High-value Added vs. Internationally Competitive Industries Paul Krugman has argued in the past that high-value added...

High-value Added vs. Internationally Competitive Industries

Paul Krugman has argued in the past that high-value added industries do not necessarily need to be the most competitive industries in international trade at the same time. Please, list and discuss key reasons behind this argument! Would this observation apply to the same extent in we examine service industry?

Expert Solution

High value added industries are the backbone of all industries in the world. They do not necessarily need to be the most competitive industries in international trade at the same time. This can be justified as :

Value added industries act as backbone for the economy and boost the GDP and economic growth : Value added industries like sugar industry act as backbone and boost the domestic GDP of the economy.They need not be competitive in international trade as the value addition in the domestic country is enough.
Value added products are for domestic consumption and improves the living standards of the people : Value added products improve the living standards of the people in the economy.
Value added products have got high demand worldwide.
Value added industry contribute as key factors in assessing the status of the economy.

The same concept is not applicable in service industry. Service industry revolves around value addition only as it is only about creating value to the service delivered to the end consumers. It has to be competitive as well as it has to meet the international standards prevailing worldwide.

Rahul Sunny answered 2 years ago

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