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Independent research & practical ideas for global prosperity
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Independent research & practical ideas for global prosperity
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August 10, 2009It’s Not All Downhill from Here: The Uphill Flow of Skill-Intensive Goods and FDI from Developing CountriesPosted by Arvind Subramanian in Economic Growth, Global Development Tags: Add new tag, Capital Flows, FDI, Foreign Direct Investment, Globalization, Protectionism, TradeWe tend to think of globalization in the following way: the rich world exports financial capital, technology, sophisticated goods, and entrepreneurial and managerial skills in the form of foreign direct investment (FDI) to developing countries; the latter, in turn, export people, resources, and low-skilled goods to the rich world. Well, it turns out that globalization no longer respects these clean distinctions. Many recent studies have examined movement of capital from developing to high-income countries, with the assumption that only flows of finance could defy our expectations. But, increasingly, even flows of of sophisticated goods and FDI are going in both directions, a phenomenon Aaditya Mattoo and I call “Criss-crossing Globalization” in our latest paper. Countries such as China are exporting sophisticated goods to OECD countries, and countries such as India, Brazil, and South Africa are exporting FDI to the rich world. Think of Indian TATA’s takeover of the UK’s Jaguar, China’s Lenovo’s acquisition of IBM, Brazil’s success exporting commercial aircraft to high-income countries, and the growing exports of skilled services from Israel and India to OECD markets, and it’s clear that something significant is happening. We call these flows of skill-intensive goods and FDI from poor countries to rich countries “uphill flows”—uphill because they are defying the normal pattern of comparative advantage. What are the consequences for countries that send goods and services uphill? Our preliminary work suggests that such countries experience positive economic growth as a result. If this is true, it suggests that policies that promote skill-intensive patterns of production and specialization—even if they go against natural comparative advantage—may need to be considered by developing countries. A second consequence—and one that will perhaps play out more in the future—relates to the political economy of international trade and investment negotiations. When flows are two-way, perceived objectives of high-income and developing countries are more in sync with one another, which makes the political economy much more conducive to reaching agreement on common international rules. This could be good for all countries, developed and developing. 2 Comments »April 2, 2009Will G-20 Back Anti-Protectionist Pledges with Action This Time?Posted by Cindy Prieto in Global Development, Globalization, Trade Tags: G20, IMF, Protectionism, Trade, World Trade OrganizationThe outcome of today’s G20 summit has become even more critical for developing countries as the World Bank revised the 2009 forecast for GDP growth in the developing world to 2.1 percent down from 5.8 percent in 2008. But a draft copy of the G20 communiqué published by the Financial Times could go farther in its commitment to help the world’s most vulnerable countries. While the draft heeds Nancy Birdsall’s advice to increase resources for developing countries through the IMF and MDBs, the communiqué leaves more to be desired on one of the most important avenues through which this crisis is already affecting the developing world: trade protectionism. Read More… Comment »March 27, 2009Do We Need a “Crisis Round” of Trade Talks? (Or Just Faster Dispute Settlement?)Posted by Kimberly Ann Elliott in Food & Agriculture, Global Development, Trade Tags: Protectionism, Trade, USTR, World Trade OrganizationWould a “Crisis Round” of trade talks launched at the London Summit next week be a useful mechanism for averting a further beggar-thy-neighbor protectionism? My colleague Arvind Subramanian and his frequent co-author, World Bank economist Aaditya Mattoo, think so. They argued for such a move in an interesting piece in the Wall Street Journal Asia earlier this week (A Crisis Calls for a Crisis Round): Read More… 2 Comments »March 27, 2009Will the Financial Crisis Undermine Support for Market Capitalism in Russia?Posted by Nora Lustig in Capitol Flows/Financial Crisis, Global Development Tags: Financial Bail-Out, Protectionism, RussiaAs part of CGD’s efforts to track the impact of the financial crisis, I have been leading a series of conference calls to discuss how recent policy responses—or the lack thereof—may affect poor people in the developing world. Our latest call on the prospects for Russia suggests that the government could—and should—do more. Read More… Comment » |
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