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© 2009 Pankaj Ghemawat What Are the Real Gains from a Successful Doha Round? Pankaj Ghemawat WTO Workshop November 2, 2010.

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Presentation on theme: "© 2009 Pankaj Ghemawat What Are the Real Gains from a Successful Doha Round? Pankaj Ghemawat WTO Workshop November 2, 2010."— Presentation transcript:

1 © 2009 Pankaj Ghemawat What Are the Real Gains from a Successful Doha Round? Pankaj Ghemawat WTO Workshop November 2, 2010

2 The Way Forward 1. Understanding how global we really are 2. Understanding all the barriers that constrain trade 3. Thinking broadly about the gains from trade © 2010 Pankaj Ghemawat

3 How Global Are We? A. In real estate, the mantra is 'location, location, location.' For global brand managers, it might be 'localise, localise, localise. A consultant B. There is a balance on the spectrum between local and global that represents the sweet spot…[and makes for] the race to the middle. A manager C. The world got flat…[creating] a global, Web- enabled playing field that allows for…collaboration on research and work in real time, without regard to geography, distance or, in the near future, even language. A journalist © 2010 Pankaj Ghemawat

4 20%10%0%30%40%50%60%70%80%90%100% FDI/Gross Fixed Capital Formation © 2010 Pankaj Ghemawat

5 Levels of Internationalization Telephone calls Immigrants (to Population) Direct investment Equity investment Exports (to GDP) 20% 40%60% 80%100%

6 The Way Forward 1. Understanding how global we really are 2. Understanding all the barriers that constrain trade 3. Thinking broadly about the gains from trade © 2010 Pankaj Ghemawat

7 What Are the Barriers to Trade? The Mystery of the Missing Trade In 1988, Canadian provinces traded 20 times as much merchandise with each other as with U.S. states By the mid-1990s, this multiple had come down to 12 After a decade of NAFTA, this multiple still exceeds 5and this is just for merchandise! Note free trade agreement, common border, mostly common language/ colonizer, generally friendly relations etc. making U.S.-Canadian trade largest bilateral trade relationship in the world © 2010 Pankaj Ghemawat

8 Influences on Bilateral Trade (%) Common Language Common Regional Trading Bloc Colony/Colonizer Relationship Common Currency Common Land Border +42% +188% +47% +125% +114% Change in Trade (%) © 2010 Pankaj Ghemawat

9 The CAGE Distance Framework Cultural Distance Administrative Distance Economic Distance Geographic Distance © 2010 Pankaj Ghemawat

10 Exploit language bridges Encourage interregional networks/exchanges -students Promotional efforts Improve regional transportation/communications infrastructure Create an efficient energy network Coordinate infrastructural investment Improve interregional market linkages -employee mobility -capital markets -information about interregional flows Exploit scale/scope -business networks/ events -joint embassies -process for upgrading cross-border clusters Collect and disseminate information about interregional flows Harmonize: -foreign investment promotion to avoid races to the bottom -public procurement processes -health, safety, environmental standards Simplify cross-border regulations and paperwork Bilateral/multilateral summits -share best practices in government operations -review regional institutions CULTURALADMINISTRATIVEGEOGRAPHIC ECONOMIC Expanded Conception of Policy Levers The Case of Catalonia

11 The Way Forward 1. Understanding how global we really are 2. Understanding all the barriers that constrain trade 3. Thinking broadly about the gains from trade © 2010 Pankaj Ghemawat

12 TCS Latin America: A Case Study © 2010 Pankaj Ghemawat Global Delivery Centers Local Solution Center Montevideo Buenos Aires San Pablo Brasilia Santiago Lima Guadalajara Quito Medellín Bogotá Querétaro Monterrey DF Associates 150+ Active Clients. 16 of Fortune of 11 Latin firms in the Global 500

13 ADDING Value: The Case of TCS Latin America TCS Latin AmericaVALUE COMPONENT © 2010 Pankaj Ghemawat Buzz Multiculturalism Propagating delivery capabilities G enerating and Deploying Knowledge/Other Resources Reduction in India risk N ormalizing Risk Judo economics vis-à-vis IBM, Accenture I mproving Industry Attractiveness Language advantages Time zone/local presence advantages Claim to be truly global D ifferentiating (Increasing Willingness to Pay) Increase in absolute cost levels Dynamics of Indian costs/availability Pursuit of large global deals A dding Volume D ecreasing Costs

14 ADDING Value vs. Standard Approaches D ECREASING COSTS ECONOMIES OF SCALE, UTILIZATION… D IFFERENTIATING G ENERATING KNOWLEDGE N ORMALIZING RISK I NTENSIFYING COMPETITION A DDING VOLUME SourcesofValue © 2010 Pankaj Ghemawat

15 ADDING Value through Merchandise Trade: Some Additions AdditionsVALUE COMPONENT © 2010 Pankaj Ghemawat Technological progress/capabilities literature Imitation as well as innovation Complementarities with investment G enerating and Deploying Knowledge/Other Resources Case studies (e.g., food) N ormalizing Risk Productivity studies (decomposition, turnover…) Rent-seeking/DUP activities Entrenchment effects I ntensifying Competition Economics of missing products The moving quality window D ifferentiating (Increasing Willingness to Pay) Scale economies Investments in cost reduction Other cost drivers (e.g., utilization) A dding Volume D ecreasing Costs

16 Unimpressive Projected Gains? Agree and abandon Avert gaze and carry on Adjust baseline Add to the categories of effects considered © 2010 Pankaj Ghemawat

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20 Adding Economic Value by Opening up © 2010 Pankaj Ghemawat ADDING ECONOMIC VALUE THROUGH MERCHANDISE TRADE ADDING ECONOMIC VALUE THROUGH SERVICES TRADE ADDING ECONOMIC VALUE THROUGH OTHER CROSS-BORDER FLOWS (CAPITAL, PEOPLE, KNOWLEDGE) ADDING VALUE CULTURALLY ADDING VALUE POLITICALLY COMPLEMENTARITIESCOMPLEMENTARITIES

21 Levers of Value Economic Value Margin Volume Competitive Advantage Cost drivers Differentiation drivers Industry Attractiveness/ Bargaining Power + Uncertainty / Risk Dynamics (Learning) © 2010 Pankaj Ghemawat

22 A Key Question How far to cast our nets in identifying the gains from a successful Doha round (or, more broadly opening up)? If Im not able to pin down the numbers precisely, I report just the qualitative effects © 2010 Pankaj Ghemawat

23 ADDING Value vs. Standard Approaches D ECREASING COSTS ECONOMIES OF SCALE, UTILIZATION… D IFFERENTIATING G ENERATING KNOWLEDGE (AND OTHER RESOURCES) N ORMALIZING RISK I NTENSIFYING COMPETITION A DDING VOLUME SourcesofValue © 2010 Pankaj Ghemawat

24 The Way Forward 1. Understanding how global we really are 2. Understanding all the barriers that constrain trade 3. Thinking broadly about the gains from trade © 2010 Pankaj Ghemawat

25 ADDING Value LEVERS © 2010 Pankaj Ghemawat G enerating and Using Knowledge/Other Resources N ormalizing Risk I mproving Industry Attractiveness D ifferentiating (Increasing Willingness to Pay) A dding Volume D ecreasing Costs

26 Strategic Headroom © 2010 Pankaj Ghemawat

27 Source:

28 0% 1% 2% 3% 4% 5% 6% Size of Net Capital Flows Since 1870 (current account as % of GDP) © 2010 Pankaj Ghemawat


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