Beyond offshoring: tradable services and regional markets in the global South

Abstract

Trade in services has grown more rapidly than trade in manufactured goods in recent decades. Countries from the Global South are chiefly responsible for this shift. The research note draws attention to service investment that originates in Southern economies and is directed at markets of the same (sub)continent. Such dynamics have been neglected by academic debates focussed on global value chains and offshored, largely generic services. The authors argue that direct integration into global markets is often disadvantageous for firms from the South, as they tend to play a subordinate role, face the risk of disinvestment and hardly upgrade. Regional markets offer better opportunities. These ideas are applied to Argentina and South Africa. The fDi Markets database and qualitative information from secondary sources are used to get a better grasp of the expansion of Argentinean and South African providers of advanced services into Latin America and sub-Saharan Africa, respectively. It is shown that regional markets matter. It appears that they allow companies from Argentina and South Africa to be lead firms, internationalize their business activities and achieve various forms of upgrading.