sauvage, & Shepherd, ). Thus, services exports are increasing despite the current trade environment, not because of it.…”