Rethinking Industrial Policy for the Services Economy

The paper contends that traditional industrial policy is overly focused on manufacturing and must be expanded to include services, which now account for roughly two-thirds of global GDP. It identifies five pillars for a services-led industrial policy: infrastructure, investment/FDI, skills and human capital, regulatory quality, and connectivity. The author highlights that services offer developing economies advantages in terms of lower capital intensity, smaller minimum scale, and environmental sustainability. Furthermore, the document notes that the General Agreement on Trade in Services (GATS) provides governments with more policy space for experimentation than the rules governing manufacturing trade.

• Traditional industrial policy frameworks are outdated because they remain rooted in a manufacturing paradigm, despite services now accounting for approximately two-thirds of global GDP and the majority of employment.
• Services act as essential inputs that drive productivity across all sectors, including agriculture and manufacturing; intermediate services are estimated to be worth roughly 2.5 times the value of trade in final services.
• A successful industrial policy for services requires focusing on five enabling pillars: infrastructure (energy, broadband, transport, payments), investment and FDI, skills and human capital, regulatory quality, and physical and digital connectivity.
• For developing nations, a services-led strategy is often more feasible than manufacturing-led models due to lower capital intensity, smaller minimum scale for competitiveness, higher employment potential, and a smaller carbon footprint.
• Governments have significantly more policy flexibility to implement industrial strategies in services than in manufacturing because the General Agreement on Trade in Services (GATS) is less restrictive than the General Agreement on Tariffs and Trade (GATT).

APA

Sauvé, P. (2025). Rethinking Industrial Policy for the Services Economy. International Institute for Sustainable Development. https://www.iisd.org/articles/policy-analysis/rethinking-industrial-policy-services-economy

Chicago

Sauvé, Pierre. Rethinking Industrial Policy for the Services Economy. International Institute for Sustainable Development, 2025. https://www.iisd.org/articles/policy-analysis/rethinking-industrial-policy-services-economy.

Wikipedia

{{cite report |last1=Sauvé |first1=Pierre |title=Rethinking Industrial Policy for the Services Economy |publisher=International Institute for Sustainable Development |date=8 December 2025 |url=https://www.iisd.org/articles/policy-analysis/rethinking-industrial-policy-services-economy |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{sauv2025rethinking, author = {Sauvé, Pierre}, title = {{Rethinking Industrial Policy for the Services Economy}}, institution = {International Institute for Sustainable Development}, year = {2025}, month = dec, url = {https://www.iisd.org/articles/policy-analysis/rethinking-industrial-policy-services-economy}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }