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) Supplier (Supplier) Complexity Codifiability capability profit margin Market Low N/A N/A 0.5% Modular High High High 6.9% Tradability Relational High Low High 1.9% Captive High High Low 0.7% Hierarchy High Low Low --