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New Trends in Globalisation

New Trends in Globalisation. Conference on Medium Term Economic Assessment Iasi, September 26 2008 Koen De Backer OECD. Pervasive globalisation. Geographical scope: developed and emerging countries Organisational scope global value chains Sector scope

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New Trends in Globalisation

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  1. New Trends in Globalisation Conference on Medium Term Economic Assessment Iasi, September 26 2008 Koen De Backer OECD

  2. Pervasive globalisation • Geographical scope: developed and emerging countries • Organisational scope global value chains • Sector scope manufacturing and services • Functional scope production/distribution and R&D/innovation

  3. Globalisation isadvancingrapidly

  4. Fast and deep globalisation

  5. ICT is a major driving force Transporation and communication costs Costs of processing information

  6. The emergence of global value chains distribution production R&D

  7. Value chainsbecome global

  8. Multinational enterprises (MNEs) Employment in manufacturing industries

  9. In more traditionalmanufacturing industries (1) The story of a ‘particular’ American car: 30% to Korea: assembly 17,5% to Japan: components and advanced technology 4% to Taiwan and Singapore: minor parts 7,5% to Germany: design 1,5 to Ireland and Barbados: data processing 2,5% to UK: marketing 37% in USA Source: Grossman and Rossi-Hansberg (2006)

  10. In more traditionalmanufacturing industries (2) Nylon hair: Japan Design: California,USA Body material: Taiwan Moulds, paint pigments: USA Clothing: China Assembly: Indonesia and Malaysia Quality testing: USA Marketing: USA Source: Grossman and Rossi-Hansberg (2006)

  11. But also in highertech industries Aerospace industry Source: Wixted (2005)

  12. There seems to be no clear relationship between GVCs and overall employment Effects of GVCs (1)

  13. Effects of GVCs (2) There are winners and losers on the labour market • More traditional manufacturing industries • Low skilled workers • Differences between USA and Europe: • wages vs unemeployment • Services offshoring: also higher skilled • ‘Stuck in the middle?’

  14. Effects of GVCs (3) Important productivity effects • Longer term, dynamic effects, less visible • Correlation between openness and income level • Causality goes from openness to income • 1% increase in openness: 0,9 to 2% income growth • Protectionism does not lead to economic growth • Comparative advantage • Higher competition • Spillovers through MNEs

  15. The internationalisation of R&D… distribution production R&D

  16. …Goes fast, R&D-investments under foreign control

  17. …Goes also to emergingountries, Which of the following countries would you choose as being the best overall overseas location for R&D (please do not select your own country)? (% respondents) Source: The Economist Intelligence Unit

  18. …and stresses additional location factors (number of firmsciting a factor as critical) Source: Case studies from OECD project ‘Open innovation in global networks

  19. Global innovation networks distribution production R&D

  20. Matching of global demand… • New customers • Increasing customer needs • Global and intense competition • Shorter product life cycles … and of global supply of innovation • Multidisciplinaryresearch • Converging technologies • Increasingcosts and risks of R&D • Global S&T supply

  21. Large supply of s&t, also in emerging countries

  22. China stillspecialized in lowertechnology industries

  23. Wrapping up: new trends in globalisation • Geographical scope: Truly global character and increasing importance of emerging countries • Organisational scope Global value chains, not only transfer of goods/services, but increasingly activities and capital • Sector scope: Manufacturing industries and services industries • Functional scope: Production/distribution but also R&D/innovation

  24. Policy implications (1) • Do governments still have a role to play in an increasing global world? • Protectionism appears to risk a lot, instead open and pro-active policies seem to do the job • Accommodating globalisation • Moving up the value chain

  25. Policy implications (2) • Adjusting to globalisation • Balanced perspective of cost and benefits of globalisation • Accommodating structural change • Spreading the benefits of globalisation • Avoid policies that distort structural change

  26. Policy implications (3) • Need for moving up the value chain • Science, technology and innovation • Human resources • Entrepreneurship • Network and cluster policies • Attractiveness • IPR • Trade and investment policies

  27. Relevant OECD-work • Emergence of global value chains Staying competitive in a global economy: moving up the value chain (2007) Staying competitive in a global economy: compendium of studies on global value chains (2008) • R&D- internationalisation The internationalisation of business R&D: evidence, impacts and implications (2008) • Open innovation Open innovation in global networks (2008)

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