Servicification: Its Meaning and Policy Implications

Abstract

Servicification means that services are becoming more important in manufacturing activities. In other words, the servicification of manufacturing can be defined as the fact that manufacturing increasingly buys, produces and sells services.
Accordingly, competitiveness in manufacturing, as well as the service industry itself to a larger degree, depends on being able to buy cost-efficient and high quality services. Servicification, therefore, implies that competitive services could be a key to improving performance in manufacturing. This again implies that free movement of services and natural persons is central to the competitiveness of manufacturing.
Reforms in the services sector would bring significant benefits not only to exporters, but also to firms serving the local market, since services provide important inputs to, and facilitate trade in other sectors. Thus, it becomes crucial to liberalize services not just to enhance the competitiveness of the services sector itself, but also to raise productivity of manufacturing which uses services as inputs. In this regard, the world trade community needs to be more attentive to reducing unnecessarily burdensome regulatory procedures in respect of the movement of natural persons which is one of the most sensitive areas in services trade negotiations.