Linking Trade and Technology Policies An International Comparison of the Policies of Industrialized Nations (1992) / Chapter Skim
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4. TECHNOLOGICAL AND TRADE COMPETITION: THE CHANGING POSITIONS OF THE UNITED STATES, JAPAN, AND GERMANY
4. TECHNOLOGICAL AND TRADE COMPETITION: THE CHANGING POSITIONS OF THE UNITED STATES, JAPAN, AND GERMANY
Pages 29-59
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From page 29... ...
In this respect, the major economies reacted according to different patterns and with different degrees of success. This essay deals with the three technological leaders Japan, the United States, and West Germany and compares their international trade performance and specialization in the past two decades, providing empirical evidence of the differences in their technological levels and innovative capabilities.
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. Such taxonomies are unsatisfactory for evaluating a country's technological capability and international trade performance, because they ignore those prominent differences with respect to the mechanisms of introducing and diffusing technologies, already mentioned,
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The first group, so-called science-based sectors, includes industries such as fine chemicals, electronic components, telecommunications, and aerospace, which are all characterized by innovative activities directly linked to high R&D expenditures. Their product innovations generate broad spillover effects on the whole economic system, and a large number of other sectors heavily rely on them as capital or intermediate inputs.2 A second group scale-intensive sectors includes typical oligopolistic large-firm industries, with high capital intensity, wide economies of scale and learning, high technical or managerial complexity, and significant inhouse production engineering activities.
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The present comparative analysis of the technological and trade competitive positions of the three major leaders in world trade the United States, Japan, and Germany therefore makes use of Pavitt's classification. For this investigation, I have employed the SIE-World Trade data base (see Appendix)
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This indicator highlights the international distribution of trade surpluses and deficits in each group of products by country over time, thus underlining major shifts in relative competitive positions of various countries.5 In trade of manufactured products, Japan's share in world exports has been increasing sharply over the period considered (see Table 1) , and standardized trade balances have been growing even more impressively (see Figure 2~.
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Standardized trade balances are expressed as a percentage of total world trade in manufactures. For methods and sources, see note 5.
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and rapidly increasing positive trade balances (see Table 64. In the scale-intensive sectors, Japanese industry has further consolidated its competitive position that was already strong in the early 1970s, registering significant losses, however, in the second half of the 1980s (see Tables 7-8~.
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the "specific market-commodity effect" due to the structure of a country's exports by specific market and product groups. The competitiveness effect reflects the actual changes of a country's market shares, assuming that its trade structure is constant, and it represents that part of a country's trade performance deriving from its competitive factors (both price-, and nonprice-related)
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(h) United States, 1970-1987: Total: -4.86 -4.31 -0.55 -1.12 1.02 -0.45 Food Industry -0.72 -1.2 0.48 0.7 0.23 -0.45 Traditionals -3.01 -1.87 -1.14 -0.77 -0.25 -0.11 Scale intensive -4.74 -4.02 -0.71 -0.52 0.5 -0.7 Specialized -11.77 -8.25 -3.52 -2.55 -0.66 -0.32 suppliers Science based -9.39 -6 25 -3.14 -3.48 0.01 0.34 Japan, 1970-1987: Total 3.38 1.07 2.31 1.97 0.55 -0.21 Food Industry -0.93 -1.29 0.37 0.14 0.18 0.05 Traditionals -5.29 -4.77 -0.51 0.68 -0.82 -0.37 Scale intensive 4.38 2.08 2.31 1.6 1.01 -0.28 Specialized 8.23 4.29 3.94 3.47 0.21 0.27 suppliers Science based 8.36 5.52 2.84 3.57 -0.55 -0.18 Asian NICs, 1970-1987: Total 6.17 3.85 2.32 0.93 1.04 0.35 Food Industry 1.74 0.88 0.87 0.06 0.3 0.5 Traditionals 10.87 5.26 5.61 2.58 2.71 0.32 Scale intensive 4.27 4.05 0.22 0.1 -0.4 0.52 Specialized 3.25 2.22 1.03 0.81 0.3 -0.08 suppliers Science based 8.25 2.03 6.22 2.1 4.77 -0.65 Germany (Federal Republic)
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In this respect, many studies7 have pointed to a significant role played by structural competitiveness factors, especially technological factors. The latter may be connected with the profound changes that have taken place in the industrial structure and in the patterns of Japan's trade specialization in the past two decades.
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Hence, positive ICTB values indicate those sectoral groups with positive contributions to trade balance greater than their weight in total trade. Therefore, they represent sectors with comparative advantages in the trade specialization of a given country.
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Standardized trade balances are expressed as a percentage of total world trade in it&D-intensive electronics sectors. For methods and sources, see note 5.
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Together with the increase in comparative advantage in science-based and specialized-supplier sectors, the evolution of Japanese specialization patterns reveals that the contribution of scale-intensive sectors to the trade balance has significantly decreased since the second half of the 1970s and was equivalent to that of science-based sectors in 1989 (see Figure 31. A new element has been the great reduction in the role of traditional sectors, which registered negative ICTB indicators in the second half of the 1980s, following a decrease of more than 22 percentage points [from 14.45 (1970)
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trade performance in the past two decades was anything but positive stems from trade balance patterns in total manufactures.
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The notable decrease in market shares (see Table 11) , particularly when considered together with the strong decline in trade balances over the past decade (see Figure 4)
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The new element in the evolution of the U.S. pattern of specialization is the sharp decrease in the positive contribution to the trade balance (ICTB)
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Thus, the patterns of U.S. trade performance and specialization analyzed here demonstrate that it is the combination of adverse cyclical macroeconomic factors and long-standing competitive disadvantages of a structural type that account for the relative deterioration in the international standing of the U.S.
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with highly positive trade balances and market shares, which were the highest of all major industrialized countries. It should be noted, however, that German market shares decreased slightly during both the 1970s and the 1980s, and such decrease may be attributable, as shown by the CMSA, to a loss of competitiveness in the same period.
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In fact, in data processing systems, electronic office equipment and electronic components, German industry suffered a significant decrease in its market shares and an increase in trade deficits to the advantage of Japan primarily and of Asian NICs to a lesser extent (Table 11, Figure 4~.~3 In the other sectors of science-based (A&D-intensive products) group, on the other hand, German industry maintained or strengthened its competitiveness (such as in chemicals and pharmaceuticals, electrical machinery, and engineering instruments)
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The specialized-supplier sectors of mechanical engineering, despite a notable decrease of their indicator ICTB (-5.1 percentage points from 1970 to 1989) , have continued to represent the other fundamental pillar of German specialization, as demonstrated by the high comparative advantages maintained by the German industry in machine tools and machinery for specialized industries, which, it must be recalled, are vital investment goods for many manufacturing industries.
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CONCLUDING REMARKS The rapid development of world trade in the past two decades was accompanied by profound changes in the product and market patterns of trade flows. The new shape of the international trade environment, together with the new technological opportunities stemming from accelerated growth of product and process innovations, affected all the major countries and accelerated structural adjustments in their industries.
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Certainly, it is extremely difficult to define and quantify these interindustry flows of technology, and additional research is needed to demonstrate how it affects the dynamics of innovation in each individual sector, and the overall pattern of technological change in each country.~5 The patterns of trade performance and specialization of West Germany have been more complex and do not provide the basis for clear-cut conclusions. On the one hand, the competitive position of German industry was sound in the past and strengthened in the 1980s in specialized-supplier and scale-intensive industries; in traditional product and above all in sciencebased sectors, on the other hand, the West German economy registered negative results on the whole.
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highlights the international distribution over time of trade surpluses and deficits among countries in each group of products. Trade surpluses and deficits are normalized by total world trade in the same group of products (CEPII 1983, 1989)
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, and (d) effects represents the overall "structural effect," which measures those changes in a country's aggregate export share resulting only from changes in commodity-market structure in world trade.
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1991. Technology and International Trade Performance of the Most Advanced Countries, BRIE Working Paper, University of California, Berkeley.
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APPENDIX SIE-WORLD TRADE DATA BASE The world foreign trade statistics used for the analysis in this paper are taken from a data base developed at Servizi Informativi per l'Estero (SIE)
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1986. Standard International Trade Classification, Revision 3, Department of Economics and Social Affairs, Statistical Office of the United Nations, Statistical Papers, Series M, No.
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