1. N EW T RENDS IN G LOBALISATION Conference on Medium Term Economic Assessment Iasi, September 26 2008 Koen De Backer OECD

2. P ERVASIVE 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. G LOBALISATION IS ADVANCING RAPIDLY

4. F AST AND DEEP GLOBALISATION

5. ICT IS A MAJOR DRIVING FORCE Transporation and communication costsCosts of processing information

6. T HE EMERGENCE OF GLOBAL VALUE CHAINS distribution production R&D

7. V ALUE CHAINS BECOME GLOBAL

8. M ULTINATIONAL ENTERPRISES (MNE S ) Employment in manufacturing industries

9. The story of a ‘particular’ American car: 30% to Korea: assembly17,5% to Japan: components and advanced technology 7,5% to Germany: design 4% to Taiwan and Singapore: minor parts 2,5% to UK: marketing 1,5 to Ireland and Barbados: data processing 37% in USA Source: Grossman and Rossi-Hansberg (2006) I N MORE TRADITIONAL MANUFACTURING INDUSTRIES (1)

10. Design: California,USA Body material: Taiwan Nylon hair: Japan Clothing: China Moulds, paint pigments: USA Assembly: Indonesia and Malaysia Quality testing: USA Marketing: USA Source: Grossman and Rossi-Hansberg (2006) I N MORE TRADITIONAL MANUFACTURING INDUSTRIES (2)

11. Source: Wixted (2005) B UT ALSO IN HIGHER TECH INDUSTRIES Aerospace industry

12. There seems to be no clear relationship between GVCs and overall employment E FFECTS OF GVC S (1)

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

14. 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 Important productivity effects E FFECTS OF GVC S (3)

15. T HE INTERNATIONALISATION OF R&D… distribution production R&D

16. …G OES FAST, R&D-investments under foreign control

17. …G OES ALSO TO EMERGING OUNTRIES, Source: The Economist Intelligence Unit 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)

18. … AND STRESSES ADDITIONAL LOCATION FACTORS (number of firms citing a factor as critical) Source: Case studies from OECD project ‘Open innovation in global networks

19. G LOBAL INNOVATION NETWORKS distribution production R&D

20. M ATCHING OF GLOBAL DEMAND … New customers Increasing customer needs Global and intense competition Shorter product life cycles … AND OF GLOBAL SUPPLY OF INNOVATION Multidisciplinary research Converging technologies Increasing costs and risks of R&D Global S&T supply

21. L ARGE SUPPLY OF S & T, ALSO IN EMERGING COUNTRIES

22. C HINA STILL SPECIALIZED IN LOWER TECHNOLOGY INDUSTRIES

23. W RAPPING 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. P OLICY 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. 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 P OLICY IMPLICATIONS (2)

26. Need for moving up the value chain –Science, technology and innovation –Human resources –Entrepreneurship –Network and cluster policies –Attractiveness –IPR –Trade and investment policies P OLICY IMPLICATIONS (3)

27. R ELEVANT 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)