The service sector has for too long taken a back seat to industry in the discussions of the Asia-Pacific Economic Cooperation (Apec). But thanks largely to the leadership of the Philippines, which is the host of the Apec Leaders’ Summit this coming November, services will now take center stage as a key to Apec growth.
Credit should be given to the Philippine delegation headed by Acting Foreign Affairs Secretary and Apec Senior Officials Meeting chair Laura del Rosario and Apec Business Advisory Council (Abac) chair Doris Magsaysay-Ho.
An Abac commissioned study “Trade Services in the Apec Region” by the University of Southern California showed a significant finding: A reduction in Apec services cost can result in $100 billion (or P4.4 trillion) in increased gross domestic product (GDP) for the region.
Statistics had shown that 64 percent of Apec trade came from products, with only 6 percent from services. But upon recognizing that almost every product has a necessary service component, the new finding is that 42 percent of Apec trade comes from services.
Apec conferences
Last May 22, Alyansa Agrikultura was invited to participate in both a forum and organizational meeting on Apec services. Alyansa was invited again to the Sept. 7 Conference on Services, but this time as a speaker to address representatives from the 22 Apec member-economies. The objective was to show how an improved Apec service sector trade regime could improve both agriculture and industry, especially in the Philippines.
Quoting different studies on services, the new global picture shows two important points that must be kept in mind.
First, every product has a very large service component. From the Board of Trade in Sweden, a study showed that Sandvik Tooling needed 40 different services to deliver a product. Thirteen additional services were needed after product delivery to complete the product cycle. In the same study, Aromatic, a food company that relies on agriculture produce, has practically the same number of pre-and-post product services. Therefore, to understand a product’s composition, one must likewise identify the different service components that make that product successful, whether it is industry- or agriculture-based.
The second point is that many products are really “Made in the World.” For example, the Texas instrument chip TCM 9055 would not exist without services from many nations.
Information technology is from Sweden; blueprint design from France; prototypes from Japan; engineering to fix problems from Chinese-Taipei (or Taiwan); packaging finished chips from different Southeast Asian countries; implanting chips into phone switches from the United States, Mexico, and Australia; and transportation, insurance, distribution, and other relevant services from other countries.
Without these two realizations, services can never be addressed properly in a way that can optimize the total product package. The international trade environment should be managed so that the impact of services can be maximized to produce the needed growth.
Next Steps
The Alyansa Agrikultura representative made four recommendations:
1) Have a clear understanding that today’s services are an essential part of the product and that this product often relies on services from around the world (“Made in the World”).
2) Identify the top three to five trade barriers from the list of the 12 most debilitating barriers cited by the study “Trade Services in the Apec Region.” After this, work for priority trade measures that will have the most impact on inclusive growth.
3) Ensure that Apec gives the long-delayed appropriate emphasis to services. Encourage this service sector focus in other multilateral institutions such as the World Trade Organization because of its huge role in our economies.
4) Establish an Apec Service Coalition Network with a revolving chair and secretariat to facilitate follow-up action and accountability.
We should give full support to the Philippine initiative of an Apec Service Cooperation Framework with an inclusive agenda that addresses SMEs, as well as other agriculture and industry concerns. At the Cebu conference, Dr. Ramonette Serafica ably presented the accompanying proposed interactive website “Apec Virtual Knowledge Center on Services.” It will be hosted by the Asian Institute of Management.
Makati Business Club’s Peter Perfecto said, “An efficient and competitive service sector will make the manufacturing and the agriculture sectors look good. Almost 30 percent of the agriculture sector productivity is actually services, not goods.” Today, the service sector accounts for 54 percent of total employment, or around 20 million Filipinos.
The government and private sector must now unite to propose and implement strategic service trade initiatives, especially those that will benefit our agriculture. This way, we can achieve inclusive growth under a much improved Apec service trade regime.
(The author is chair of Agriwatch, former Secretary for Presidential Flagship Programs and Projects, and former Undersecretary for Agriculture, Trade and Industry. For inquiries and suggestions, email agriwatch_phil@yahoo.com or telefax (02) 852-2112).