Jo Van Biesebroeck (KU Leuven) Trade theory these days Comparative - - PowerPoint PPT Presentation

Trade & Globalisation

how free trade can unleash Europe’s potential

Jo Van Biesebroeck

(KU Leuven)

Trade theory these days

• Comparative advantage (Heckscher-Ohlin, Ricardo)
• Differentiated products (Krugman)
• 1. Trade-in-tasks

Global fragmentation of production

• 2. Global Value Chains

Price evolution of selected products

Good or service September 2012 CPI (1983=100)

College tuition and fees 706 Medical care services 445 Services 272 Energy 258 Food 234 All items 231 Housing 224 Transportation 223 Apparel 127 Toys 53 Televisions 5

Obstacles to trade in education??

• Visa requirements for students and teachers
• Joint ventures & partnerships between universities
• Tailor course content to different needs
• Prevent copying of textbooks and/or web sites
• Certification of degrees makes end-product more valuable
• Need to give faculty incentives to develop MOOCs

Obstacles to trade in education!!

• Visa  Immigration restrictions on consumers & producers
• JVs  Investment possibilities & protection (FDI)
• Customization  Product regulation hampers innovation

and reduced competition

• Textbooks  Protection of intellectual property
• Certification  Harmonization of standards
• Incentives  Organization of local labor markets

Smiley face of global value chains

Value creation in the iPhone (Mudambi 2008)

Governance of global value chains

(Schmitt & Van Biesebroeck 2014)

Complexity Codifiability Supplier capability (Supplier) profit margin

Market Low N/A N/A 0.5% Modular High High High 6.9% Relational High Low High 1.9% Captive High High Low 0.7% Hierarchy High Low Low

• Tradability