7 losers. ⢠12 gainers. ⢠RoW see little change. China, Brazil, Mexico, Poland, India, Turkey, Russia, Korea, Indone
Société canadienne de science économique
Misthinking Globalisation Richard Baldwin Professor at Graduate Institute, Geneva & University of Oxford; Director of CEPR
Conventional view of globalisation No trade to free trade, slowly.
1870–1990: Globalisation 1.Falling transport costs
2.Rising tariffs
Trade costs
3.Falling tariffs & transport costs
Globalisation changed around 1990
What changed globalisation?
Global GDP shares, 1960 2012 Post 1990: 7 losers. 12 gainers. RoW see little change.
People in poverty (under $2/day) Post 1993 Hi middle poverty plummets. 650 million fewer poor! Others’ poverty keeps rising.
1990
World manufacturing share
Global manufacturing shares, 1970 2010 7 ‘losers’. 7 ‘risers’. RoW = little change.
Nature of trade changed: Vertical Specialisation
1990 Source: Amador and Cabral (2009).
Nature of trade changed: Intra industry trade (IIT)
1990
Trade & investment policies Protectionism becomes destructionism
1990
1995
‘Smile curve’: Distribution of value
What changed globalisation?
Clues Clue #1: The change is: Historic in size, Global in reach, VERY unevenly spread geographically. Clue #2: The change is: Related to manufacturing & trade in intermediates.
Clue #3: Transformed developing nations’ views of trade & investment.
Buzzwords in lieu of analysis It’s ‘hyper globalisation’
It’s FDI It’s FDI
It’s vertical specialisation
It’s the East Asian ‘miracle’
It’s ‘Emerging Markets’
It’s capital flows
Elephant = international movement of firm specific know how. It’s ‘hyper “GVC revolution” globalisation’
It’s FDI It’s FDI
Know how becomes: 1) Firm specific, not nation specific. It’s the East 2) Rapidly combined with Asian South It’s labour – but only in‘miracle’ a few capital developing nations. flows
It’s vertical specialisation
It’s ‘Emerging Markets’
A new globalisation narrative Globalisation as 2 processes, not 1
Globalisation: 3 cascading constraints
High
High
High
=
Pre globalised world
High
=
1st unbundling
=
2nd unbundling
Steam revolution High Low
ICT revolution High Low
Low
Stage A
Stage B Stage C
Distance still matters
Regionalization of supply chains Hypothesis: people still expensive to move. “Face 2 face” and “Face 2 machine” constraints.
Conjecture: Virtual presence
rd 3
unbundling?
3rd unbundling?
Face to face and face to machine constraints relaxed. Production networks spread to Africa? To South America?
st 1
versus
nd 2
unbundling
Basic economic difference 1st unbundling: “old paradigm globalisation” Globalisation allows nations to exploit their comparative advantage. Goods crossing borders
2nd unbundling: “new paradigm globalisation” Globalisation changes nations’ comparative advantages. “De nationalisation” of comparative advantage.
Factories crossing North South borders as well.
New Kuznets Cycle ICT revolution => Low tech/low wage bundle switches to high tech/low wage; But only where the GVCs operate.
=> Rapid industrialisation in 7 risers. => Commodity cycle for 12 GDP risers not part of 7 risers.
Sources of growth 12 GDP gainers
G7
Examples of Misthinking
Misthinking int’l growth 1st unbundling thinking:
YJpn
AJpn F LJpn K Jpn
2nd unbundling thinking: Competitiveness involves mix and match comparative. National performance depends upon non national factors.
Spence growth commission (2008) Economy
Period of +7% growth
GDP/pop at start
GDP/pop in 2005
Botswana
1960–2005
210
3,800
Brazil
1950–1980
960
4,000
China
1961–2005
105
1,400
Hong Kong, China*
1960–1997
3,100
29,900
Indonesia
1966–1997
200
900
Japan*
1950–1983
3,500
39,600
Korea, Rep. of*
1960–2001
1,100
13,200
Malaysia
1967–1997
790
4,400
Malta*
1963–1994
1,100
9,600
Oman
1960–1999
950
9,000
Singapore*
1967–2002
2,200
25,400
Taiwan, China*
1965–2002
1,500
16,400
Thailand
1960–1997
330
2,400
Hausmann & Rodrik
Undergraduate diagram
st 1 euros
DS
SS
unbundling: euros
euros
DN XS
SN
MD Quantities
World trade
Quantities
1st unbundling: Trade costs fall North industrialises; South de industrialises euros
DS
SS
euros
euros
DN XS
S produces less & imports more Quantities
N produces & exports more
SN
MD World trade
Quantities
nd 2 euros
UB: start with free trade in goods DS
SS
S imports
euros
euros
DN XS
N exports
SN
MD Quantities
World trade
Quantities
2nd UB euros
DS
Direct recombination of North tech with South labour SS
S imports
euros
euros
DN XS
N exports
SN
MD Quantities
World trade
Quantities
nd 2 euros
UB: DS
Hi tech/Lo wage combo
SS
euros
euros
DN SN
XS S exports
XS’
S’S
MD MD’ Quantities
World trade
N imports
Quantities
Policy rethinks necessary 1. 2. 3. 4. 5.
Social & education policy. Industrial policy. Urban policy. Trade policy. Development policy.
END Thank you for listening. Unpaid avert: please visit: www.VoxEU.org “Research based policy analysis and commentary by leading economists”
Extra slides for Q&A
Trade changed:20th vs 21st century trade Goods crossing borders
Goods, know how, ideas, capital & people crossing borders
“Trade investment services IP nexus”
21st century trade needs different disciplines 1) “Supply-chain disciplines”
2) “Offshoring disciplines”
th 20
vs
st 21
regionalism
20th century RTAs: Mostly about tariff preferences. 21st century RTAs: Mostly about underpinning GVCs.
Keystone difference:
th 20
vs
st 21
Lack of discrimination technology
RTAs
Soft preferences work differently TPP nations
10% Regulation costs 10% Regulation costs
Japan
nonTPP nations
2% 5%
Indonesia
US
Hard preferences mostly negligible
Multilateralisation is different Multilateralising 20th century RTAs: Mostly about reducing discrimination. Multilateralising 21st century RTAs: Most about realising network externalities via common rules.
Supply chain trade by industry
I2P trade: Bilateral intermediate imports as % of global flows, 2009
Factory Europe
Factory Asia
Facto NorA
Trade in parts can switch comparative advantage euros
euros
Quantity, parts
Quantity, final goods
