The importance of embodied services
in trade
Tom Westcott, ITS Global
Partners in Growth: Services Trade with Southeast Asia
Wellington, 3 June 2011
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What are ‘embodied’ services?
•
They are intermediate services inputs embodied in the final output of
a business, contributing part of its value
•
Businesses use internal resources (land, labour and capital) to
manufacture, mine or grow and do this using additional external
services
•
E.g. Manufacturing steel requires services such as electricity, a water
supply, transport to market and typically business services such as
accountants
•
Machinery exports include engineering services embodied in the
machinery
•
(To be distinguished from ‘embedded’ services, which are services
linked and related to the sale of merchandise or to the sale of another
services. Eg. After-sale support.)
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Key messages
1.
Cross-border export data does not fully convey the contribution of
services.
•
Embodied services make a significant economic contribution to exports
that is not counted by usual export data
•
–
about A$35 billion in 2008-09 in Australia are ‘carried’ by
merchandise exports
–
in addition to A$52 billion in cross-border services exports
Sales of services overseas by foreign affiliates of Australian companies
also provide a major contribution not reflected in services exports
–
estimated at around A$108 billion in 2009-10.
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Key messages
2.
Embodied services are critical to manufacturing and global supply
chains.
•
As businesses continue to outsource and adopt ‘lean production’
techniques, embodied services exports will continue to grow
•
–
with technology advances (esp. telecoms) services can
increasingly be disembodied or splintered
–
outsourcing means services are increasingly embodied in
manufactures
–
this contributes to manufacturing efficiency and export growth
There is a convergence in production systems in manufacturing and
services
–
manufactures use more services
–
services delivery uses manufactured capital goods.
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Key messages
3.
Efficient services regulation matters in Southeast Asian manufacturing
countries
•
Understanding size and distribution of embodied services becomes a
policy tool
•
Policy makers can prioritise reforming regulation of services most used
in manufacturing
•
Can identify key ‘carrier’ exports and services inputs they use
•
Can identify services industries most commonly embodied in exports
•
In general, regulating access to network services is a priority (e.g.
transport, electricity, gas, water, postal and telecoms).
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Which exports use most embodied services?
•
•
For Australia:
–
manufacturing accounted for 26% of all services exported in
embodied form
–
mining: 31%
–
agriculture: 4%
–
Services: 38%
Notable manufacturing carrier export categories for Australia were
–
basic non-ferrous metal &products (3.6%); and
–
motor vehicles & parts (2.9%)
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Industries whose services are embodied in
exports
•
•
Major sources of embodied services in cross-border exports:
–
Property & business services (26% of all embodied services exp.)
–
Transport & storage (15.6%)
–
Wholesale trade (12.3%)
–
Services to mining (11.9%)
–
Construction (6.9%)
–
Finance & insurance (6.3%)
–
Electricity, gas & water supply (5.5%)
16 ANZSIC services industry groups used in analysis
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ITS Global’s report for the Australian government is available at:
http://www.dfat.gov.au/publications/trade/Services-International-Linkages.html
For further information, please contact:
ITS Global
1/34 Queen St
Melbourne, Australia
Tom Westcott: t.westcott@itsglobal.net
Jeffrey Rae: j.rae@itsglobal.net
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