Tradable Services: Understanding the Scope and Impact of Services Outsourcing

Abstract:     
Exporting through international supply chains was a successful way for East Asian countries to develop their textile and apparel industries in the 1970s and 1980s, but it is a less clear route for countries like Egypt trying to compete today. The challenge is particularly acute given the strength of competitors like China, and even more so in the post-MFA era. Some analysts suggest that lean retailing increases the importance of geography in exporting in the world of rapidly changing apparel fashion, in a way that could benefit a country like Egypt with its proximity to European end markets. Using a supply chain model, this paper suggests that shortening lead times can indeed have an impact on profits, but that the effect is not tremendous, being in the range of a 0.3 percent to 0.9 percent increase in profits for every week of improvement in lead times. The study also finds that the business environment in Egypt lags key comparator countries in several areas that help the firms compete in global apparel chains, although recent reforms by the Egyptian government are working to address several of these aspects. It concludes by exploring to what extent geography, trade preferences, and local production factors may help Egypt's textile and apparel industry carve out a role for itself in global supply chains, and provide an engine to drive industrial upgrading throughout the country.

Number of Pages in PDF File: 47

Keywords: services, offshoring, trade, labor, information technology, jobs

JEL Classification: F16, J44, R12

working papers series