Tradable Services: Understanding the Scope and Impact of Services Outsourcing

47 Pages Posted: 20 Sep 2005 Last revised: 6 Apr 2011

J. Bradford Jensen

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy; Peter G. Peterson Institute for International Economics

Lori G. Kletzer

University of California at Santa Cruz

Date Written: September 1, 2005

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.

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

JEL Classification: F16, J44, R12

Suggested Citation

Jensen, J. Bradford and Kletzer, Lori G., Tradable Services: Understanding the Scope and Impact of Services Outsourcing (September 1, 2005). Institute for International Economics Working Paper No. 05-9. Available at SSRN: https://ssrn.com/abstract=803906 or http://dx.doi.org/10.2139/ssrn.803906

J. Bradford Jensen (Contact Author)

Georgetown University - Department of Strategy/Economics/Ethics/Public Policy ( email )

Washington, DC 20057
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Lori G. Kletzer

University of California at Santa Cruz ( email )

1156 High St., Social Sciences I
Santa Cruz, CA 95064
United States
831-459-3596 (Phone)
831-459-5900 (Fax)

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