Misthinking Globalisation. Richard Baldwin Graduate Institute, Geneva & University of Oxford

Transcription

1 Misthinking Globalisation Richard Baldwin Graduate Institute, Geneva & University of Oxford

2 Conventional view of globalisation Autarky to free trade, slowly. Several waves, but single process.

3 : Globalisation Trade costs

4 : Globalisation Trade costs Falling transport costs Rising tariffs 1.9 Averge trade cost Global trade flow (right scale) Falling tariffs & transport costs Source: Gravity model based estimates of trade costs (Jacks, Meissner, Novy 2011).

5 Globalisation changed post % 70% 60% 50% 40% 30% 20% 10% 0% G7 world GDP share 1820, 22% 1900, 46% 1990, 66% % 1990

6 What changed globalisation? Follow the clues

7 Global GDP shares, % 70% 60% 50% 40% 30% 20% RoW 67% G7, 48% 10 gainers 27% Post 1990: G7 share loss goes to 10 developing nations. RoW see little change. 10% 0% 11% 1990

8 People in poverty (under $2/day) Millions under $2/day by national income class 1,600 1,400 1,200 1, Lomiddle Hi- Middle Low poverty: Rising in Low and Low middle income nations. Flat in High middle income nations.

9 People in poverty (under $2/day) Millions under $2/day by national income class 1,600 1,400 1,200 1, Lomiddle Hi- Middle Low Post 1993 Hi middle poverty plummets. 650 million fewer poor! Others poverty keeps rising. 1990

10 Global manufacturing shares, World manufacturing share 80% 70% 60% 50% 40% 30% 1990, G7 65% RoW 47% 7 losers. 7 risers. RoW = little change. 20% 10% 0% risers, 5% China, 3% 3% China, 18% 9% Source: unstats.un.org; 6 risers = Korea, India, Indonesia, Thailand, Turkey, Poland

11 Nature of trade: Vertical specialisation Vertical specialisation index Asia ex Jpn G LatAm Africa Source: Amador and Cabral (2009).

12 Nature of trade changed: Intra industry trade (IIT) Intraindustry trade indices 80% 70% 60% 50% 40% 30% 20% 10% Germany -France US- Mexico Germany- Poland US- Mexico Japan- Thailand 0%

13 Trade & investment policies Developing nations BITs signed per year (right scale) World FDI ($ billion) Applied tariffs (%) Middle East & North Africa East Asia Sub- Saharan Africa South Asia US, Japan & EU

14 What changed globalisation?

15 Clue #1: The change is: Clues Historic in size, Global in reach, Unevenly spread geographically. Clue #2: The change is: Related to manufacturing & trade in intermediates. Clue #3: Transformed developing nations views of trade & investment.

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17 Buzzwords in lieu of analysis It s hyperglobalisation It s FDI It s FDI It s the East Asian miracle It s capital flows It s vertical specialisation It s Emerging Markets

18 Elephant = international movement of firm specific know how. It s FDI It s FDI It s hyperglobalisation GVC revolution Know how becomes: 1) Firm specific, not nation specific. It s the East 2) Rapidly combined with Asian South labour but only in miracle a few developing nations. It s capital flows It s vertical specialisation It s Emerging Markets

19 We need a new narrative for globalisation Globalisation as 2 processes, not 1

20 Globalisation: 3 cascading constraints High High High = Preglobalised world Steam revolution Low High High = 1 st unbundling Stage A Stage C Stage B ICT revolution Low Low High = 2 nd unbundling Stage A Stage B Stage C

21 Distance still matters Regionalization of supply chains Hypothesis: people still expensive to move. Face 2 face and Face 2 machine constraints.

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23 Misthinking industrialisation: Spence growth commission (2008) Economy Period of +7% growth GDP/pop at start GDP/pop in 2005 Botswana ,800 Brazil ,000 China ,400 Hong Kong, China* ,100 29,900 Indonesia Japan* ,500 39,600 Korea, Rep. of* ,100 13,200 Malaysia ,400 Malta* ,100 9,600 Oman ,000 Singapore* ,200 25,400 Taiwan, China* ,500 16,400 Thailand ,400

24 Misthinking globalisation = misthinking economics 1 st unbundling thinking: Y A F[ L, K ] Jpn Jpn Jpn Jpn 2 nd unbundling thinking: Globalisation changes technology in some developing nations. Know how flows directly in global value chains & indirectly via intermediates.

25 Economics of 2 nd unbundling 2 ways of recombination hi tech & low wages: Direct: North know how moves to South labour (offshoring). Indirect: North know how moves to South in components. (trade in parts & components). NB: Comparative advantage becomes a multicountry concept.

26 1 st unbundling: euros D S S S euros euros D N P T XS S N P -T MD Quantities World trade Quantities

27 1 st unbundling: Trade costs fall North industrialises; South de industrialises euros D S S S euros euros D N P T XS N produces & exports more S N P FT P FT S produces less & imports more MD P -T Quantities World trade Quantities

28 2 nd UB Direct recombination of North tech with South labour euros D S S S euros euros D N XS S N P FT P 2UB S exports S S MD MD Quantities World trade Quantities XS N exports P FT P 2UB

29 Trade in parts can switch comparative advantage euros South euros D Z South S Z D Y S Y P W Z S Z P Y MC Z P P Y Q Y Q Y Quantity, parts Q Y =Q Z M Z X Z Quantity, final goods

30 Basic economic difference 1 st unbundling globalisation: Exploit comparative advantage by producing more at home & exporting. 2 nd unbundling globalisation: Sources of comparative advantage move internationally.

31 Rethinking impact of globalisation The death of production functions? Y A F[ L, K ] Jpn Jpn Jpn Jpn Globalisation works with a finer degree of resolution. Need IO work to track its impact. Old, bold approaches need more detail. Open up the blackbox of production functions.

32 Key difference for policy 1 st unbundling = UB Slow, predictable, controllable (tariff cuts). By sector and skill group. 2 nd unbundling = 2UB Sudden, individual, unpredictable. Globalisation with a finer degree of resolution.

33 GVC revolution: Policy rethinks necessary 1. Social & education policy. 2. Industrial policy. 3. Urban policy. 4. Trade policy & Global trade governance.

34 #5: Development policy Traditional industrialisation = build a supply chain (e.g. Korea). After 2 nd unbundling, industrialisation = join a supply chain (e.g. Thailand). Some key points: Industrialisation is easier but less significant. 2 nd unbundling killed import substitution. North tech + South labour unbeatable.

35 Development paths changed Holmes Lopez Gonzales curve Importing to export: Rising then falling with income - 10,000 20,000 30,000 40,000 50,000 Per capita GDP (2000 $s)

36 END Thank you for listening. Please continue developing Int l IO tables and the like. World of 2 nd unbundling needs finer ganularity! Unpaid avert: please visit: Research based policy analysis and commentary by leading economists

37 Extra slides for Q&A

38 1UB w/w* e EU exports Postwar tariff liberalisation z x Nontraded Non traded Job creation Job destruction z m Globalisation s impact is: 1. Slow & controlled. Mainly tariff liberalisation 2. Predictable. Sunset sectors like those already lost. Sunrise Foreign goods sectors in Home like those already exporting. A(z) 3. Globalisation s impact felt at level of sectors & skill groups. Home goods in Foreign EU imports z, sectors

39 2 nd unbundling: Industrialisation easier, but less meaningful 2UB: External economies with GVC wage SVMPL M (ISI) M Social Value Marginal Product of Labour in Manufacturing A U U VMPL A L M L M L L M 39

40 Supply chain trade by industry All services Food & related Manufacturing, Leather & Machinery, nec Transport equip Textiles & related Elect & Opt'l equip Ag & related Fuels Chemicals & Paper & related Rubber & Plastics Wood & related Basic metals & Mining Non-metallic World final share, '09 World final share, '95 0% 20% 40% 60% 80% All services Food & related Manufacturing, Leather & Machinery, nec Transport equip Textiles & related Elect & Opt'l equip Ag & related Fuels Chemicals & Paper & related Rubber & Plastics Wood & related Basic metals & Mining Non-metallic Total world export shares '09 0% 10% 20% 30%

41 I2P trade: Bilateral intermediate imports as % of global flows, 2009 UK Germany France Itlay NL Belgium Austria Poland Czech Denmark Spain Portugal Finland Greece Ireland Turkey Sweden Brazil Russia India Indonesia Australia Taipei China Japan Korea US Mexico Canada RoW I2P '09 UK 0% 0% 0% 0% 1% Germany 0% 1% 0% 0% 0% 1% 0% 2% France 0% 1% Itlay Factory 1% NL 1% 0% 0% Belgium 0% Europe Austria Poland Czech Denmark 0% Spain 0% Portugal Finland Greece Ireland 0% Turkey 0% Sweden Factory 0% Brazil 0% Russia Asia 1% India 0% Indonesia 0% Australia 1% 0% Taipei 1% 0% China 1% 0% 1% 1% 2% 4% Japan 1% 0% 0% 2% Korea 1% 1% US 0% 0% 0% 1% 0% 1% 1% 4% Mexico 1% Canada 2% RoW 1% 1% 1% 1% 1% 0% 0% 0% 1% 0% 0% 0% 4% 2% 1% 3% Facto NorA

42 2 nd unbundling: Differences for policymaking Misthinking globalisation = misthinking policy. 2 nd unbundling: 1. Less predictable. Globalisation changes national comparative advantage. 2. More sudden. Not controlled by tariff cutting. 3. More individual. Not by sectors or skill groups.