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The UK in a Global World The UK in a Global World The UK in a Global World The world economy has become a more complex, interconnected place; changing patterns of international trade combined with significant changes in how The UK in a Global World businesses organise their production over global value chains demands a rethink of conventional approaches to policy. In addition, the recession that has followed the global financial crisis has been both deep and prolonged, creating further How can the UK focus on steps challenges for academics and policymakers alike. This eBook forms the basis of a joint BIS-CEPR-ESRC conference on ‘The UK in a Global World: How can the UK focus on steps in global value chains that really in global value chains that add value?’ held in London on 14 June 2012. The volume brings together the research of leading experts in international trade, innovation and economic history. The first of the chapters takes an historical view of the role of policy in really add value? creating comparative advantage; the second considers UK innovation and R&D in a global world. The third chapter looks at value creation and trade in manufactures and draws a number of important policy implications for UK manufacturing. The focus of the final chapter is on comparative advantage and service trade, what drives export growth and whether policy can influence the drivers. As David Greenaway concludes in his introduction, this collection is timely reminder of the importance of looking beyond the current financial crisis when thinking about innovation and international competitiveness; it offers a sophisticated and nuanced evaluation of the scope for policy intervention and the processes that need to be worked through to raise the likelihood of efficacious intervention. Some of the key messages relate to infrastructure and environment, some to demanding due diligence and some to the imperative of long term commitment. Together they really add value and will be helpful and useful to both the research and policymaking communities. Edited by David Greenaway The UK in a Global World How can the UK focus on steps in global value chains that really add value? Centre for Economic Policy Research (CEPR) Centre for Economic Policy Research 3rd Floor 77 Bastwick Street London EC1V 3PZ UK Tel: +44 (0)20 7183 8801 Fax: +44 (0)20 7183 8820 Email: [email protected] Web: www.cepr.org © Centre for Economic Policy Research 2012 ISBN: 978-1-907142-55-0 The UK in a Global World How can the UK focus on steps in global value chains that really add value? Edited by David Greenaway, University of Nottingham Department for Business, Innovation and Skills (BIS) The Department for Business, Innovation and Skills (BIS) is making a difference by supporting sustained growth and higher skills across the economy. BIS brings all of the levers of the economy together in one place. It’s policy areas – from skills and higher education to innovation and science to business and trade – all help to drive growth. ‘BIS: working together for growth’. Centre for Economic Policy Research (CEPR) The Centre for Economic Policy Research is a network of over 700 Research Fellows and Affiliates, based primarily in European universities. The Centre coordinates the research activities of its Fellows and Affiliates and communicates the results to the public and private sectors. CEPR is an entrepreneur, developing research initiatives with the producers, consumers and sponsors of research. Established in 1983, CEPR is a European economics research organisation with uniquely wide-ranging scope and activities. The Centre is pluralist and non-partisan, bringing economic research to bear on the analysis of medium- and long-run policy questions. CEPR research may include views on policy, but the Executive Committee of the Centre does not give prior review to its publications, and the Centre takes no institutional policy positions. The opinions expressed in this report are those of the authors and not those of the Centre for Economic Policy Research. The Economic and Social Research Council (ESRC) The ESRC is UK’s largest organisation for funding research on economic and social issues. It is a non-departmental public body (NDPB) established by Royal Charter in 1965, which is financed predominantly through the Department for Business, Innovation and Skills (BIS). ESRC supports independent, high quality research that has an impact on business, the public sector and the third sector. At any one time, the ESRC supports over 4,000 researchers and postgraduate students in academic institutions and independent research institutes. Contents About the Contributors vi Acknowledgements viii Foreword ix 1 Introduction and Overview 1 David Greenaway 2 Creating Competitive Advantage: Policy Lessons from History 7 Nicholas Crafts 3 Choosing Races and Placing Bets: UK National Innovation Policy and the Globalisation of Innovation Systems 37 Alan Hughes 4 Value Creation and Trade in 21st Century Manufacturing: What Policies for UK Manufacturing? 71 Richard E. Baldwin and Simon J. Evenett 5 Comparative Advantage and Service Trade 129 Giordano Mion About the Contributors Richard Edward Baldwin is Professor of International Economics at the Graduate Institute, Geneva since 1991, Policy Director of CEPR since 2006, and Editor-in- Chief of Vox since he founded it in June 2007. He was Co-managing Editor of the journal Economic Policy from 2000 to 2005, and Programme Director of CEPR’s International Trade programme from 1991 to 2001. Before that he was a Senior Staff Economist for the President’s Council of Economic Advisors in the Bush Administration (1990-1991), on leave from Columbia University Business School where he was Associate Professor. He did his PhD in economics at MIT with Paul Krugman. He was visiting professor at MIT in 2002/03 and has taught at universities in Italy, Germany and Norway. He has also worked as consultant for the numerous governments, the European Commission, OECD, World Bank, EFTA, and USAID. The author of numerous books and articles, his research interests include international trade, globalisation, regionalism, and European integration. He is a CEPR Research Fellow. Nicholas Crafts is Professor of Economics and Economic History at the University of Warwick, a post he has held since 2006. He is also Director of the ESRC Research Centre on Competitive Advantage in the Global Economy (CAGE), at Warwick. His main fields of interest are long-run economic growth, British economic performance and policy in the 20th century, the industrial revolution, and the historical geography of industrial location. He has published many papers in academic journals and has also contributed to research by the International Monetary Fund and the World Bank. Simon J. Evenett is Professor of International Trade and Economic Development at the University of St. Gallen, Switzerland, and Co-Director of the CEPR Programme in International Trade and Regional Economics. Evenett taught previously at Oxford and Rutgers University, and served twice as a World Bank official. He was a non-resident Senior Fellow of the Brookings Institution in Washington. He is Member of the High Level Group on Globalisation established by the French Trade Minister Christine LaGarde, Member of the Warwick Commission on the Future of the Multilateral Trading System After Doha, and was Member of the the Zedillo Committee on the Global Trade and Financial Architecture. In addition to his research into the determinants of international commercial flows, he is particularly interested in the relationships between international trade policy, national competition law and policy, and economic development. He obtained his Ph.D. in Economics from Yale University. vi About the Contributors vii David Greenaway is the sixth Vice-Chancellor of the University of Nottingham and Professor of Economics. From 2004 to 2008 he was a University Pro-Vice- Chancellor, having previously held this position between 1994 and 2001. He was also Dean of the Faculty of Law and Social Sciences between 1991 and 1994. Alan Hughes is Margaret Thatcher Professor of Enterprise Studies at Cambridge Judge Business School at the University of Cambridge. He is also Director of the Centre for Business Research (CBR), and a Fellow of Sidney Sussex College, both at the University of Cambridge. He was, from 2000-2003, Director of the National Competitiveness Network of the Cambridge-MIT Institute, a joint venture between Cambridge University and the Massachusetts Institute of Technology. Professor Hughes has also held visiting professorships in the USA, France, Australia and Japan. In 2004 he was appointed by the Prime Minister to membership of the Council for Science and Technology, the UK’s senior advisory body in this area. Giordano Mion is a Lecturer at the Department of Geography and Environment of the London School of Economics and Political Science, (LSE). He is also affiliated with the Centre for Economic Performance (CEP), the Centre for Economic Policy Research (CEPR), and the Spatial Economics Research Centre (SERC). The main focus of his research is on international trade (productivity, firm heterogeneity, and gains from trade), on regional economics (agglomeration, externalities, and local institutions) and on labour economics (sorting, matching, and managers). He earned his PhD in Economics at Université Catholique de Louvain, Belgium, and has been a post-doc and FNRS fellow at the Center for Operations Research and Econometrics (CORE), Belgium. Acknowledgements This eBook has been jointly produced by the Department for Business, Innovation and Skills (BIS), the Centre for Economic Policy Research (CEPR) and the Economic and Social Research Council (ESRC). The four papers contained within the book will be presented by the authors at a high-level conference in London on 14th June 2012. The research has been funded from a number of sources, including BIS. The organisers of the event would like to thank the authors of the individual chapters and the editor, David Greenaway, for their contributions and collaborative approach towards developing the papers.
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