ABSTRACT

Introduction The services sector is a major feature of national economies, especially in those countries where manufacturing activities are no longer economically viable in the context of increased competition from lower-wage economies. However, this does not mean that firms from the advanced capitalist countries are structurally on the defensive, at least not the large multinationals. Their response has been to retain core activities and farm out the nonessential ones to third parties either at home or abroad. In other cases, they take advantage of lower costs by relocating manufacturing to third countries through their own subsidiaries or third-party subcontractors. Thus, the deindustrialization witnessed in the USA and the hollowing out of industries in Japan reflect these global developments. However, much of the manufacturing that has been shifted offshore by American firms is aimed at the US market, which is still a large consumer market. Japan, on the other hand, due to its competitive export-oriented manufacturing sectors, has mostly relied on offshoring for second and third country markets and less for exports back to Japan.1