Dr. Stephen K. Kwan Professor, Service Science Management Information Systems College of Business Administration San

1. Introduction to Service Science, • Management, Engineering, • and Design (SSMED) Dr. Stephen K. Kwan Professor, Service Science Management Information Systems College of Business Administration San José State University, CA, USA http://www.sjsu.edu/ssme Contact:stephen.kwan@sjsu.edu 2/2 October, 2012

2. Trade in History Exchange between the Laplanders and Russians by Olaus Magnus, 1555 Kwan 2012

3. Silk Road – Trade between East and West * Less Complex – Need Less Rules * Chris Lau, 2012 Kwan 2012

4. The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to help producers of goods and services, exporters, and importers conduct their business. 157 members Kwan 2012

5. Broad Areas of Trade: Goods Services Trade-related Aspects of Intellectual Property Rights Ranging from architecture to voice-mail telecommunications and to space transport, services are the largest and most dynamic component of both developed and developing country economies. Important in their own right, they also serve as crucial inputs into the production of most goods. Their inclusion in the Uruguay Round of trade negotiations led to the General Agreement on Trade in Services (GATS). Since January 2000, they have become the subject of multilateral trade negotiations. Agricultural Non-Agricultural Kwan 2012

6. Different Types of Trade in Services Cloud Computing? Adapted from WTO definitions Modes of TradeSome Examples Cross Border Trade Software, Insurance, tele-diagnosis from country B into A Consumption Abroad A’s residents obtain education or hospital treatment in B Commercial Presence Bank, telecommunications firm, hospital from B set up subsidiary in A Movement of Natural Persons Engineers, doctors from B provide services in A The World is now more complex in Politics and Commerce. Kwan 2010

7. China’s Service Sector Kwan 2012

8. China  Innovation in Modern Services In its 11th Five-Year Plan, China had targeted an increase of the service sector’s output to 43.3% of GDP by 2010, up from 40.3% in 2005 In its 12th Five-Year Plan, China had targeted an increase of the service sector’s value-added output to 47.3% of GDP by 2015, up 4%. But don’t forget the WTO! Kwan 2012

9. Service Sector in China $419 billion In 2011 4th largest in world ≈ 43% GDP + 11% 6/23/2012 “Products will need more support from service providers such as marketing, branding and packaging, so as to fetch a better price. An underdeveloped service sector will hinder the technical upgrading of the manufacturing sector.” Qiu Hong, assistant commerce minister Kwan 2012

10. Service Sector in China Kwan 2012

11. Maslow’s Hierarchy of Needs Estimated China Per Capita National Income Maslow的需要阶层 Disposable Income & Desire for Services Needs vs. Wants Kwan 2012

12. Guangdong vs. China China’s Internal Market for Services Kwan 2012

13. What happened in the last few years? Attempts at Purilateral Agreements WTO Doha Round of Trade Talks with goals of Reduce Trade Barriers Open Market Access…. “..fundamental disagreements between the developed nations and the major developing countries…” BIC nations… R S

14. Doha Talks Aftermath • With plurilateral agreements derailed, • nations are now engaged in more (inefficient) negotiations for • Bilateral agreements • Regional agreements – e.g., NAFTA – to be renewed soon • Sector/Sector Agreements – US has service sector agreements with Japan and EU • Free Trade Agreements (FTA) – US has FTA (or pending) with Australia, Andean Countries, Bahrain, CAFTA, Chile, Colombia, FTAA, Korea, Israel, Jordan, Malaysia, Morocco, Oman, Panama, Peru, Singapore.

15. Doha Talks Aftermath • G20 and APEC meeting in November 2008 • agreed on a “standstill” policy: • revive Doha talks • no imposition of new trade barriers • 12 months Ineffective Global Financial Crisis

16. Global Financial Crisis • Less imports, less exports • less consumption, particularly for services (less disposable income) • stimulus of domestic markets (more protectionist measures) “The US Service Sector contracted for the 11th straight month, …” “Global trade is expected to shrink 10% in 2009.”

17. Doha Talks might be out of reach

18. Potential Problems for US Trade in Services • Complacency – “We have a huge trade surplus…. We are doing fine…” • Other countries that are “top-down” will catch up or exceed US in their service sector abilities • No Intellectual Property protection on Service Concepts – no patents • Very little International Service Standards – potential for national and domestic standards development • Continued weak economy – shrinking of global trade • Loss of confidence in US services – e.g., financial services

19. G-20 Ministers Meeting in Korea

20. Growth of Protectionist Measures Global Trade Alert: G20 members passed over 100 “blatantly discriminatory measures”. WTO reported 53 new measures this year. Everyone sinned a little, or a lot…

21. Russia’s Accession to the WTO

22. August, 22nd, 2012 Russia’s Accession to the WTO

25. World Trade in Services Imports vs. Exports

26. US Services Surplus with China US $ 3.7 Billion Trade surplus with China in 2007

27. Problems of doing business in China “2009 Joint Commission on Commerce and Trade (JCCT) Input on Standards and Conformance Issues in China” cited the following concerns: • Transparency – national “GB” standards are easily accessible but not so with regulatory agencies, local/provincial, professional, decrees, etc. • Uneven Enforcement – inadequate enforcement for local companies, tedious procedures put US companies at a competitive disadvantage, etc. • Conformity Assessment Policies – only by designated Chinese bodies, does not recognize external certifications, etc. • Revisions to “China Compulsory Certification” Program • Foreign Participation on Chinese Technical Committees Will what happened to Manufactured Goods going to happen with Services?

28. Technical Barriers to Trade (TBT) and service Technical regulations and product standards may vary from country to country. Having many different regulations and standards makes life difficult for producers and exporters. If regulations are set arbitrarily, they could be used as an excuse for protectionism. The Agreement on Technical Barriers to Trade tries to ensure that regulations, standards, testing and certification procedures do not create unnecessary obstacles. Conformity Assessment Problems

29. China maturing in the Standards game Research Directions Completed Service Standards

30. More Complaints against China

31. China – Complainant and Respondent Kwan 2012

32. US – Complainant and Respondent Kwan 2012

33. Service Sector Challenges Kwan 2012

34. Current Issues Kwan 2012

35. Current Issues Kwan 2012

36. The Retreat of Globalization by K. Warsh and S. Davis ? http://online.wsj.com/article/SB10000872396390444799904578050742893108514.html Kwan 2012

37. The Law “America Competes Act” Public Law 110-69 110th Congress “To invest in innovation through research and development, and to improve the competitiveness of the United States.” SEC. 1005. STUDY OF SERVICE SCIENCE. (a) Sense of Congress.--It is the sense of Congress that, in order to strengthen the competitiveness of United States enterprises and institutions and to prepare the people of the United States for high-wage, high-skill employment, the Federal Government should better understand and respond strategically to the emerging management and learning discipline known as service science. (b) Study. No later than 1 year after the date of the enactment of this of Sciences, conduct a study and report to Congress on how the Federal Government should support, through research, education, and training, the emerging management and learning discipline known as service science. (c) Outside Resources.--In conducting the study under subsection (b), the National Academy of Sciences shall consult with leaders from 2- and 4-year institutions of higher education, as defined in section 101(a) of the Higher Education Act of 1965 (20 U.S.C. 1001(a)), leaders from corporations, and other relevant parties. (d) Service Science Defined.--In this section, the term “service science” means curricula, training, and research programs [[Page 121 STAT. 578]]that are designed to teach individuals to apply scientific, engineering, and management disciplines that integrate elements of computer science, operations research, industrial engineering, business Strategy, management sciences, and social and legal sciences, in order to encourage innovation in how organizations create value for customers and shareholders that could not be achieved through such disciplines working in isolation. http://thomas.loc.gov/cgi-bin/bdquery/z?d110:HR02272:@@@T

38. ? Greater China 2012 – 2013? How can Service Science Help China develop its Service Industry? Kwan 2012

39. What do these have in common? Services Transformation and Innovation Group LLC www.servtrans.com Kwan 2012