significantly. second, the service sector plays an important role in the production of higher value - added export goods through making the gvcs more sophisticated. i will mention later that manufacturing firms essentially need to input services in order to produce higher value - added goods and differentiate themselves from competitors. third, the global trade volume in services still has ample room for expansion, even if the global trade growth in goods remains slow. let me review the situation of the service sector in asian countries excluding japan. the left panel of chart 5 shows the share of the tertiary sector, or service sector, in the nominal see c. constantinescu, a. mattoo, and m. ruta ( 2015 ), " the global trade slowdown : cyclical or structural?, " imf working paper, no. 15 / 6. for discussion of productivity and trade in the service sector, see m. morikawa ( 2016 ), theory of service - intensive country : frontier for activating a mature economy, nikkei publishing inc. ( available in japanese ). gdp. contrary to popular belief about asian countries being manufacturing - dominated, the share of the tertiary sector has increased gradually to almost 50 percent in 2014. the share of the tertiary sector in asian countries is smaller than that in developed countries, which reached around 60 percent, but this shows that the asian industrial structure is not extremely biased in favor of the manufacturing sector. therefore, it is evident that petty - clark's law also applies to asian countries whose per capita income has increased steadily. it is, however, somewhat concerning that labor productivity in the tertiary sector is significantly lower than that in the secondary sector in asian countries. the right panel of chart 5 shows the ratio of labor productivity in the tertiary sector to that in the secondary sector. in general, labor productivity in the manufacturing sectors tends to be higher than that in the service sectors due to the rapid progress of technology. in developed countries, the productivity in the tertiary sector is around 90 if that in the secondary industry is set equal to 100. however, in china and the nies economies such as korea, productivity in the tertiary sector is around 70, and that in asean countries such as thailand and indonesia is around 60. an increase in the share of the service sectors with lower productivity than manufacturing sectors dampens productivity in the overall economy, which brings about a decline in economic growth rate. this is a phenomenon known as baumol's cost disease, in which advanced countries tend to be trapped

. asian countries are probably in the same situation. gvcs and modern services i will now discuss the current situation of the service sectors in asia in detail. the left panel of chart 6 splits the share of service sector into two categories : " traditional services " and " modern services. " traditional services consist of daily necessary services such as the retail and wholesale industries and administrative services. modern services are those services in demand by people with higher income, such as restaurants, education, financial intermediation, and medical services. modern services are generally said to be higher value - added than traditional services, although the degree of value added differs by country and by type of service. chart 6 indicates that the share of traditional services in asian countries is almost same as that in developed countries. on the other hand, the share of modern services in asian countries is considerably lower than that in developed countries. it is considered that the lower productivity in asia's service sectors is due to the fact that modern services have not yet fully expanded. the right panel of chart 6 describes modern services in detail. it indicates that the share of medical services and business services in asian countries is considerably lower than that in developed countries. it is likely that the lower share of medical services results from the insufficient health care system in asia. business services consist of any service accompanying a business activity such as legal, accounting, consulting, and design services. the lower share of business services in asia is probably related to the development of gvcs which i mentioned earlier. the production process is not composed of only a simple manufacturing process to assemble the parts of a product. production of final goods consists of not only a manufacturing process but also service inputs like r & d, design, and market research, before the manufacturing process. further, it needs service inputs such as advertising, sales promotion, and maintenance after the manufacturing process. service inputs before and after the manufacturing process are important components in the production process. moreover, this service input largely determines the value - added of final goods. it is generally said that service input, not the manufacturing process, produces the largest amount of value - added in final goods. this is known as the " smile curve, " that is, the relationship between the degree of value - added and production process is a u - shaped curve. gvcs made full use of comparative advantages by segmenting each production process. as a result of the development of gvcs, a service process other than a manufacturing process stays in