than the accession of Spain and Portugal, hich increased EU10. GDP by 8.3%. ...... Leather. 24.0. 0.8. 0.5. 15. Food and beverages. 22.9. 14.2. 5.3. 17. Textiles. 22.7. 1.4 ..... tougher competition and the development of global production and.
Location Issues in Europe Slavo RADOSEVIC Frédérique SACHWALD
There is a strong perception in the public that enlargement is linked to the current competitiveness and fiscal problems faced by the ‘old’ EU members. This “Note” argues that the relocation problems experienced in the EU15, which are often attributed to ‘unfair competition’ from the new member states, are driven by deeper structural changes in the global economy. An analysis of EU international trade and investment is used in combination with industry case studies to assess the impact of global competition and enlargement on the location of production. Previous enlargements had allowed productivity growth through scale and competition effects among quite similar countries. The latest enlargement has on the contrary stimulated a process of vertical specialisation, with a more radical impact on the location of production. It thus represents a further pressure to structural change in a context of increasing global competition. Examples in the paper illustrate the process of value creation through value chain reorganisation and relocation of production within the EU and more globally. Whether the initially positive effects of enlargement on competitiveness and growth will be maintained depends on firms’ strategies and both national and EU structural policies. Slavo RADOSEVIC is Reader at the School of Slavonic and East European Studies, University College London. Frédérique SACHWALD is Head of Economic Studies at the Institut français des relations internationales, Paris and Brussels. Diffusion : La Documentation française 29-31, quai Voltaire 75340 Paris Cedex 07 Téléphone : 33 (0)1 40 15 70 00 Télécopie : 33 (0)1 40 15 72 30 www.ladocfrancaise.gouv.fr
-:HSMIQF=^WV[^U:
les notes de l’ifri – n° 58
Does Enlargement Conceal Globalisation ?
Does Enlargement Conceal Globalisation ? Location Issues in Europe
les notes de l’ifri
n° 58
les notes de l’ifri Does Enlargement Conceal Globalisation ? Location Issues in Europe
Slavo RADOSEVIC Frédérique SACHWALD
Prix : 8 ISBN 2-86592-169-7
institut français des relations internationales
Does Enlargement Conceal GlobalisationF Location Issues in Europe
Acknowledgements This paper is partly based on the contributions and debates of a conference, the program of which is in appendix. We would like to thank all the contributors for their participation, inputs and comments on a draft of the paper. We also thank Vincent Vasques for his efficient research assistance. The opinions and remaining errors are the responsibility of the authorsj
All rights reserved - Ifri Paris 2005 ISHN 2-86592-169-7 ISSN 1272-9914 Ifri is a research center and a forum for debate on the maZor international political and economic issuesj Headed by Thierry de Montbrial since its founding in 1979, Ifri is a state-approved organisationj Institut français des relations internationales C]]]jifrijorgE 27, rue de la Procession - 75740 Paris Cedex 15 Télj @ 33 (0)1 40 61 60 00 - Fax @ 33 (0)1 40 61 60 60
Les notes de l'Ifri – n° 58
Does Enlargement Conceal Globalisation?
Locations Issues in Europe
Slavo Radosevic and Frédérique Sachwald
October 2005 Institut fran/ais des relations internationales
Contents Abstract ...........................................................................................7 Résumé............................................................................................8 Introduction...................................................................................11 I- Enlargement and globalisation ................................................15 II- Location of firms in the EU: The value creation potential of enlargement .............................................................................19 Aj East]ard expansion of the LEuropean motor industryL jjjjjjjj20 Enlargement and the new pattern of global competition ................ 21 Impact of enlargement in the New Member States ........................ 27
Hj Relocation and upgrading in ICT industries jjjjjjjjjjjjjjjjjjjjjjjjjj28 Global competition and production location in ICT industries ........ 29 Relocation to the East and upgrading in the West ......................... 31 Integration into global value chains and local value added ............ 32
III- Conclusion and policy implications ......................................35 References ....................................................................................39 Appendix. Program of the conference .......................................45 Authors ..........................................................................................47
5
Abstract Despite the lo] share of ne] member states (NMS) in the EU economy, there a strong perception in the public that enlargement is lin[ed to the current competitiveness and fiscal problems faced by the $old$ EU membersj The paper discusses the $paradox of enlargement$ and argues that the relocation problems experienced by various sectors in the EU15, ]hich are often attributed to $unfair competition$ from the NMS, are actually driven by deeper structural changes in the global economyj This paper combines an analysis of EU international trade and investment ]ith case studies of the automotive and ICT industries to assess the impact of global competition and enlargement on the location of production ]ithin Europej Previous enlargements of the EU had allo]ed productivity gro]th through scale and competition effects among quite similar countriesj Related intra-industry trade and specialisation have had a limited impact on the structure of production of each countryj The latest enlargement has on the contrary stimulated a process of vertical specialisation, ]ith a more radical impact on the location of productionj It thus represents a further pressure to structural change in a context of increasing global competitionj Examples in the paper illustrate the process of value creation through value chain reorganisation and relocation of production both ]ithin the EU and more globallyj It suggests that vertical specialisation ]ithin Europe can contribute to increased competitiveness of firms located in the EUj The initial effects of enlargement have been quite positiveB they have stimulated demand for exports from Nestern members and have contributed to gro]th in the NMSj Nhether competitiveness and gro]th effects ]ill be maintained depends on the strategies of multinational companies but also on adequate structural and policies at both the national and EU levelsj A maZor challenge is to move from ^ero sum to positive sum vie] of enlargement by promoting EU-]ide industrial restructuringj Alternatives - tax and subsidy competition, migration restrictions - rather belong to ^ero sum gamesj
7
Résumé Malgré le faible poids des nouveaux pays membres dans l$économie européenne, le débat public suggère souvent que l$élargissement aggrave les problèmes de compétitivité, d$emploi et de finances publiques des \ anciens ] membres de l$UEj Les problèmes de délocalisation rencontrés dans certains secteurs par les Muin^e sont attribués * tort * la concurrence déloyale qu$exerceraient les nouveaux pays membresj L$évolution de la localisation des capacités de production doit plut9t 0tre analysée comme le résultat de changements profonds de l$économie mondialej Cette note étudie l$impact de la concurrence mondiale et de l$élargissement sur la localisation de la production en Europe, en combinant une analyse d$ensemble des échanges internationaux de l$UE avec des études de cas de l$industrie automobile et des secteurs de l$information et de la communication (TIC)j Les élargissements précédents avaient permis des progrès de productivité * travers des économies d$échelle et une stimulation de la concurrence entre pays similairesj L$accroissement des échanges intra-branche et la spécialisation hori^ontale n$avaient eu qu$un impact limité sur la structure de la production de chacun des pays membresj Le dernier élargissement a au contraire stimulé un processus de spécialisation verticale, qui a eu un impact plus radical sur la localisation de la production en Europej L$élargissement renforce ainsi la pression qu$exerce la concurrence mondiale en faveur de changements structurels des économies européennesj L$analyse illustre les opportunités qu$offre l$élargissement pour accélérer l$évolution de la spécialisation des vieux pays industriels de l$UEj Elle donne des exemples de création de valeur * travers la réorganisation des cha4nes de valeur et la relocalisation de la productionj La spécialisation verticale au sein de l$UE peut ainsi contribuer * accro4tre la compétitivité des entreprises implantées en Europej Au cours des années 1990, le processus d$élargissement a stimulé les exportations des Muin^e et contribué * la croissance des pays d$Europe centrale et orientalej La réalisation du potentiel de l$élargissement en termes de compétitivité et de croissance dépend 8
des stratégies des multinationales, mais aussi dans une large mesure de l$adoption de politiques structurelles adaptées au niveau national et européenj La promotion d$un processus de restructuration * l$échelle européenne doit permettre de concevoir l$élargissement comme un Zeu * somme positive, alors que les alternatives d la concurrence fiscale, la course aux subventions et aux restrictions * l$immigration d organisent un Zeu * somme nullej
9
Introduction During the 2005 electoral campaigns for the EU constitution strong voices have been expressed about the effects of enlargement on ]elfare and competitiveness of the $old$ member statesj Delocalisations of production facilities from $old$ to ne] member states, ]age and tax competition for FDI bet]een member states have appeared as [ey areas of public concernj The debates have revealed a ]idespread fear that $unfair competition$ from ne] member states is threatening Zobs in the $old$ member statesj This latest ]ave of enlargement is significant in terms of population as the ne] member states (NMS) from central and Eastern Europe account for 20% of the EU15 populationj Ho]ever, by economic measures they represent much smaller increases of less than 5% of EU15 GDP and about 8% of its tradej In economic terms, the impact of the latest enlargement is thus less significant than the accession of Spain and Portugal, ]hich increased EU10 GDP by 8j3%j The eight ne] member states from central and Eastern Europe are poor ]ith a GDP per capita belo] 50% of the EU15 averagej Ho]ever, in terms of economic structures they are not systematically different from the EU15, ]hich includes quite diverse countries such as Germany and Greece, S]eden and Spainj Hased on these data, the latest ]ave of enlargement should not have a substantial impact on competitiveness and ]elfare of the EU15j So, ]hy is there such a strong perception in the public that enlargement is lin[ed to the current competitiveness and fiscal problems of the $old$ EU member statesF There exists a $paradox of enlargement$@ EU accession ]as partly designed to contribute to the development of the ne] member sates, but the $old$ members fear that they may represent too much of a burden for their o]n economies and for the EU budget (Sach]ald 2005)j This policy paper explores the roots of the $paradox of enlargement$ before suggesting policy measures to promote the adaptation of both old and ne] EU members to the rapidly evolving
11
global economic contextj It is partly based on contributions and debates of a conference organised by IFRI in June 2005 in Hrusselsj1 The paper is structured in three partsj Part 1 highlights the simultaneous occurrence of enlargement and globalisation ]hose interaction has shaped the depth of the EU integration and the perception of the consequences of enlargementj The coincidence of the process of accession ]ith the rapid integration of ne]ly emerging economies, especially China, into the ]orld economy and ]ith the global diffusion of ICTs has mixed up adZustment issues of enlargement ]ith the globalisation driven adZustmentj Relocation problems of the EU15 ]hich are often perceived as $unfair advantages$ of the ne] member states (NMS) are actually driven by deeper structural changes in the global economyj In this sense, enlargement has been concealing broader globalisation issues in the EUj Part 2 explores these issues in the case of the t]o maZor sectors of the East - Nest integration@ the car industry and information and telecommunication technologies (ICT)j Sector studies clearly illustrate the interaction bet]een globalisation and European integrationj They discuss the value creation potential of the latest EU enlargement and ho] it could be further exploited in the global contextj They sho] that initial relocation effects of enlargement have been quite positive and have contributed to the gro]th process experienced by the NMSj Nhether competitiveness and gro]th effects ]ill be maintained depends on strategies of multinationals but also to a great extent on adequate structural policies at both the national and EU levelsj Part 3 concludes and derives policy implicationsj A maZor conclusion relates to the evolution of the role of the EU integration as an economic strategy for European countriesj Up to the Single Mar[et program, EU integration stimulated productivity gro]th through scale and competition effects among quite similar countriesj Intra-industry trade developed ]ith benign impact on industrial structures and Zobsj In the context of increasing global competition, the latest ]ave of enlargement represents on the contrary a further pressure to structural changej This last part 1
The program of the conference is in appendix and contributions can be accessed on Ifri$s ]ebsite at ]]]jifrijorg
12
discusses policy ideas, ]hich could assist EU - ]ide restructuring in ne] directionsj A maZor challenge is ho] to s]iftly move from ^ero sum to positive sum vie] of enlargement by promoting EU-]ide industrial restructuringj Alternatives - tax race, FDI subsidy race or race in migration restrictions - are ^ero sum games, ]hich may even be counterproductive in the global contextj
13
I- Enlargement and globalisation The process of integration through increasing trade bet]een ne] and $old$ member states started in the early 1990s, ijej ]ell before official enlargement in 2004j Hilateral free trade agreements or so-called European Agreements have been crucial for the recovery of the economies from central and Eastern Europej They have stimulated trade ]ith the EU during the 1990s (figure 1)j As a result, the share of trade of the NMS ]ith the Euro area is, on average, greater than that of ]itching the Euro area (ECH 2005)j Figure 1. Increasing trade between EU15 and NMS, % in EU25 trade 8 7 6
Intra NMS8 exports NMS8 exports to EU15 EU15 exports to NMS8
5 4 3 2 1 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Note: NMS do not include Cyprus and Malta Source: Calculation from CHELEM
Increasing trade bet]een the EU and accession countries has compensated the decrease in intra-EU15 trade during the 1990s (figure 2)j Since the late 1990s, the slight decrease in the share of intra-EU-25 trade has been influenced by the dynamism of trade ]ith extra-European countries, and in particular ]ith Chinaj 15
Figure 2. Decreasing intra-EU trade, % of total exports of EU15 and EU25 70
Intra EU25 trade Intra EU15 trade
68 66 64 62 60 58 56 54
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source@ Calculation from CHELEM
The share of EU15 trade ]ith NMS10 is higher than ]ith China, especially for Germanyj Ho]ever, EU15 trade ]ith China has become quite dynamic, ]hich explains the strong increase in the share of China, especially in total European importsj Figure 3 illustrates the dynamics of trade ]ith the NMS on the one hand and China on the other handj Simultaneous declining trade surpluses of the EU15 ]ith NMS as ]ell as gro]ing trade deficit ]ith China suggest that much of trade and competitiveness problems of the EU15 are driven by deeper globalisation tendenciesj A reshuffling of global value chains, ]hich no] involve countries of different levels of development including ne] member states but also increasingly China and other emerging economies is a micro driver of this global processj In that respect, enlargement has contributed to globalisation tendencies that ]ould have ta[en place ]ithout itj In a nutshell, it is not trade by itself but industry restructuring and increasing integration of production processes across borders that drive this processj
16
Figure 3. EU15 trade balance with NMS and China, Euro bn 25
Fra n ce u N MS 1 0 G e rm a n y u N MS 1 0 E U 1 5 u N MS 1 0
20 15 10 5 0 -5 90
91
92
93
94
95
96
97
98
99 2000 01
02
0
03
0
-1
-1 0
-2
-2 0
-3 -4
-3 0
-5 -6
Fra n ce u C h in a
-7
G e rm a n y u C h in a
-8
E U 1 5 u C h in a (rig h t s ca le )
-4 0 -5 0 -6 0
-9 90 91
92 93 94
95 96 97 98
99 2000 01
02 03
Source: Sach]ald (2004)
The outcome of this intensive and large scale restructuring is visible in the declining share of Europe in ]orld manufacturing value added (table 1)j Het]een 1990 and 2001, the share of Nestern Europe in ]orld value added has decreased by 7j8 percentage points ]hile the share of North America has actually increased by 6j8 percentage pointsj During the same period, the share of China has increased by 5j8 percentage points ]hile transition in Central and Eastern Europe has led to a reduction in their share of ]orld manufacturing, ]hich actually started before 1990j Overall this table suggests that the declining share of
17
Nestern Europe in ]orld manufacturing has deep roots and started before the effects of enlargement became visiblej Table 1. Distribution of manufacturing value added, at current prices, in % of world total 1980
1990
2001
Developed countries
67.0
76.7
73.6
Central and Eastern Europe
19.9
8.9
2.7
Developing countries
13.7
14.4
23.7
North America Nestern Europe
Africa South America South and East Asia - China Nest Asia and Europe
22j1 32j1
0j9 7j1 4j1 3j9 1j6
23j3 34
0j9 5j6 6j1 2j6 1j8
30j1 26j2
0j8 5j7 16j0 7j2 1j2
Source@ UNIDO
In addition, the process of relocation of manufacturing capacity out of EU15 countries seems to gather speedj For example, a recent survey by Roland Herger indicates a trend of more closures than openings of manufacturing sites in Nestern Europe (Mercier 2005)j This trend is also suggested by databases on restructuring and FDI in Europej2 These surveys indicate that foreign investment in ne] manufacturing sites is more dynamic in the NMSj These ne] foreign o]ned manufacturing sites have been driving intra-EU25 tradej The follo]ing section discusses the interactions bet]een European and global trends in the location of production activities, focusing on t]o sectors in ]hich foreign direct investment has been very dynamic, the automobile industry and information and communication technologies (ICT)j
2
Examples includes the European Monitor (http@uu]]]jemccjeurofoundjeujintuermu) and the data base compiled by the French agency for international investment (AFII)j
18
II- Location of firms in the EU: The value creation potential of enlargement Since the 1990s, integration of production locations ]ith different cost levels and structures has benefited EU firmsj The $heterogeneity of production functions$ ]ithin the ]ider Europe has constituted a competitive advantage for multinational companies (MNCs)j The advantages of divergence, ]hich emerged ]ith the accession process, have enabled companies to separate product development from manufacturing and lo]er the capital requirements and the range of in-house production s[ills needed for volume production (Rysman et alj 1997, 1998)j These value creation opportunities ]ithin the East - Nest of Europe have been exploited by the MNCs since the early 1990s (Rysman and Sch]art^ 1998)j Nith the European Agreements most of legal restrictions that ]ould deter MNCs from expanding these production arrangements have been removedj EU accession process and liberalisation of trade relationships ]ithin Europe during the 1990s have led to mar[et see[ing FDI in NMSj Privatisation has stimulated foreign investment, in particular in servicesj FDI in industry has nevertheless been quite dynamic and has ta[en an increasing importance recentlyj The car industry and ICT have attracted a relatively large share of industrial FDI, including export oriented greenfield operationsj These ne] production sites from multinational companies partly explain the evolution of the pattern of trade of ne] member states and a significant shift in their specialisationj Hy the end of the 1990s, foreign firms generated more than half of Polish international trade (Picciotto 2003)j In 2003, they have generated as much as 80% of Hungarian exports and 75% of Hungarian importsj This pattern results from the increasing vertical intra-industry and intra-firm trade bet]een the EU15 and the NMSj This trend has been documented in particular in the case of trade ]ith France (Sach]ald 2004) and Germany (Marin 2004)j
19
Table 2 sho]s that the NMS have become specialised in automotives and electronics, areas in ]hich they ]ere marginal exporters or non-exportersj As a result, ne] members have become less specialised in traditional labour intensive sectors such as textiles and more specialised in mid- to high-tech industriesj Table 2. Specialisation* of NMS in their trade with EU 15 Furniture \ parts Motor vehicles Internal combustion piston engines Telecommunication equipment Television receivers Equipment for distributing electricity Nood manufacture Automatic data processing machines Nood simply ]or[ed Nomen$s clothing
1993 3,1 -1j7 0j0 -1j6 0j0 0j4 1j5 -1j2 1j3 5j0
2003 4j0 3j3 3j0 1j6 1j5 1j4 1j1 1j0 1j0 1j0
Change 0j9 5j0 3j0 3j1 1j4 1j1 -0j4 2j2 -0j3 -4j0
@ Indicator of contribution to trade balance, in % Source: Sach]ald (2004)
In continuation, ]e discuss this process on the examples of t]o important sectors of the East - Nest integration ]ithin Europe@ automotive and ICT industriesj Ne sho] ho] the evolution of global competition in these industries has coincided ]ith the EU enlargement and analyse the impact on the location of productionj Ne also discuss the benefits from integration since the 1990s, as ]ell as the potential dynamic effects on the competitiveness of firms and the development of NMSj
A. Eastward expansion of the "European motor industry" Since the early 1990s, the accession countries have been progressively integrated into the LEuropean motor industryL, as Spain had been in the 1980s (Rhys 2004)j German carma[ers have been the first to locate ne] production capacities in Central and Eastern Europej This is due both to geographical proximity and to 20
the maZor crisis experienced by the German car industry in the early 1990sj The German carma[ers have been obliged to clamp do]n on costs to restore their international competitiveness and relocation of production should be interpreted as part of this effortj As in other sectors, EU ]ide integration also corresponds to the globalisation of the automobile industryj
Enlargement and the new pattern of global competition The opening and integration of the ne] member states$ mar[ets and industry coincided ]ith the emergence of a $ne]$ pattern of competition in ]orld automotive industryj Table 3 summarises the [ey features of this ne] pattern of competition, ]hich has ]or[ed in favour of the NMS as an important production locationj Global competition has favoured establishment of the NMS as node ]ithin the EU net]or[ for building cutting-edge productive capacityj Table 3. A new pattern of competition in the automotive industry since the 1990s ‘Old’ pattern of competition
‘New’ pattern of competition
Domestic competition based on exporting from home country supply-base
Global competition@ production functions are organised on a regional and global basis
Emerging mar[ets as dumping grounds for old models and production equipment
Emerging mar[ets as locations for building leading-edge productive capacity
Export-led industry@ firms from different countries compete mainly through mar[ets
Net]or[-led industry@ each maZor firm manufactures ]ithin each maZor mar[et
Source: Hased on Sturgeon and Florida (1999, 2004)
Modulari^ation and supplier outsourcing have been the [ey drivers of the transition from the domestic to the global pattern of competitionj The sharing of responsibility bet]een carma[ers and component suppliers has given rise to first tier global suppliersj These evolutions have led to both vertical disintegration by 21
assemblers and vertical integration by suppliers that- in combination ]ith globalisation- generates a ne] global supply-base capable of supporting the activities of final assemblers on a ]orld]ide basisj As a result of these evolutions, carma[ers initially considered NMS as ne] mar[ets, but progressively follo]ed Lbuild-]here-yousellL strategyj The small si^e of the NMS mar[ets led them to gradually use these countries as a production location to serve all European mar[etsj This led to a stream of investment in Greenfield sites and purchase of local operations in CEE countriesj Hy 2004, local production reached 1j3 million cars a year and ne] investments in Poland, C^ech Republic, Slova[ia, Slovenia and Hungary ]ill increase production capacity to 3j5 million by 2014 (Heymann 2004)j3 The integration of NMS into the European automotive industry has led to a ne] economic geography, ]ith a fast expanding ne] manufacturing pole in central Europej The lo]-cost corridor in Central Europe is one of the ]orld$s fastest-gro]ing centres of car manufacturing, second only to China (Hoston and Rammert 2005)j The Central European pole concentrates on exports of a fe] productsj It tends to compete ]ith Spain in the segment of small cars and is strongly specialised in engines (Lefilleur and Lepape, 2005)j As a result, the EU15 has a trade deficit in cars and engines ]ith NMS, but a trade surplus in car components being exported for assembly to Central European countries (figure 4)j The car industry thus illustrates the complex impact of vertical FDI on trade flo]sj
3
Supply ]ill thus exceed demand for some timej In the longer term, supply and demand in NMS could balance around 4 million vehicles (Lepape 2005b)j
22
Figure 4. EU15 trade with NMS in the automobile industry, $ bn 10 8 6 4 2 0 93 94 95 96 97 98 99 00 01 02 03 Exports of cars Imports of cars 10 8 6 4 2 0 93 94 95 96 97 98 99 00 01 02 03 Exports of components Imports of components 6 5 4 3 2 1 0 93 94 95 96 97 98 99 00 01 02 03
Imports of engines
Exports of engines
Source@ Sach]ald (2005)
23
The types of cars and components being produced reflect the dual motivation for investing in NMS@ lo] costs and increasing local demandj Cost factors are strongly emphasised by commentators, but the potential for demand gro]th in catching-up countries has also been a maZor determinant of ne] investmentsj The cost and demand factors combine to explain that a number of production units in NMS are specialised in small cars and lo] cost carsj4 Demand for cars in these countries focuses on the small and lo]er middle-class segmentsj Fiat has been using Poland to source its mini car and Renault sources the Logan from Romaniaj The ne] Greenfield site by PSA and Toyota in Kolin (C^ech Republic) is also geared to ma[ing small carsj These cars correspond to the purchasing po]er of local customersj They also tend to be relatively labour intensive, as the labour content does not increase proportionately ]ith the si^e and sophistication of carsj It seems thus logical to produce smaller models in lo]-]age countriesj Several restructuring strategies of automotive MNCs underpin these changes in the ]ider Europe (box 1)j Box 1. Typology of the role of emerging markets in global strategies 1j Mar[et entry@ Companies enter ne] countries in order to expand consumer base using a similar production model in the foreign country to the one they operate at homej 2j Product specialisation@ the entire production process (components to final assembly) is located in a single location or region, ]ith different regions specialised in different products and trading finished goodsj 3j Value chain disaggregation@ different components of one product are manufactured in different locations and are assembled into the final productj 4j Value chain reengineering@ after moving value chain steps to a ne] location, processes can be redesigned to capture further efficienciesucost savings (ejgj capitalulabour trade off)j 5j Ne] mar[et creation@ by capturing the full value of global activities firms can offer ne] products at significantly lo]er price and penetrate ne] mar[et segmentsugeographies Source@ McKinsey (2003) 4
One exception is the assembly of Audi TT Coupé in HungaryB 99% of the production is exported
24
During the early 1990s strategies ]ere mainly of the mar[et entryj Tariff Zumping stimulated some FDI li[e Opel$s investment in Polandj Ho]ever, liberalisation of trade tariffs ]ith the EU has removed this motivation for FDIj Realisation of the NMS as competitive production locations led to product specialisation strategiesj Audi$s engine factory in Gyor (Hungary) or Fiat$s production of cars in Poland, ]hich the carma[ers use to supply the entire European mar[et are examples of this type of restructuringj Value chain disaggregation and reengineering are currently the most common in the NMS automotive industryj Ho]ever, the greatest value creation potential may be realised by ne] mar[et creation type of restructuringj Such restructuring has been fully implemented in the case of .[oda VNj Also, the Logan model of Renault Dacia has been designed to generate such potential (Verdonc[ 2005) and is already in great demandj5 In summary, carma[ers have been using NMS for mar[et access, cost and rationalisation of their value chains, but also ne] mar[et creationj Value creation has been ta[ing place and enlargement has increased the competitiveness of the European auto industry, but progress is still necessary as global competition is tighteningj In this perspective, lo]er costs and higher flexibility in ]or[ organisation appear as strong assets for NMS production sitesj Especially as some of the plants are recent and use up to date technologies and organisation principlesj The ne] PSAToyota plant in Kolin, ]hich has an annual capacity of 300,000 cars, has benefited from best practice transfers from Toyota$s French plant in Valenciennes (Hocquet 2005)j LNhen it reaches full capacity, Kolin ]ill be Toyota$s most efficient factory in the ]orldL according to Shinichi Sasa[i, president and CEO of Toyota Motor Europe6j Another illustration is VN$s Hratislava plant, ]hich has recently ]on the bid to produce Audi$s ne] M7 SUV, beating out VN$s ]est European plants (Hoston and Rammert 2005)j Relocation and outsourcing are important means for EU15 carma[ers and supplier to remain competitivej The integration of Central Europe into the ]ider European production net]or[ should be ]elcomedj Ho]ever, as pointed by Nunnen[amp (2004), the 5
Including in France ]here the Logan is sold in a more equipped and more expensive version than in NMS 6 Muoted in Hoston and Rammert (2005)j
25
benefits to be derived from relocation and outsourcing are not equally distributed ]ithin the industry@ $for lo] s[illed production ]or[ers, the competition from Central Europe has intensified pressure on relative ]ages and impaired employment opportunities$j Increasing production capacity ]ill tend to deepen this problem and is li[ely to lead to continuing ]age restraints and longer ]or[ing hoursj NMS experience ]age inflation, but ]age differentials bet]een Nestern and Central Europe remain quite large in the car industry (figure 5)j Figure 5. Labour costs in the automotive industry (Euro/hour, end of 2004) 35
33j0
30 24j5
25
22j0
20
17j3 17j3
15 9j2
10
7j6
7j4
7j3
5j8
5
4j1
2j6
0 DE
SUE
FR
IT
ESP POR SLV
HU
CZ
POL
SLK ROU
Source: Lepape (2005a)
In vie] of competitive pressures from Japanese and Korean producers, as ]ell as the possible emergence of China as an automotive exporter, European carma[ers ]ill have to continue ]ith value chain disaggregation and reengineering, ]ith product specialisation and ]ith creation of ne] mar[ets based on heterogeneous production capabilities ]ithin Europej As pointed by Nunnen[amp (2004) ]age restraint ]ill provide only part of the solution for lo] s[illed ]or[ers in EU15, but also, in a long term, for the NMS as ]ellj Hence, the only long-term solution ]ill be improvement in the level of qualification and trainingj
26
Impact of enlargement in the New Member States The NMS automotive industry is highly concentrated on central Europe (the C^ech Republic, Slova[ia, Hungary, Slovenia, Poland) ]ith great potential benefits in terms of clustering of supplier net]or[sj Integration of this emerging cluster into EU ]ide industry net]or[s is ]ell under ]ay and has enhanced competitive position of the EU automotive industryj Productivity is significantly higher in the assembly sector ]hen compared to suppliersj For example, in Hungary assembly is 3 times more productive, and in Poland 1j8 times (Radosevic and Ro^ei[ 2004)j Although lo]er productivity of component suppliers could be attributed to lo]er capital intensity of this sector,7 case study evidence suggest that it may be also partly due to ]ea[ competencies of local suppliersj It seems that the NMS component industry is not yet able to satisfy ]orld standardsj Indigenous suppliers are considered of lo]er technological ability and quality (Pavl2ne[ 2002)j Ho]ever, the increasing location of Nest European and American suppliers in the region is li[ely to lead to improvements in the technological levelj Practically all-maZor component firms have established subsidiaries in NMS by ta[ing over local companies or more commonly through Greenfield investmentsj This is usually because they are requested to follo] their clients$ strategic movesj Hut on the other hand, increased reliance on modular systems and shared platforms enables carma[ers to source from a larger number of countries than before, thus reducing their incentives to source locally (Sturgeon and Florida 1999)j Carma[ers and first tier component suppliers are [ey agents of building a local supply base in NMS through their lin[ages ]ith local suppliersj Hence, from an industrial restructuring perspective it is important to understand ]hat the drivers and obstacles are in spreading the local supply base, but systematic evidence on local suppliers is not ]idely availablej It seems ho]ever that high productivity improvements in car plants have not yet been accompanied by the spread of a local supply basej The arrival of first tier suppliers ]ill deepen automotive clusters and ensure local 7
Labour ma[es up a higher share of costs for suppliers (20 to 40% as opposed to 10 to 15% for carma[ers), Hoston and Rammert (2005)j
27
content ]ith important effects on technology transfer and employmentj Increasing employment in the supplier sector suggests that this process is under]ayj
B. Relocation and upgrading in ICT industries Since the 1980s, ICT has rapidly globalised as an increasing number of countries has been involved in ever more complex value chainsj Outsourcing of production by American producers in particular has led to the relocation of activities to a number of emerging economiesj8 In the 1990s, production has spread to yet other locations through relocation by American, Japanese and European firmsj Some activities have also been shifted from emerging countries such as Mexico to lo]er cost locationsj As a result the production of ICT, ]hich belongs to high tech industries, is no] ]idely spread among emerging countries in Asia (China, Singaporejjj), Latin America (Mexico, Hra^il) and Europe (Hungary, C^ech Republic, Estonia, Poland)j The recent emergence of China as a maZor producer should be seen ]ithin this ]ider historical contextj In 2002, China, Japan and the United States ]ere the main exporters of ICTj China has become a maZor exporter of automatic data processing equipment, ]ith a share of ]orld exports increasing from 2 to 15% bet]een 1992 and 2002j9 The share of some European countries has also increased remar[ably since the 1990sj Among EU countries, it is the case of Ireland, and especially Finlandj It is also the case of a number of NMS, especially Hungaryj ICT is one important sector in European industry, but ]ith ]ide differences in the degree of specialisation bet]een countriesj Ireland, Finland and to a lesser extent Hungary have been increasing their specialisation in ICTj Different European countries are specialised in different ICT productsj Telecommunication equipment is the main sector for most European countries, but is 8
See for example Kenney and Florida (2004) Data on trade in ICT are dra]n from Sach]ald (2004), based on UNCTAD trade data base
9
28
particularly important in Finland and Austriaj The share of computing is highest for Ireland, Hungary and the Netherlandsj Instruments remain a strong sector, especially in Germany and the Netherlandsj These profiles are reflected in trade performancej Overall, telecommunication equipment is a strong sector for European countriesj Het]een 1992 and 2002, EU15 mar[et share has gro]n from 31 to 41% of ]orld exports and that of accession countries has gro]n from less than 1% to nearly 4%j European performance is much ]ea[er in all the other ICT sectorsj
Global competition and production location in ICT industries Several features of the structural change in electronics have been favourable to the expansion of ICT in NMSj First, there is a long-term trend in electronics of moving from a highly localised to a highly globalised production pattern and a rationalised net]or[ of facilitiesj An example is Philips consumer electronics, ]hich has gone from more than 100 factories t]enty years ago, to 12 main production sites today (of ]hich t]o are in Hungary)j Each of these factories produces larger volumes, ]hich increases productivityj Second, manufacturing has become increasingly decoupled from product development and the various activities are being dispersed across firms and countriesj10 The rise of electronics manufacturing services is a clear indication of this trendj Ho]ever, location of production has also become heavily concentrated in a fe] specialised local clustersj For example, around t]o-thirds of computers sold in Europe in the 1990s ]ere assembled in Ireland and Scotlandj Ireland also accounted for over 40 % of all pac[aged soft]are and 60 % of all business soft]are sold in Europe (Harry and Curran 2005)j Third, in order to resolve the paradox bet]een increased dispersion and concentration, companies are focused on reducing costs of the integral supply chain through outsourcing, relocation to lo] cost sites, reduction in the number of suppliers, common 10
See Ernst (2000), Kenney and Florida (2004)
29
standards to improve flexibility and a global product rangej This has led to large-scale relocationsj For example, over the period 1995 to 2000 there ]as a loss of 34,000 European Zobs in the sector, ]ith Ireland, Scotland and Hungary gaining against the trendj Hy the end of the period Ireland and Scotland had around 20,000 each in the segment and Hungary had around half of the 20,000 NMS$ Zobs in the sector (Harry and Curran 2005)j In addition, the most labour intensive production processes (Flextronics, IHM, Philips, TDK) have been relocated from central Europe to China and to lo]-]age eastern European countries (especially Romania and U[raine)j Fourth, competitive pressures are forcing electronics companies not only to move production from expensive to cheaper areas, but also to locate close to the main mar[ets to increase mar[et responsivenessj These drivers generate the need for flexible-manufacturing structures, ]hich requires common standards, ]hich are in turn a great incentive to transfer process technologies in order to attain these standardsj Hence, NMS are ]ell placed to acquire production capabilities given their s[ill levelsj Hungary and recently C^ech Republic have managed to ma[e full use of these opportunitiesj Several factors have contributed to Hungary becoming one of the maZor European locations in electronicsj First, Hungary has been open to FDI both through FDI incentives and through privatisationj Second, until EU membership, its regulation on free trade ^ones has been favourable for establishing export-oriented scale-intensive assembling operationsj Third, availability of semi-s[illed and s[illed but relatively cheap ]or[force, ]hich has been made available through privatisation and ban[ruptcy of state o]ned firms, has attracted FDIj Fourth, its geographic proximity to the biggest EU mar[ets has enhanced its competitive advantages through moderate logistic costsj In addition, its accumulated experience ]ith a fe] large exsocialist electronics firms (Tungsram, Videoton) has enabled it to [ic[-start the processj Finally, local governments in Hungary and Poland played an important role in ]or[ing Zointly ]ith foreign investors on establishing industrial par[s and ne] capacitiesj In Hungary, and after 1996 in the C^ech Republic, the government also played an important role in attracting FDI to electronicsj
30
Relocation to the East and upgrading in the West Relocations in electronics are driven by differences in ]ages but they are also inextricably lin[ed to opportunities to upgrade once the cost structure becomes untenablej The movement up the value chain ]ithin the hard]are sector involves a shift of innovation from computers to electronic componentsj The ability to organise an efficient and responsive global value chain to ans]er consumer needs also plays an increasing role in competition (Curry and Kenney 2004)j Nithin the last decade computer value chains have been shifting to global scale, but final assembly has remained close to mar[ets, moving from the United States to Mexico, from Singapore to lo]er costs locations in East Asia (Thailand, Malaysia, China) and from Ireland and Scotland to central Europej Nithin central and Eastern Europe, there are emerging signs of relocations moving further east (Romania, U[raine)j As computer assembly Zobs have been shifting overseas, many of the computer firms have remained and upgraded in Irelandj Relocations from Ireland have forced companies to concentrate on relatively high value added non-manufacturing functions such as sales and technical support for call centres and logisticj Ireland has also attracted advanced manufacturing facilities as in the case of Intelj Finally, ne] Zobs in the component segment tend to be better paid (Harry and Curran 2005)j Ho]ever, the same pressures have not led to upgrading in Scotland ]hose R\D spending in electronics is one quarter of Irish$s (ibid)j This has revealed ]ea[nesses in the UK supplier base and the need to move to more sophisticated segmentsj The large-scale manufacturing operations that have characterised the Scottish electronics industry for the last 20 years are no longer competitive, but Scotland is not ready in the short-to-medium term to move up the value chain and has to import labour to fill vacancies in information technology and soft]are companiesj In summary, company responses to structural changes in ICT have been operating in favour of NMS as an emerging locationj Despite examples of relocation to East Asia, NMS retain their advantages in terms of s[ills, proximity and flexibilityj This is confirmed by recovery of production after the 2001 crisisj In addition, trends li[e decoupling of manufacturing and design need 31
for both concentration and proximity, pressure to reduce costs converge to increase the attractiveness of NMSj For example, even the EU15 companies, ]hich have been traditionally vertically integrated, have moved rapidly to the region pursuing outsourcing and lo] cost strategiesj For some products or components, NMS are nevertheless not able to produce at lo] enough costsj Rising costs, including unit labour cost, in some NMS11 are forcing the shift of simple assembly Zobs to Chinaj Also, some cases suggest that ]e may expect relocation further east to U[raine and Romaniaj For example, Flextronics is subcontracting some production in U[raine, ]here labour costs are less than one-quarter that of Hungary$sj For contract manufacturers such as Flextronics, the search for greater efficiency ]ill not stop at the Hungarian border and it ]ill be only a matter of time before ]e see further expansion of electronic assembly to U[raine and its increase in Romaniaj
Integration into global value chains and local value added Expansion of the existing facilities in NMS electronic manufacturing has involved extensive upgrading of production capabilitiesj Ho]ever, cases of functional upgrading or moving from manufacturing to engineering ]ithin the same firm seem rarej Examples of foreign controlled R\D, soft]are and design centres in electronics are concentrated in telecommunicationsj This, together ]ith the strong product specialisation of foreign plants, suggests that the mastery of technology has been confined to process improvement (Radosevic 2002, 2004)j In the medium-term ]e may see the emergence of regional architecture in electronics characterised by the inclusion of a fe] more countries into the production net]or[s (U[raine, Romania) and possibly the tiering of countries ]ith Hungary and the C^ech Republic occupying higher positionsj There is already a trend of positioning some companies in Hungary as European mandate plantsj For example, Philips, No[ia and Samsung have established European mandate facilities in specific production lines (Radosevic 2002, 2004)j Ho]ever, this scenario implies an upgrading of the 11
For recent data, see DGTPE (2005)
32
Hungarian system of innovation as ]ell as significant improvements in the system of educationj For the time being ]e can observe a limited value creation potential because national net]or[s are underdevelopedj The Hungarian ICT industry is concentrated on fe] products that are all highly export-orientedj Among the top 10 export products 8 are electronic products, ]hich account for almost 20% of Hungarian export (table 4)j Strong export orientation results from the central role of multinationals in the Hungarian industry, especially in ICTj Multinationals are among the top Hungarian exportersj MaZor exporters such as Flextronics, Philips or IHM export nearly all their Hungarian productionj Table 4. Major products in Hungarian exports, in % of total exports Product Telecom appliances Reciprocating piston engines Cars Input or output units Parts for TV, radio Storage units for computers Television receivers Video recording appj Parts for automatic data processing machines Electric conductors
Export share 2002
Export share 1992
7j8 6j2 4j3 2j2 2j1 1j6 1j6 1j5 1j5 1j3
0j1 0j0 0j2 0j0 0j3 0j0 0j2 0j1 0j1 0j4
Source: Sass (2005)
ICT manufacturing tends to generate relatively lo] value added in NMSj This is the case in Hungary, except for medical and optical instruments (table 5)j Relatedly, R\D intensity of the NMS$ electronics is belo] R\D intensity for manufacturing in general (Srholec 2006)j These data suggest that the role of local production activities is focused on assembly and simple operationsj Local suppliers and subcontractors tend to provide a limited set of components to foreign firms$ subsidiariesj As a result, the potential for dynamic effects through either vertical or hori^ontal spillovers is limitedj Estimates suggest that technology transfers and productivity increases have focused on multinational subsidiaries ]ith little spillovers on suppliers (DamiZan et alj 2003)j The layer of 33
local firms in NMS$ electronics is still very ]ea[ ]ith limited capabilities in core technologies (Radosevic 2002, 2004)j Table 5. Distribution of value added in Hungarian manufacturing, 2002
33 16 26 24 36 28 35 31 22 20 25 29 23 18 37 21 19 15 17 27 34 30 32
gross VA u gross output
share in manufacturing output
share in manufacturing export
Medical, optical and precision instruments Tobacco Non-metallic minerals Chemical products Furniture Metal products Transport equipment Electrical machinery njejs Publishing, printing Nood and ]ood products Rubber and plastic Machinery njejs Co[e and petroleum Clothing Recycling Paper and paper products Leather Food and beverages Textiles Hasic metals Motor vehicles Office machinery Communication equipment
42j2 40j6 37j0 36j6 32j7 31j9 31j5 30j9 30j4 30j1 29j4 28j5 26j7 26j1 26j1 24j8 24j0 22j9 22j7 20j1 18j4 14j8 11j1
1j2 0j6 2j9 6j3 1j4 4j4 0j7 7j8 3j1 1j4 3j7 5j6 4j6 2j4 0j1 1j7 0j8 14j2 1j4 3j4 13j0 3j4 16j0
0j7 0j1 1j2 6j5 0j8 2j6 0j4 10j2 0j1 1j0 3j2 5j6 1j8 1j9 0j0 1j3 0j5 5j3 1j0 2j8 22j1 6j2 24j7
Manufacturing
24.1
100.0
100.0
Source@ Sass (2005)
34
III- Conclusion and policy implications Increased exchanges ]ith EU countries through trade and investment have opened opportunities for ne] member states to upgrade their manufacturing capabilities and become more specialised in mid- to high-tech productsj12 Access to Nestern mar[ets and FDI have thus contributed to the transition process and gro]th in Central and Eastern European countriesj For the EU15, increasing integration ]ith accession countries has meant both exports to small but dynamic mar[ets and imports as part of a process of regional vertical specialisationj Hoth trends can contribute to strengthen the EU15 economies, provided the latter do adapt to further specialise in high-tech products and servicesj Enlargement thus represents both an opportunity to speed up structural change and an additional pressure to do soj The paper has emphasised the fact that enlargement occurs in a context ]here global competitive pressures from emerging countries are gathering pace and call for structural evolutions of the European economiesj From this global economic perspective, EU enlargement is not a maZor eventj This latest ]ave of enlargement may actually correspond to the end of the focus of the EU on integration itself as a strategy in ]hich increasing economies of scale in sectors of mass production played a maZor role in improving economic performance13j Increased mar[et si^e resulting from the latest ]ave of enlargement has stimulated vertical specialisation along value chains and integration of NMS$ facilities into European net]or[s, but increasing performance requires restructuring in a number of sectorsj Enlargement thus appears as a factor of acceleration of change in a global context of change, ]hich explains the increasingly complex political economy of European economic integrationj
12
The convergence process is focused on manufacturingj Overall structural convergence ]ith the EU is slo] as the share of agriculture in value added remains higher and the share of services remains lo]er (ECH 2005) 13 The Single mar[et has been both the last step in the economies of scale driven integration and the beginning of the era of integration cum structural change (Sach]ald 1997)j
35
The current perceptions of $unfair$ competition from the ne] member states tend to mas[ the true causes of increasing competitive pressuresj Tax competition has often been cited as an example of $unfair$ competition, in particular by increasing the attractiveness of the NMSj Ho]ever, research on this issue reveals little ground for strong conclusions of this typej Until the beginning of the 2000s, higher taxes have tended to discourage in]ard foreign direct investment, but it seems that the $ne]$ and $old$ member states ]ere not competing for same type of investmentj14 This may be due in particular to the privatisation process, ]hich attracted important investment flo]s in servicesj15 Such analyses are not yet available for the post-enlargement period, during ]hich industrial sectors have attracted a larger share of foreign investment in NMSj Hesides, as ]e sa] in t]o sector studies, cost attractiveness seems to play a relatively larger role in comparison ]ith mar[et attraction, ]hich ]as a more prominent motivation during the 1990sj The diagnosis is similar ]ith respect to ]age competition and relocation of manufacturing facilities in NMSj16 Studies based on data up to the beginning of the 2000s generally conclude that the impact of relocation to lo] cost countries has been a minor cause of unemployment in Nestern Europej17 Hased on recent events and the apparent multiplication of relocation cases in both industry and services, some analysts nevertheless suggest that competition from lo]-cost countries could have an increasing impact on the labour mar[et in EU countriesj18 Hesides, the public opinion is also struc[ by the combination of persistently high unemployment, concrete examples of industrial sites being closed and ne] sites being 14
During the conference, Amina Lahrèche-Revil (2005) presented the results of her research on tax competition at CEPII (]]]jcepiijfr )j 15 Mi[erova (2004) suggests that mar[et gro]th potential, lo]er costs and proximity to mar[ets and customers have been the main drivers of FDI in services in NMSj 16 Studies analyse relocation to emerging countries in general and fe] focus on NMSB see Riess and Uppenberg (2004), Konings (2004)j For France, Aubert and Sillard (2005)B for Germany, Marin (2004), Deutsche Hundesban[ (2004), Hr?c[ et alj (2004)B for Helgium, Van Den Cruyce and Courcelle (1998)j 17 This conclusion has been emphasi^ed during the conference by Reinhilde Veugelersj 18 Recent reports in France have suggested such an acceleration of relocation (Fontagné and Loren^i 2004, Grignon 2004), but statistical data is not yet available for a complete diagnosis
36
opened in NMSj In Germany and France, this gloomy atmosphere has been further deteriorated by pressure from some companies, ]hich have been arguing that they ]ill relocate to NMS or emerging economies unless they can increase ]or[ing hours and flexibility in order to reduce unit labour costsj This has been accompanied by migration restrictions from East to Nest, ]hich have been facilitated by a lac[ of co-ordination at the EU level (Hoeri and Hruc[er 2005)j Some $old$ member states may feel as though they are in a $nutcrac[er$, positioned bet]een high tech America and lo] cost global locations, including ne] member statesj Ne] member states also feel squee^ed in bet]een $old$ member states and lo] cost locations li[e China and Indiaj Hoth have difficulties to generate sufficient value added given their cost and technology competitivenessj The perception that there are races to the bottom ]ithin Europe may trigger structural beggar-my-neighbour policiesj This ]ould be particularly counter productive as a race to the bottom in some spheres (ejgj tax competition) ]ould not be compatible ]ith a race to the top in areas such as public expenditure on infrastructure or researchj Ne] members should resist the temptation to reduce taxes only to attract FDI and ris[ running unsustainable public deficitsj Hesides, they ]ould exacerbate the competition to attract FDI among themselves rather than ]ith Nestern EU membersj For EU economies, the obZective should be to ]or[ at stimulating structural change, so that the perception of a race to the bottom is dissipatedj If European countries engage more clearly on an innovationbased gro]th path, they ]ill generate more Zobs in ne] activities and ]ill feel less threatened by relocation to lo] cost countriesj Such an ambition is quite challenging for public policies as it does not only require more public spending in education and research, but also institutional changes, ranging from national innovation systems to labour mar[ets and competition in product mar[etsj19 In this perspective, enlargement should certainly not be seen as another opportunity to simply increase the EU economic areaj Enlargement and its challenges should rather trigger reform of a number national features and an evolution of the role of the EU 19
In the case of France the required evolutions and reforms have been discussed in a number of recent contributions, among ]hich Cahuc and Rylberberg (2004), Camdessus (2004), Miotti and Sach]ald (2004)j
37
economic policiesj The challenges of enlargement should thus not be seen in isolation from the Lisbon strategy, as the maZor problem is that of stimulating industry restructuring in the EUj
38
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Sach]ald, Fj, 2005, The impact of EU enlargement on the location of production in Europe, Paris, Ifri, Les Etudes de I$Ifri nB4, ]]]jifrijorg Sass, Mj, 2005, LThe ICT Manufacturing sector in HungaryL, Enlargement and Globalisation@ Location and Competitiveness of Firms in Europe, IFRI, Hrussels, 17 June (see appendix)j Srholec, Mj, 2006, LGlobal production systems and technological catching up@ thin[ing t]ice about high-tech industries in emerging countriesL, Piech Kj and Sj Radosevic, Knowledge based economy in central and Eastern Europe: countries and industries in a process of change, Palgravej Sturgeon Tj and Rj Florida, 1999, The World that Changed the Machine: Globalisation and Jobs in the Automotive Industry, Final Report to the Sloan Foundation Sturgeon, Tj and Rj Florida, 2004, LGlobali^ation, deverticali^ation, and Employment in the Motor Vehicle Industry, in Mj Kenney and Rj Florida (eds), Locating Global Advantage, Stanford Husiness Hoo[sj Van Den Cruyce, Hj and Cj Courcelle, 1998, Participation des entreprises belges au processus de mondialisation, Helgian Federal Planning Hureau, Hrusselsj Verdonc[, Jj, 2005, LLocation and competitiveness of firms in EuropeL, Enlargement and Globalisation@ Location and Competitiveness of Firms in Europe, IFRI, Hrussels, 17 June (see appendix)j Rysman, Jj, Ej Doherty and Aj Sch]art^, 1997, Tales from the $global$ economy@ Cross-national production net]or[s and the reorgani^ation of the European economy, Structural Change and Economic Dynamics 8, 45-85j Rysman, Jj and Aj Sch]art^, 1998, LReunifying Europe in an Emerging Norld Economy@ Economic Heterogeneity, Ne] Industrial Options, and Political ChoicesL, Her[eley Roundtable in the International Economy, available on http@uubriejber[eleyjeduuHRIEupubsu]pu]pj113jhtml 43
Appendix. Program of the conference Enlargement and Globalisation: Location and Competitiveness of firms in Europe 17 June, 2005, European Economic and Social Committee, Hrussels 9:50 Opening remarks@ Josly Piette, Member of the Hureau of the EESC and President of the Consultative Commission on Industrial Change Introduction@ Pierre Lepetit, Executive Director, Ifri 10:00-11:30 IMPACT OF ENLARGEMENT ON THE LOCATION OF FIRMS IN EUROPE Chair@ Pierre Mirel, Director for Tur[ey and Croatia, European Commission DG Enlargement Impact of Enlargement on Firms' Strategies and the Location of Production in Europe, Frédérique Sach]ald, Head of Economic Studies, Ifri, Paris Global networks of production and location in Europe, Vincent Mercier, Managing Partner Roland Herger Strategy Consultants Discussion@ Naltraut Urban, Vienna Institute for International Economic Studies (NIIN) 11:45-13:10 EUROPEAN DIVISION OF LABOUR AND THE COMPETITIVENESS OF THE AUTOMOBILE INDUSTRY Introduction and Chair@ Slavo Radosevic, University College London Enlargement and the "European Motor IndustryL, Qann Lepape, Regional Economist, EU Enlargement, French Ministry of Economics in Narsa] Discussion@ Jacques Verdonc[, VP Strategic Planning RenaultB Reinhold Kopp, Group Senior VP Vol[s]agen
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14:40-16:10 ICT: THE EU-25 IN THE GLOBAL PRODUCTION NETWORKS Introduction and Chair@ Michel Martine^, Rexecode, Paris The European Geography of the ICT Sector, Fran[ Harry, University College, Dublin ICT in Hungary: Evolution since the 1990s, Magdolna Sass, Institute of Economics, Hungarian Academy of Sciences, Hudapest Discussion@ Serge Ferré, Vice-President, No[ia FranceB Slavo Radosevic, UCL 16:10-17:30 EUROPEAN GEOGRAPHY OF PRODUCTION AND PUBLIC POLICIES Chair@ Pierre Defraigne, Director of Eur-Ifri Fiscal competition in Europe, Amina Lahrèche-Revil, CEPII, Paris Enlargement, competitiveness and the Lisbon Reinhilde Veugelers, Catholic University of Louvain (KUL)
strategy,
The revised Lisbon strategy : contributing to a strong European industrial base, Mathias Ruete, Director, Competitiveness Coordination, European Commission DG Enterprise
17:30-17:45 CONCLUSION Nicolas Théry, Advisor to the DG, European Commission DG Enterprise
Presentations are available on IFRI’s website (www.ifri.org)
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Authors Slavo Radosevic is Reader at the School of Slavonic and East European Studies, University College Londonj His research interests are in the area of science, technology, industrial change and foreign direct investment in countries of central and eastern Europe and is involved in international proZects, consultancy and policy advisory activities in this areaj He has published extensively in international Zournals on these issuesj In 2004, Drj Radosevic published $A T]o-Tier or Multi-Tier EuropeF@ Assessing the Innovation Capacities of Central and East European Countries in the Enlarged EU$ (Journal of Common Market Studies)j He is co-editor of several volumes, of ]hich@ The emerging industrial structure of the wider Europe (Routledge 2004), and International industrial networks and industrial restructuring in central Europe, Russia and Ukraine, (Klu]er 2004)j His forthcoming co-edited volumes are on [no]ledge based economies in countries of central and eastern Europe, on Estonian economy and on science and technology policy in countries of central and South East Europej Drj Radosevic is also the author of International Technology Transfer and Catch Up in Economic Development (Ed]ard Elgar 1999)j Frédérique Sachwald is Head of Economic Studies at IFRI (Institut Fran/ais des Relations Internationales, Paris and Hrussels) and has been teaching in various universitiesj She ]or[s on globalisation processes, ]ith a focus on the interactions bet]een firms$ location strategies and national economies, in both developed and developing countriesj She has been studying a number of issues related to the adaptation of national economic systems to tougher competition and the development of global production and innovation net]or[sj Drj Frédérique Sach]ald$s recent publications include@ In English, Growth in France between 1950 and 2030: The challenge of innovation, IFRI, 2004 (]ith Luis Miotti, online at ]]]jifrijorg)B The Integration of China and East European Countries in Global Networks, (Les Etudes de l$ifri nB2, 2004, online 47
at ]]]jifrijorg)B LCo-operative R\D@ Nhy and ]ith ]homFL (]ith Luis Miotti, Research Policy, 2003)j In French, LImpact de l$élargissement sur la localisation de la production en EuropeL, Industrie en France et mondialisation (Ministère de l$industrie, 2005) B La Croissance française 19502030: le défi de l'innovation (en collj avec Luis Miotti, La Documentation fran/aise, 2005)B Le Système d'innovation français dans l'économie mondiale (]ith Pj Larédo, IFRIuIDEP, La Documentation fran/aise, 2005)j
Impression Hialec - Nancy Dép9t légal 63655 Octobre 2005
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