The roles of services in international trade and Global Value Chains: A conceptual framework

Abstract

This chapter discusses the important roles of services in the Global Value Chains (GVCs). It highlights the fact that, similarly for goods, the roles of services in GVCs are critical inputs to GVCs as well as constituting GVCs in their own right. In addition, international fragmentation can occur in the value chain of services, just like goods. The globalization of production in the services industry began around the middle of the 1990s, about 20 years after it had begun in the manufacturing sector (Stephenson, 2012). Similar to the manufacturing sector, new technologies – especially information technology and telecommunications – have allowed the production of service components to be disseminated to different parts of the world. However, despite several similarities, services have distinct characteristics from goods. They are not just inputs but also the glue that holds value chains together. In addition, services differ from goods in how they are transacted and delivered, how they are linked with the rest of domestic economy, how they are regulated, how international cooperation can contribute to integration of national markets, or how they are measured. Therefore, services deserve special attention in a discussion about GVCs.