1. ”Everybody is in services” Servicification and trade policy Emilie Anér Magnus Rentzhog Presentation at lunch seminar: ”Servicification - Why free trade in services matter to manufacturing” ECIPE, BusinessEurope and ESF April 25, 2013

2. Servicification = more and more services as inputs and outputs in manufacturing Increased dependence in the manufacturing industry on Purchased service inputs In-house service production Sales of services integrated into products Sales of services alongside products Service import and export …supports competitiveness, productivity and trade

3. Key figures for manufacturing firms Costs for services as inputs Sweden: 25 % Employees in service-related occupations Sweden: 46 % Services sales in total turnover Sweden: 26 % Added value in manufacturing: 30 % (OECD) OECD countries: 13-30% EU-12 countries: 40 % Various MNCs: 25-50% of total revenue

4. Services needed by Sandvik for effective supply chain and delivery of goods Legal services Accounting, book- keeping etc. Taxation services Medical services Computer services Research and development Rental/Leasing Advertising Market research Services incidental to manufacturing Placement of personnel Maintenance and repair Security services Packaging Maritime transport – freight Inland waterways – freight Air transport - freight/passenger Road transport – freight/passenger Cargo-handling services Storage and warehouse services Freight transport agency service Feeder services Energy services Printing, publishing Design Building-cleaning services Photographic services Courier services Logistic services Postal services Telecommunications Audio-Visual services Educational services Environmental services Banking services Insurances Health related services Hotels and restaurants Travel agency services

5. Services delivered by Sandvik to the customer Computer services Research and development Rental/leasing Maintenance and repair Management consulting Technical testing and analysis services Services incidental to manufacturing Design Environmental services Financial services Logistics Warehouse services

6. Motives for servicification in firms Servicification as a response/effect Servicification as a strategy Use of services (input) Logistics and transport as a result of fragmented production (global value chains) Ex. Volvo AB imports parts from all over the world IT and management services in order to increase efficiency Ex. Albin Components uses services to implement lean production, just-in-time delivery and total quality management Offered services (output) Recycling services as a result of regulatory demands Ex. Sandvik Tooling offers recycling services as a result of regulatory demands Repairs, upgrades and surveillance services to prolong the relationship with the customer Ex. Atlas Copco leases instead of sells many products, also offers upgrades and diagnostic services

8. Services as enablers in global value chains R&D/ Design Raw Materials Inter- mediate Inputs Semi Finished Goods Final Good Assembly and Packaging Ware- house Retail/ Delivery Customer Service Source: USITC 2011 Financial services Quality Control Services Logistics Services Marketing Services

9. The GVC of video game Minecraft USA Germany England Scotland Holland Canada Japan Denmark Finland Sweden Plus: UN Habitat, and other countries (”Community”, marketing and ”3rd Party Servers) Without order of importance

10. Trade policy implications Shift towards a ”Goods AND services” mindset for 1.Formulation of trade policy 2.Liberalisation 3.Negotiations

11. Service import dependency in the Swedish motor vehicle industry Input-output tables for Sweden in 2008

12. Trade policy implications Shift towards a ”Goods AND services” mindset for 1.Formulation of trade policy 2.Liberalisation 3.Negotiations

14. Thank you Studies available at: http://www.kommers.se/In-English/ Servicificaiton ”Everybody is in Services” ”At Your Service” [Sanvik case-study] Services and GVC ”Global Value Chains and Services – An Introduction” ”Minecraft Brick by Brick”

15. Difficult to capture servicification Value-based trade statistics underestimate the contribution of services Services sold in a package with a good may be registered as goods trade in official statistics BoP only captures cross-border services trade FATS statistics will register all sales by a “manufacturing firm” abroad as goods sales