international trade in services: challenges and...
TRANSCRIPT
INTERNATIONAL TRADE IN SERVICES:
CHALLENGES AND OPPORTUNITIES FOR
DEVELOPING COUNTRIES AND BRAZIL
Dorothée Rouzet Organisation for Economic Co-operation and Development Seminar “Brazil and International Trade in Services” Brasília, 28 June 2016
• Services are a huge global market and increasingly tradable
• Distance is less of an obstacle
– Easier global integration for countries with poor road and port infrastructure, remote or landlocked
– But digital connectivity and language skills do matter
• Developing countries can enter global markets as competitive providers of offshored business services
– With a greater fragmentation of production combined to cost pressures, services previously provided in-house are more and more offshored
– Creating an opportunity to join regional or global value chains with relatively low fixed costs: front and back office functions are stand alone products
– With a view to moving up from BPO to ITO and KPO – from standard to customised skill-intensive services
• Leapfrogging structural transformation – The Indian story?
A source of opportunities…
• Some conditions for the development of a successful services export sector may not be easy to fill
– A critical mass of skilled workers
– A predictable business environment and cost attractiveness
– A domestic manufacturing base as clients from which to grow a competitive business services industry
– The ability for specialists to move to the client’s location on short notice
• A favourable policy environment is a full package
– For traditional traded services (transport, travel): infrastructure, security, administrative procedures, openness in goods, etc.
– For trade in financial services, telecommunications and other business services: services trade liberalisation is intertwined with the mandate of sector regulators, the competition framework, investment regulation, prudential regulation, public procurement rules, etc.
• Challenges are the capacity and maturity of services regulatory authorities, and preserving policy space to regulate while offering an open and secure environment for investors
… And challenges
Services in (G)VCs
Services needed to establish and maintain a goods supply chain: Sandvik Tooling
Source: Kommerskollegium (2010)
Services in the supply chain
Services are the highest value added activities in manufacturing supply chains
And also add value in bundles of goods and services sold together
The price difference is largely due to services
Mass market branded Up-market branded
€ 20 € 100
Speed to market
Design
Services inputs determine quality and
performance
Medium/low tech High tech
Price R&D Engineering
• Taking advantage of the expansion in global services trade requires a coherent strategy dealing with the various relevant policies (e.g. skills, infrastructure, FDI, competition)
• Opportunities are not only on the export side but also on the import side: state-of-the-art and cost-effective services inputs to upgrade manufacturing
• Services liberalisation for its own sake versus holding a bargaining chip
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Taking stock
• Brazil has a large services sector compared to economies of similar development
– 71% of GDP, three quarters of formal jobs, more than 80% of new jobs
– Directed towards and sustained by the domestic market
– Attracting market-seeking FDI inflows
• But the competitiveness of services is hampered by structural deficiencies:
– Low productivity
– High inflation
– High and distortive tax burden
– Weak international performance
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The case of Brazilian services
Large services trade deficit
10
(60,000)
(40,000)
(20,000)
-
20,000
40,000
60,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Goods, balance Services, balance Trade, balance
Trade balance in million USD, 1995-2014
Low services productivity
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Labour productivity in constant BRL 1,000
12
Intermediate services are critical for
Brazil’s manufacturing competitiveness
0%
10%
20%
30%
40%
50%
Agriculture
Min
ing
Foo
d p
roducts
Textile
s &
ap
pare
l
Wood
Pape
r, p
rin
t, p
ubls
h
Co
ke
& p
etr
ole
um
Ch
em
ica
ls
Ru
bbe
r &
pla
stics
No
n-m
eta
llic m
ine
rals
Basic
me
tals
Fab
ricate
d m
eta
ls
Ma
ch
inery
ICT
& e
lectr
on
ics
Ele
ctr
ica
l m
achin
ery
Mo
tor
veh
icle
s
Oth
er
transpo
rt
Oth
er
man
ufa
ctu
ring
Services value added in Brazil’s manufacturing exports (2011)
Construction Wholesale, retail & hotels Transport & telecoms Finance & insurance Business services Other services OECD average
• Improve the bottlenecks
– Transport and logistics: Infrastructure, speed and reliability
– Finance: Cost, availability and allocation
• Support manufacturing diversification and upgrading
– Key services: R&D, design, branding, engineering, software, consulting
– Building and improving digital infrastructure and skills
– Global integration as a tool for technology transfer
• Leverage existing strengths in high value added services
– Professional and technical services
– Domestic business services outsourcing
– Services related to the commodity sector
• Develop an integrated goods/services strategy for international negotiations?
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Reaping the benefits from services trade:
Food for thought
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