Technology in Services Policies for Growth, Trade, and Employment (1988) / Chapter Skim
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Key Policy Issues Posed by Services
Key Policy Issues Posed by Services
Pages 211-234
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economy and the role of technology in improving the productivity of, and the value added by, the services sector. Given the dominance of services activities in the U.S.
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policy discussion: · This nation's strong services sector is a natural and desirable outgrowth of a highly productive industrial economy and the sophisticated application of technology to services activities. Services growth has not led to a decline in the overall manufacturing base; rather it has both created new markets for manufactured goods and supported increased manufacturing competitiveness.
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Serious funding and administrative support are needed to modernize and upgrade both domestic and international trade data concerning services.
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DISTRIBUTION SERVICES Wholesaling __ Retailing Re~ nng I l 1 1 1 SERVICES _ _ I NTERMEDIARY CONSUMER (Self Service) GOVERNMENT SUPPORT SERVICES E.g., Waste Disposal, Road Maintenance, Education, Health Support, Standards, Police and Fire Protection 1— FIGURE 1 Some mutual interactions among manufacturing and services activities.
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products are sold to the services sector. In addition, manufacturing success today often requires more rapid feedback from the marketplace, better customized products, and more accurate delivery in shorter cycle times all of which are dependent on downstream services integration.
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Services and International Manufacturing Operations One of the areas in which services technologies affect manufacturing most significantly is international operations. Telecommunications, air transport,
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Effective coordination of the international operations of large manufacturing enterprises and of many much smaller companies depends heavily on services technologies and efficiencies. Also, economies of scale in international operations are very often due to the corporation's services capabilities (i.e., technology transfer, marketing skills, financial services, or logistics)
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1 1 1 1 :~ ~,,,,,,,,,,,,,,,,,,,,,,,,,,,. ~,,,,,,,,,,,,,,,,,,,,,,/ ~//////i////////////// At: Greece Saudi Arabia Philippines Indonesia Israel Mexico Brazil Switzerland Federal Republic of Germany Japan France Italy United Kingdom Spain Sweden Taiwan Kuwait Singapore Canada Republic of Korea South Africa Australia Hongkong _ /~//////////////////////////3 ~Y////////////////////{ ~ 1 1 0 :////////////// ~ ~7 ////////////////, ~/////~ 1,224 FIGURE 2 Exchange rate fluctuations.
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domestic economic and international trade policies recognize the extreme fluidity, substitutability, and mutual interrelatedness between manufacturing and serv~ces. GOVERNMENT POLICY ISSUES Recognizing these important facts as context, what are the central policy initiatives needed to support the effective use of technology in services?
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Macroeconomic and Tax Policies: Capital Formation and Technology Investment . The basic macroeconomic and tax policies to support a strong services sector are quite compatible with those desirable for a healthy manufacturing sector not surprising when one understands the substitutability and interrelatedness of the two sectors.
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Any capital gains tax reduction should, of course, be related to expected rates of inflation. The electronic integration of world capital markets will make a national policy of arbitrarily low capital costs much more difficult to maintain, even for Japan.
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o co v' o 20 15 r' / Public 10 _ / r, , I , I I I 1954 1960 1 1970 1 1980 1986 est 1965 1 975 FIGURE 3 Real public sector investments (annual public spending averages in 1982 dollars) and capital stock per public worker (in 1982 dollars)
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In others, new fortes of intervention may be desirable to overcome new market imperfections or to accelerate the development and deployment of emerging services technologies. Increasingly, regulation is likely to be more equitable at a transactional level (i.e., establishing similar disclosure, safety, or insurance requirements for a particular transaction)
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The Presidential Task Force on Market Mechanisms (the Brady Commis
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More attention to the interests of less developed countries and the implications for their international trade balances will be a core policy issue to ensure a more stable and continuously growing world economy. Many maintain that the present complex of insurance mechanisms, hedging instruments, and open markets is sufficient to avert real disasters and that those who invest should bear their own risks (Norton, 19881.
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The safety net provided by widely distributed services jobs has undoubtedly helped by absorbing displacements from manufacturing into local jobs in the services sector. The economy has benefited if the wage levels in growing services areas and the value added which is presumably necessary to support them—are higher than those that displaced blue-collar workers would have had to accept to keep their companies from going overseas.
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Therefore, basic education remains a high priority, especially if the basic education offered can prepare people for lifetime learning in connection with constantly changing job demands. In his chapter in this volume Kendrick also concludes that it is most important to stress education appropriate for services jobs, especially vocational training and in such programs as the Job Training Partnership Act.
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Sectoral Risks and Diversification Another key policy issue is the extent to which government should attempt to lower the country's economic and political risks by maintaining sectoral diversification between the goods and services sectors. In an increasingly global economy, and one in which the United States is more of an equal participant than an overwhelmingly dominant force, national security concerns with the industrial base may require special interventions.
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may actually have increased value as human assets. Thus, international trade accounting conventions probably overstate the relative net value of products versus services sold in trade by at least an order of magnitude.
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the lack of incentive to engage in international trade or operations on the part of the many privately held, smaller services establishments. And in fact, the measured world market share of manufactured goods produced by U
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· Macroeconomic and tax policies should focus on improving capital formation rates, lowering capital costs, increasing investments versus current consumption, and lengthening investment time horizons. Crucial, and feasible, elements include fiscal constraints on government expenditures to lower anticipated inflation rates and pressure on capital funds available, institution of a 3-year minimum holding period (and perhaps progressively higher incentives for longer term holdings)
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services position in international trade should become a central element in U.S. trade policy.
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Also, data are not refined enough to sort out critical relationships. Step by step, as opportunities present themselves, new categories reflecting services activities should be substituted for the less relevant manufacturing details now collected.
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1982. Measuring productivity in the services sector.
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