ArticlePDF Available

A new industrial strategy for Europe -new indicators of the results of its implementation

Authors:

Abstract and Figures

This paper discusses the experiences resulting from EU’s adoption and implementation of a wide variety of policy measures in response to the COVID-19 crisis. These measures included stimulating the relocation and expansion of manufacturing to reduce vulnerability, depending on imports, ensuring the stability and development of industrial production. Using the example of the pharmaceutical industry in EU27 in the years 1995–2018, the study proposes and tests a new approach to assessing the consequences of relocation policies aimed at developing the local production potential, increasing the value added by activity, and expanding the share of local value added in industry exports. Specifically, the focus is on the formation of statistical analysis tools for assessing the changes of the specialisation and identifying the country's comparative advantages. The authors propose new indicators: RSP – coefficient of Revealed Specialisation of Production, CAVA – coefficient of Comparative Advantage in Value Added by Activity and EVA – coefficient of Comparative Advantages in the Domestic Value Added Exports. Additionally, formulas for their calculation are provided which allow the assessment of the position of Ukraine’s industries among a reference group, widening the ‘revealed comparative advantage’ concept. Finally, a test of the new methodology showed that it can be used to identify the comparative advantages of EU member states supported by state assistance programmes involving the implementation of business projects which aim to develop domestic production.
Content may be subject to copyright.
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
Joint Special Issue: A New Role for Statistics
Vol. 23, No. 5, pp. 1–XX, DOI 10.2478/stattrans-2022-xxx
Received – 01.07.2022; accepted – 26.10.2022
A new industrial strategy for Europe – new indicators
of the results of its implementation
Oleg Krekhivskyi
1
, Olena Salikhova
2
ABSTRACT
This paper discusses the experiences resulting from EU’s adoption and implementation of
a wide variety of policy measures in response to the COVID-19 crisis. These measures
included stimulating the relocation and expansion of manufacturing to reduce vulnerability,
depending on imports, ensuring the stability and development of industrial production.
Using the example of the pharmaceutical industry in EU27 in the years 1995–2018, the study
proposes and tests a new approach to assessing the consequences of relocation policies aimed
at developing the local production potential, increasing the value added by activity, and
expanding the share of local value added in industry exports. Specifically, the focus is on the
formation of statistical analysis tools for assessing the changes of the specialisation and
identifying the country's comparative advantages. The authors propose new indicators:
RSP – coefficient of Revealed Specialisation of Production, CAVA – coefficient of
Comparative Advantage in Value Added by Activity and EVA – coefficient of Comparative
Advantages in the Domestic Value Added Exports. Additionally, formulas for their
calculation are provided which allow the assessment of the position of Ukraine’s industries
among a reference group, widening the ‘revealed comparative advantage’ concept. Finally,
a test of the new methodology showed that it can be used to identify the comparative
advantages of EU member states supported by state assistance programmes involving the
implementation of business projects which aim to develop domestic production.
Key words: indicators, specialization, comparative advantage, industrial production, value
added activity, export.
1. Introduction and motivation
The COVID-19 pandemic has affected industrial production in all countries of the
world more than any economic shock that has occurred over the past few decades
(such as the crises of 1997-1998 and 2008-2009). The closure of foreign counterparty
1
Secretariat of Cabinet of Ministers of Ukraine, Ukraine. E-mail: o.krekhivskyi@gmail.com.
ORCID https://orcid.org/0000-0002-4793-851X.
2 Institute for Economics and Forecasting of NAS of Ukraine, Ukraine. E-mail: salikhova_elena@ukr.net.
ORCID: https://orcid.org/0000-0002-7669-6601.
© Oleg Krekhivskyi, Olena Salikhova. Article available under the CC BY-SA 4.0 licence
186 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
plants due to a lockdown; the introduction of a ban by the governments of individual
countries on the export of goods of strategic importance; the blocking of air and sea
transportation caused a shortage in the market of both intermediate and finished
industrial goods (Barlow et al., 2021; Kumar et al., 2020; Vo et al., 2021). As the study
showed (Tirivangani T. et al., 2021), weak pharmaceutical systems and supply chains
turned out to be the most vulnerable in the control of COVID-19 pandemic, that has
mostly devastated public health systems and livelihoods in resource-limited countries.
The concentration of active pharmaceutical ingredients (API) production and certain
medicines in the Asia-Pacific region also has led to interruptions in European health
care systems. The crisis situation has clearly demonstrated European’s pharmaceutical
industries unpreparedness to face such challenges and threats (European Commission,
2020a). Analysis of the root causes of the crisis phenomena in industry has shown that
they are a consequence of the delocalization of industrial production in Europe, which
has taken place over the past few decades (European Parliament, 2020). The closure of
many Europe-based facilities for the production of drugs, health products, API and
other intermediate goods has made the health care system and industry hostage to
a virtually single producer and supplier of certain goods - on China, significantly
weakening the sovereignty of EU member states. The technological, human and
manufacturing resources available in the EU are capable of expanding API production
and therefore do not have a technological dependency. However, with globalization and
offshoring, as well as the active policies of the Chinese government (Wang, 1999), such
form of industry dependency developed, which can be called "component dependency".
Its implementation prompted the EU leadership to adopt a number of strategic
documents focused on reducing the vulnerability and economy's dependence
(Grumiller, 2021). In November 2020, the Pharmaceutical strategy for Europe was
adopted, which should ensure synergy with the relevant EU policies on R&D,
innovation and industrial production, in accordance with priorities of a New industrial
strategy for Europe, adopted in March 2020. The latter was adjusted in May 2021 based
on new challenges of the COVID-19 pandemic. In particular, among its new priorities
is ensuring sustainability and reducing the dependence of industrial ecosystems, among
them – health care, the foundation of which is pharmaceuticals (European
Commission, 2020b, 2021). These are being implemented, inter alia, through
strengthening the location-specific advantages (the so-called L-advantages)
in accordance with the paradigm of OLI-advantages of J. Dunning (Dunning, 1993).
For implementation of priorities, the European Commission introduced, among
other things, an investment assistance mechanism for the production of products
related to COVID-19 (which allows compensating up to 80% of business costs for the
project). This category of products includes not only those related to pharmaceuticals,
such as medicines (including vaccines) and their intermediates, APIs and raw materials,
but also products of other industries: medical devices, medical equipment and
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
187
necessary accessories for them; disinfectants and their intermediates, chemical raw
materials, etc. Germany, France, Poland and a number of other countries interested
in developing their own industry have received the consent of the European
Commission to provide financial assistance to companies for R&D projects related to
COVID-19, investments in the creation of appropriate research infrastructure, as well
as investments in production facilities related to COVID-19 (European Commission,
2020c, 2020d, 2020e). It is obvious that the new EU state aid mechanisms, as well as
decisions of business on the implementation of investment and innovation projects will
form new capacities in European countries: contribute to increasing gross output by
industry, to creating high added value, to raising exports. No doubt, these processes are
going to influence structural shifts and specialization in the economy not only
in Europe, but also in the world, and therefore new indicators are needed to adequately
assess the impact of such policies.
The measurement of post-coronavirus economic transformations is a particular
challenge for statisticians. Eurostat and the National Statistical authorities of the
European statistical system have developed a number of guidelines and methodological
notes in the context of the COVID-19 crisis for monitoring economic processes
(Eurostat, 2021a). At the end of 2020, Eurostat launched a new tool related to the
COVID-19 crisis in various EU member states. It contains monthly and quarterly
indicators on a number of statistical areas that are important for tracking economic and
social recovery after the pandemic. These are about 20 indicators covering such aspects
as macroeconomic changes, business (including industrial production) and trade,
as well as the labour market (Eurostat, 2021b). At the same time, in our view, new
approaches are also needed to assess the impact of measures (taken by the EU and
Member States) aimed at developing local productive capacities, adding value and
increasing the share of local value added in exports, strengthen competitive advantage.
The object of this paper is to provide a toolkit for assessing the positions
of countries in the international division of labour: changes in the specialization, in the
creation of value added and exports by relying on local resources and location
advantages of industries in EU. To analyse the current and future advantages of EU
member industries, the author's tools is proposed (the foundation of this tool is laid
in the work devoted to new approaches to determining international comparative
advantages (Salikhova, 2012).
3. Methodical approaches
Traditionally, RCA (Revealed Comparative Advantage) has been used to measure
the comparative advantages identified, calculated from a formula proposed by
B. Balassa in 1961 (Balassa, B. 1961, 1989; Dunning, 1992). A number of studies indicate
188 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
that the development of foreign trade is a proof of the formation of international
competitive position and at the same time international competitiveness of the national
economy, its key industries, including pharmaceuticals (Falkowski, 2018a, 2018b;
Motoryn et al., 2020).
In essence, the approach to calculating RCA is based on the concept of advantages
in the Ricardian understanding of economics, which is inspired by free trade and
perfect competition. But the modern world economy, and especially activities
in fostering local pharmaceutical industry in developing countries, is based on other
principles. The market of medicines is characterized by imperfect competition; states
intervene in economic processes through various regulators, incentives, covert
protectionist instruments. A number of countries have established strong
pharmaceutical industries with a high export potential thanks to TNC investment and
the transfer of technologies. The classical RCA in that case allows to estimate more
visible than Revealed (or real) comparative advantages in the trade of goods, because
the indicator does not take into account the local value added in export.
To assess the advantages of the location of firms and industries in the country, the
authors propose to introduce into scientific circulation the coefficient of Revealed
Specialization of the country's Production (RSP). RSP characterizes the extent of
specialization of a country in the production of a particular product (or products of
a particular industry) compared to the industry structure of the reference group.
It shows structural change in the country’s manufacturing specialization and
is calculated using the formula:
,
11
1
1
I
i
ij
J
j
J
j
ij
I
i
ij
ij
ij
P
P
P
P
=RSP (1)
where ij
P - production (gross output) of j-th industry of i-th country;
I
i
ij
P
1
total production of j-th industry of I reference group countries
(EU, OECD, World) ;,1 Ii
J
j
ij
P
1
total production of J industries of i-th country ;,1 Jj
I
i
ij
J
j
P
11
total production of J of industries of I reference group countries.
A relative location advantage of a production in a country exists if the value of RSP
> 1, that is, the country's share in the gross output of a particular industry is greater
than the share of the country's total output in the total indicator of the reference group
(EU, OECD, World). The RSP indicator measures the extent to which a country has the
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
189
advantages of an industry location (in line with the OLI advantages paradigm of
J. Dunning) compared to other countries in the reference group.
To reflect the value added created as a result of the goods' production, the indicator
"value added by activity" is used, measured as the cost of products less the cost of
intermediate consumption. To assess the advantages of the country in creating added
value in the conditions of relocation of production of goods and components, the
authors suggest using the coefficient of Comparative Advantage in Value Added by
Activity (CAVA), calculating it using the formula:
,
11
1
1
I
i
ij
J
j
J
j
ij
I
i
ij
ij
ij
VA
VA
VA
VA
=CAVA (2)
where ij
VA added value of j-th industry of i-th country;
I
i
ij
VA
1
total value added of j-th industry of I countries of the reference
group (EU, OECD, World) ;,1 Ii
J
j
ij
VA
1
total value added of J industries of i-th country ;,1 Jj
I
i
ij
J
j
VA
11
total value added of J industries of I countries of the reference
group.
There is a relative advantage if the value CAVA > 1, i.e. the share of value added of
a particular industry in a country in the value added of that manufacturing in the
reference group countries, exceeds the share of total industry value added that country
in the total manufacturing value added of the countries of reference group.
To assess the value added created by the country's activities in the production of
goods for export, the OECD accumulates statistics of foreign trade on value added
(TiVA database). This database accumulates, among other things; data from the
indicator "domestic value added in gross exports" (labelled as EXGR_DVA).
This indicator is calculated as the difference between gross output in core prices and
intermediate consumption in purchase prices. Internal value added can be decomposed
into the following components: employee remuneration; gross operating income;
mixed income; production taxes less production subsidies (OECD, 2021). The scientists
named this indicator "Value-Added Exports" and used as a measure of the domestic
value added embodied in exports (Johnson, 2014).
190 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
To assess the comparative advantages of a country in a particular industry export
of goods, the authors suggest using coefficient of Comparative Advantage
in Embodying Domestic Value Added in Exports (EVA), calculating it using
the formula:
,
11
1
1
I
i
ij
J
j
J
j
ij
I
i
ij
ij
ij
ExDVA
ExDVA
ExDVA
ExDVA
=EVA (3)
where ijExDVA domestic value-added exports of j-th industry of i-th country;
I
i
ij
ExDVA
1
total domestic value-added exports of j-th industry of I
countries of the reference group (EU, OECD, World) ;,1 Ii
J
j
ij
ExDVA
1
total domestic value-added exports of J industries of i-th
country ;,1 Jj
I
i
ij
J
j
ExDVA
11
total domestic value-added exports of J industries of
I countries of the reference group.
Relative advantage of i-th country in embodying domestic value added in exports
of j-th industry exists if the value of EVA > 1. That is, when the industry export of goods
with added value of the country in the structure of industry exports of the reference
group is higher than the total industrial export of goods with added value of the country
in the structure of total industrial exports of the reference group. This indicates that the
country is making more effective use of its comparative advantages in creating added
value based on local resources, translating it into export-oriented goods.
3. Empirical analysis
At first glance, the EU27 pharmaceutical industry shows a strong position: in terms
of value added in 2019 EU ranked first in the world, ahead of its main competitor,
the United States, with $174,832 million against $168,517 million (OECD, 2021).
The lockdown in early 2020 and supply problems pharmaceuticals (on both the export
and import sides) came as a shock to the EU27 pharmaceutical industry. However,
at the year-end the industry did not lose but increased export of drugs and medical
devices by 5% (Table 1).
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
191
Table 1. Dynamics of extra-EU exports of basic pharmaceutical products and preparations from
2019 to 2020, EUR million
Country 2019 2020 2020/2019, %
Germany 48 412 50 086 3.5
Ireland 38 629 40 249 4.2
Belgium 28 910 33 180 14.8
Netherlands 22 437 22 159 -1.2
France 17 794 17 748 -0.3
Italy 15 974 15 578 -2.5
Denmark 6 863 7 345 7.0
Sweden 6 621 6 805 2.8
Spain 4 972 4 995 0.5
Austria 4 524 4 976 10.0
Slovenia 3 100 4 557 47.0
Hungary 1 809 2 041 12.8
Poland 1 151 1 260 9.5
Other EU countries 4 046 4 369 8.0
EU27 205 242 215 348 4.9
Source: Eurostat's data, https://ec.europa.eu/eurostat/data/database.
Taking into account the statistics of trade on added value (OECD, 2021), from
Figures (1 and 2) it can be seen that since 1995 EU27 the upward trend in gross
pharmaceutical exports. At the same time, the share of foreign value added
in it increased from 7.0% (1995) to 17.8% (2018), while this indicator for the main
competitors, the United States, China, India, is 10.8%, 11.4% and 15.0%, respectively.
Figure 1. Dynamics of gross exports pharmaceuticals US Dollar, Millions.
Source: TiVA database OECD, www.oecd.org/
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
EU27 USA China India
192 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
Figure 2. Dynamics of foreign value added share of gross exports, %.
Source: TiVA database OECD, www.oecd.org/
Increase in foreign value added share of gross exports confirms the hypothesis that
RCA allows to estimate more visible than revealed comparative advantages in the trade
of goods; that RCA cannot be an indicator that uniquely characterizes international
competitiveness of the national economy in the face of the globalization with
a outsourcing and offshoring of production; and that new approaches are needed to
evaluate comparative advantages.
In the calculation of the author’s indicators, formulas 1-3 use statistics of indicators
from the TiVA database (OECD, 2021) for industry D21 Pharmaceuticals, medicinal
chemical and botanical products:
for ij
P: PROD indicator: Production (gross output),
for ij
VA : VALU indicator: Value added,
for ij ExDVA : EXGR_DVA indicator: Domestic value added content of gross
exports.
The EU27 countries were selected as the reference group. The calculation results
indicate the following.
RSP of pharmaceutical industry in the countries of EU27 shows (Figure 3,
the author's calculations of Formula (1)) that in 1995 12 countries of this reference
group had an indicator value more than 1, that is, they were specialized in the
production of pharmaceutical products. But by 2018, most of them had lost that
advantage. Only the industries of Ireland, Denmark, Belgium, Slovenia and Malta
remained specialized, and changes in Cyprus' economic policy in terms of increasing
the advantages of location to attract foreign investment in the development of
pharmaceutical enterprises in the country contributed to obtaining advantages in this
industry.
0
5
10
15
20
25
EU27 India China USA
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
193
Figure 3. RSP of pharmaceutical industry in the countries of the EU27 reference group for 1995
and 2018.
Source: The author's calculations according to formula (1) based on the OECD TiVA Database.
EU27 countries pharmaceuticals’ CAVA shows (Figure 4, the author's
calculations of Formula (2)) that in 1995, 10 out of 12 countries that had a production
specialization in this industry according to the RSP, showed advantages in creating
added value. Two countries (Bulgaria and Spain) did not show any advantages, that is,
the local industry relied heavily on foreign pharmaceuticals substances and value-added
created abroad. By 2018, Ireland, Denmark, Belgium and Slovenia still had the
advantage. Cyprus also joined them.
Figure 4. CAVA of pharmaceutical industry in the countries of the EU27 reference group for
1995 and 2018.
Source: The author's calculations according to formula (2) based on the OECD TiVA Database.
But the loss (or absence) of a country's advantage on CAVA of pharmaceuticals
in the EU27 reference group does not necessarily mean the loss (absence) of such
an advantage in the global economy (Figure 5, the author's calculations of Formula (2)).
0
1
2
3
4
5
6
7
8
9
AUT
BEL
BGR
CYP
CZE
DEU
DNK
ESP
EST
FIN
FRA
GRC
HRV
HUN
IRL
ITA
LTU
LUX
LVA
MLT
NLD
POL
PRT
ROU
SVK
SVN
SWE
RSP1995
RSP2018
0
1
2
3
4
5
6
7
8
9
AUT
BEL
BGR
CYP
CZE
DEU
DNK
ESP
EST
FIN
FRA
GRC
HRV
HUN
IRL
ITA
LTU
LUX
LVA
MLT
NLD
POL
PRT
ROU
SVK
SVN
SWE
CAVA1995
CAVA2018
194 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
Figure 5. CAVA of pharmaceutical industry in the countries of the reference group: WORLD
and EU27.
Source: The author's calculations according to formula (2) based on the OECD TiVA Database.
As an example, France has different values of the CAVA of pharmaceuticals for
different reference groups (Figure 6, the author’s calculations of Formula (2)). Against
the background of countries around the world (the OECD provides statistics in TiVA
Database for 66 countries and “other” countries around the world (OECD, 2021),
France continues to have advantages in creating added value by pharmaceuticals
(from 2013 there was a downtrend), while inside the EU27 the country no longer has
advantages.
02468
IRL
DNK
BEL
CYP
SVN
HUN
HRV
SWE
GRC
FRA
ESP
FIN
DEU
ITA
AUT
MLT
BGR
NLD
LVA
CAVA WORLD 2018
0246
IRL
DNK
BEL
CYP
SVN
HUN
HRV
SWE
GRC
FRA
ESP
FIN
DEU
ITA
AUT
MLT
BGR
NLD
LVA
CAVA EU27 2018
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
195
Figure 6. Trend CAVA pharmaceuticals industry France by reference groups of WORLD and EU27.
Source: The author’s calculations according to formula (2) based on the OECD TiVA Database.
The EVA revealed the comparative advantages of 10 EU27 countries in the export
of pharmaceutical products in 1995. But by 2018, Bulgaria, Italy, France, Croatia and
Sweden reduced the volume of domestic value added embodied in exports, having
increased the content of foreign components, which resulted in the loss of their
positions (Figure 7, the author's calculations of Formula (3)). Only 6 countries –
Ireland, Denmark, Belgium, Slovenia, Malta held and Cyprus increased their
comparative advantages in domestic value added export compared to other EU27
countries.
Figure 7. EVA of pharmaceutical industry in the countries of the EU27 reference group for 1995
and 2018.
Source: The author's calculations according to formula (3) based on the OECD TiVA Database.
0,8
0,9
1
1,1
1,2
1,3
1,4 CAVA France - WORLD
CAVA France - EU27
0
1
2
3
4
5
6
7
8
9
AUT
BEL
BGR
CYP
CZE
DEU
DNK
ESP
EST
FIN
FRA
GRC
HRV
HUN
IRL
ITA
LTU
LUX
LVA
MLT
NLD
POL
PRT
ROU
SVK
SVN
SWE
EVA1995
EVA2018
196 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
For a better graphical representation of the calculated coefficients of RSP, CAVA,
and EVA of pharmaceutical industry in the countries of the EC27 reference group
in 1995 and 2018, the natural logarithm of their values was used. Belgium, Denmark,
France, Croatia, Ireland, Malta, Slovenia and Sweden had advantages in the production,
value added and export of pharmaceuticals in 1995 (Figure 8, the author's calculations
of the Formula (1), (2), (3)). A number of countries, the like of Bulgaria, Hungary, and
Greece, demonstrated advantages in the pharmaceutical industry only by two
coefficients.
Figure 8. Diagram of RSP, CAVA, EVA of pharmaceutical industry in the countries of the EU27
reference group (1995), filed on a logopharific scale.
Source: The author's calculations according to formula (1-3) based on the OECD TiVA Database.
According to the results obtained (Figure 9, the author's calculations of the Formula
(1), (2), (3)), today EU27 has formed a narrow circle (Belgium, Cyprus, Denmark,
Ireland, Slovenia) of undisputed leaders in terms of specialization and comparative
advantages in pharmaceuticals' production, value added and exports against the
background of other industries. Malta has no advantages in creating added value
in pharmaceuticals.
Summarizing the above, we can say that on the eve of the crisis phenomena in the
economy caused by the pandemic and changes in the European policy with the
adoption of "A new industrial strategy for Europe", six EU27 countries showed the
specialization of pharmaceuticals industry and the ability of the sector to obtain higher
added value (based on local resources) compared to the values of the indicators of other
manufacturing of the reference group. Although many issues remain unresolved in the
statistical tools for analysing countries' positions in the global economic system,
-2,5
-2
-1,5
-1
-0,5
0
0,5
1
1,5
2
2,5
AUT
BEL
BGR
CYP
CZE
DEU
DNK
ESP
EST
FIN
FRA
GRC
HRV
HUN
IRL
ITA
LTU
LUX
LVA
MLT
NLD
POL
PRT
ROU
SVK
SVN
SWE
RSP1995 CAVA1995 EVA1995
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
197
applying the author's approach to assess the consequences of the new mechanisms of
EU industrial policy will reveal changes in the specialization and increase of competitive
advantages of industries by increasing domestic value added.
Figure 9. Diagram of RSP, CAVA, EVA of pharmaceutical industry in the countries of the EU27
reference group (2018), filed on a logopharific scale.
Source: The author's calculations according to formula (1-3) based on the OECD TiVA Database.
4. Conclusions
According to the study, the new industrial policy of the EU and member states
regarding pharmaceuticals manufacturing and the adoption of a number of relevant
strategic documents provide for implementation of mechanisms to eliminate the
consequences of the delocalization strategy and reduce dependence on offshore
production of both API and finished medicines. The introduced tools for providing
state financial assistance for the implementation of investment and innovation projects
for the development of production capacities related to COVID-19, encourage the
expansion of the "product portfolio" of existing companies, the creation of new
enterprises "from scratch" and/or reshoring (in some cases – backshoring) of
pharmaceutical industries from Asia to the territory of EU member states. The toolkit
created by the authors (the introduction of indicators into scientific turnover: RSP –
coefficient of revealed productive specialization, CAVA – coefficient of comparative
advantage of the country in the creation of value added and EVA – coefficient of
comparative advantage in the domestic value added exports) would permit analysis of
the position of industries in the country to assess changes in specialization and location
advantages of industries in Europe as a result of the outcome of the priority goals for
the EU.
-4
-3
-2
-1
0
1
2
3
AUT
BEL
BGR
CYP
CZE
DEU
DNK
ESP
EST
FIN
FRA
GRC
HRV
HUN
IRL
ITA
LTU
LUX
LVA
MLT
NLD
POL
PRT
ROU
SVK
SVN
SWE
RSP2018 CAVA2018 EVA2018
198 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
Calculation of RSP, CAVA, EVA indicators for pharmaceuticals industry based on
the results of the first 3 years of implementation of the new EU goals on production
relocation and comparative analysis of data from 2013 to 2018 are considered by the
authors as areas of further research. At the same time, the proposed author's approach
should be used in assessing not only pharma, but also other high-tech manufactories
that are the basis of industrial ecosystems identified as priorities in "New industrial
strategy for Europe" and also to complement it by the approaches to study trends in the
globalization of high-tech production through monitoring and analysis of foreign trade
in intermediate high-tech goods.
References
Balassa, B., (1961). The Theory of Economic Integration. London, George Allen &
Unwin Ltd.
Balassa, B. (1989). ‘Revealed’ comparative advantage revisited. In B. Balassa (Ed.).
Comparative advantage, trade policy and economic development. New York: New
York University Press.
Barlow, P., van Schalkwyk, M. C., McKee, M., Labonté, R., and Stuckler, D.,
(2021). COVID-19 and the collapse of global trade: Building an effective
public health response. The Lancet Planetary Health, 5, e102–e107. DOI:
https://doi.org/10.1016/S2542-5196(20)30291-6.
Dunning, J. H., (1992). The Competitive Advantage of Countries and the Activities of
Transnational Corporations, Transnational Corporations, No. 2, pp. 11–16.
Dunning, J. H. (1993) Multinational Enterprises and the Global Economy. Addison
Wesley, New York.
European Commission, (2020a). Dependency of the EU pharmaceutical industry on
active pharmaceutical ingredients and chemical raw materials imported from third
countries. Retrieved from:
https://ec.europa.eu/health/sites/health/files/files/committee/ev_20200312_795_e
n.pdf
European Commission, (2020b). Affordable, accessible and safe medicines for all: the
Commission presents a Pharmaceutical Strategy for Europe. Retrieved from
https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2173.
European Commission, (2020c). State aid SA.57100 (2020/N) – Germany – COVID-19
– Federal Framework Scheme “Aid for Covid-19 related R&D, investments
STATISTICS IN TRANSITION new series and STATISTICS OF UKRAINE
199
in testing infrastructures and production facilities” (“Bundesregelung Forschungs-
Entwicklungs- und Investitionsbeihilfen”), Retrieved from:
https://ec.europa.eu/competition/state_aid/cases1/202018/285722_2152196_87_2.
pdf
European Commission, (2020d). State Aid SA.57367 (2020/N) – France COVID-19:
Aid for COVID-19 relevant R&D projects, investment into relevant testing and
upscaling infrastructures, and investment into COVID-19 relevant production
capacities, Retrieved from:
https://ec.europa.eu/competition/state_aid/cases1/202024/286299_2162472_123_
4.pdf
European Commission, (2020e). State aid SA.57519 (2020/N) – Poland COVID-19:
R&D aid for Covid-19 relevant research and development, investment aid for the
construction and upgrade of relevant testing and upscaling infrastructures, and
investment aid for investments into production facilities for the production of
Covid-19 relevant products, Retrieved from:
https://ec.europa.eu/competition/state_aid/cases1/202027/286598_2168965_58_2.
pdf
European Commission, (2021). Updating the 2020 Industrial Strategy: towards
a stronger Single Market for Europe's recovery. Retrieved from:
https://ec.europa.eu/commission/presscorner/detail/en/IP_21_1884
European Parliament, (2020). European Parliament resolution of 17 September 2020
on the shortage of medicines – how to address an emerging problem
(2020/2071(INI)). Retrieved from:
https://www.europarl.europa.eu/doceo/document/TA-9-2020-0228_EN.html
Eurostat, (2021a). COVID-19: support for statisticians. Retrieved from:
https://ec.europa.eu/eurostat/data/metadata/covid-19-support-for-statisticians
Eurostat, (2021b). European statistical recovery dashboard. Retrieved from:
https://ec.europa.eu/eurostat/cache/recovery-dashboard/
Falkowski, K. (2018a). Competitiveness of the Baltic States in international high-
technology goods trade, Comparative Economic Research. Central and Eastern
Europe, ISSN 2082-6737, De Gruyter, Warsaw, Vol. 21, Iss. 1, pp. 25–43,
https://doi.org/10.2478/cer-2018-0002
Falkowski, K., (2018b). Trade interdependence between Russia vs. the European Union
and China within the context of the competitiveness of the Russian economy,
Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of
Economic Research, vol. 13(4), pp. 667–687. https://doi.org/10.24136/eq.2018.032
200 O. Krekhivskyi, O. Salikhova.: A new industrial strategy for Europe – new indicators…
Grumiller, J., Grohs H., Reiner, С., (2021). Increasing the resilience and security of
supply of production post-COVID-19 – The Case of Medical and Pharmaceutical
Products. Working Paper Reihe der AK Wien – Materialien zu Wirtschaft und
Gesellschaft 216, Kammer für Arbeiter und Angestellte für Wien, Abteilung
Wirtschaftswissenschaft und Statistik.
Johnson Robert, C.. (2014) Five Facts about Value-Added Exports and Implications for
Macroeconomics and Trade Research. Journal of Economic Perspectives, 28, 2,
pp. 119–142. Retrieved from: http://gesd.free.fr/johnson514.pdf
Kumar A, Luthra S, Mangla S. K., Kazançoğlu Y., (2020). COVID-19 impact on
sustainable production and operations management. Sustain Oper Comput, 1,
pp. 1–7. https://doi.org/10.1016/j.susoc.2020.06.001.
Motoryn, R., Prykhodko, К., Ślusarczyk, B., (2020). Asymmetry of foreign trade
turnover between Ukraine and Poland. Statistics In Transition new series, June
2020, Vol. 21, No. 2, pp. 143–156, DOI: 10.21307/stattrans-2020-017.
OECD, (2021). Trade in Value Added. Retrieved from:
https://www.oecd.org/sti/ind/measuring-trade-in-value-added.htm#access
OECD, (2021). Trade in Value Added. Retrieved from:
https://www.oecd.org/sti/ind/measuring-trade-in-value-added.htm#access
Salikhova, O. B. (2012). New approaches to determining international comparative
advantages. Economу and Forecasting, 1, pp. 101–120. Retrieved from:
http://eip.org.ua/docs/EP_12_1_101.pdf
Tirivangani T, Alpo B, Kibuule D, Gaeseb J, Adenuga B. A., (2021). Impact of
COVID-19 pandemic on pharmaceutical systems and supply chain–a
phenomenological study. Explorat Res Clin Social Pharm., 2, 100037.
https://doi.org/10.1016/j.rcsop.2021.100037
Vo, T.D.; Tran, M.D. (2021). The impact of covid-19 pandemic on the global trade. Int.
J. Soc. Sci. Econ. Invent., 7, pp. 1–7. https://doi.org/10.23958/ijssei/vol07-i01/261
Wang, Y., Jiang, S., (1999). China: A future star for foreign pharma companies.
Pharmaceutical Executive, 19(8), pp. 78–87.
... International statistics of high-tech activities U.S. National Science Foundation (NSF) monitors the high-tech activities of countries of the world, including China [34]. In the NSF's methodology Figure 7 (constructed by the authors using information from [34]). ...
... International statistics of high-tech activities U.S. National Science Foundation (NSF) monitors the high-tech activities of countries of the world, including China [34]. In the NSF's methodology Figure 7 (constructed by the authors using information from [34]). ...
Article
Full-text available
China in the late 1980s, has embarked on a new path of high-tech manufactury development that is in line with its ambitions. The philosophy of China's innovation and industrial policy is based on the idea that the achievement of competitive manufactury must be through the national high-tech zones and high-tech enterprises, creating new products and processes based on indigenous innovation. The purpose of the study is to to explore the Chinese experience on policy and mechanisms of development of high-tech manufacturies and to analyze of statistical tools to assess its implications; to assess the appropriateness or feasibility of their application in modern economic conditions of Ukraine. The study's results have enhanced the existing understanding of the effect of State on accelerating the process structural transformation of the economy and its qualitative technological growth. Discovered the fact, that the Chinese Government is providing substantial support in the form of subsidies and tax incentives for establishment of special high-tech zones and high-tech enterprises for encourage the production of new and high-tech products and processes. It was revealed that, in order to grasp the economic operation and scientific, technological, industrial development of high-tech zones and high-tech enterprises, statistical investigation system was specially formulated іn addition to official statistics of the High-tech industries. It is proven that China's state-led innovation development model has successfully accompanied and stimulated the growth of high-tech over the last 30 years; and has produced numerous endogenous technological innovations. Analysis revealed that considerable efforts in the field of policy of China transforming the industry into a high-tech sector of the economy and a powerful player in the global market have outstanding performance. The article presents the new indicator EVA-coefficient of Comparative Advantages in the Domestic Value Added Exports and formula for its calculation is provided which allow the assessment of the position of China's high-tech industries, widening the 'revealed comparative advantage' concept. This study shows some important conclusions about the determinants of success of the Chinese government in increase of resources for the modernization of industrial technologies, building and strengthening of potential of domestic high-tech manufacturies. It would be advisable to take into account some important levers of influence, following the example of China, when choosing mechanisms for the economic recovery of Ukraine after war.
... In the work [23], the authors focused on the barriers to the innovative development of the industries and the establishment of high-tech manufacturing in Ukraine. Among the issues highlighted were the lack of clear policy and comprehensive implementation of the national innovation strategy, as well as the administration of processes related to scientific, technological, and innovative activities of the industries. ...
Article
Full-text available
The analysis of the legal framework supporting the European Union’s decisions on the EU industrial sector, particularly high-tech manufacturing, shows that the European Commission maintains a long-standing commitment to prioritizing technological development in industries. To enhance their potential and competitive advantages, mechanisms of industrial, scientific-technological, and innovation policy are primarily employed. At the same time, research results show the growing trade deficit EU high-tech trade. The aim of the article is to deepen understanding on the policy and economic dimensions of high-tech activity, as well as to statistical estimates of production and international trade flows of high-tech goods in EU between 2008 and 2023. The economic-statistical analysis revealed that, since the early 2000s, the EU has gradually increased its trade deficit in high-tech goods with China. In 2009, the negative balance was €43.1 billion, rising to €73.1 billion by 2019; in 2022, the trade deficit with China reached a historic high of €129.6 billion; by the end of 2023, it was €105.5 billion. Countries such as Thailand, South Korea, Malaysia, Taiwan, and Vietnam have significantly increased their exports of high-tech goods to the EU since 2019, contributing to a growing negative balance. Before the pandemic in 2019, imports from Asian countries of high-tech goods in the groups of Electronics & Telecommunications and Computers and office machines grew at the highest rates. In the category of Electronics & Telecommunications, imports from China increased from €63,013.9 million to €89,228.1 million from 2019 to 2023; imports from Taiwan – from €3,644.7 million to €16,489.4 million; and imports from Vietnam – from €110.2 million to €14,053.8 million. In the category of Computers and office machines, imports from China increased from €40,177.4 million to €42,752.0 million; imports from Taiwan – from €802.6 million to €9,917.6 million; and imports from Vietnam – from €21.1 million to €2,787.2 million. This led to a significant trade deficit for the EU in high-tech goods from these countries. The work substantiates that the EU leadership has adopted new political documents, which prioritize reducing strategic external dependency on imports and implementing measures to enhance their effectiveness. It should serve as benchmarks for developing policies for the growth of high-tech industries in Ukraine amid wartime conditions and post-war economic recovery. Key words: EU, Industrial Policy, International trade, high-tech products, high-tech industries, exports, imports, trade balance.
Article
The article addresses the development and implementation of tools to ensure the efficiency of spatially integrated regional development policy based on territorially oriented and security approaches. The national specifics of planning in the field of regional development in the context of coherence with sectoral policies on the balanced organization of the territory and interconnectedness with relevant national, sectoral, regional, and local development programs are revealed. The authors note that the absence of a single holistic structure of state policies, their content, and legally established implementation procedures leads to the destructive functioning of the public administration system and the multiplicity of various inconsistent regulatory legal acts and program and planning documents on regional development. The article shows that strengthening the spatial integration of economic, social, and environmental development of the country as a whole is the basis for the efficiency of regional development policy on the basis of systemic integration of economic, social, and environmental policies, as well as synchronization and coherence of sectoral, regional, and local policies at all levels of government in accordance with the Constitution of Ukraine. The realization of state interests becomes a basic priority in state planning documents at the regional and local level for the rapid recovery and development of regions and territorial communities of Ukraine on the principles of transparency of the use of financial resources taking into account the potential and current interests of territorial communities, accountability, sustainability, economic feasibility, and resilience to security threats. The authors suggest creating a National Register of State Interests as part of the implementation of the territorially-oriented and security approaches. The National Register of State Interests is considered to be an information and communication system that ensures the collection, accumulation, accounting, display, processing, updating, protection, and provision of information on state interests in the context of the Codifier of Administrative and Territorial Units and Territories of Territorial Communities, sectoral policies, and state planning documents with the automated generation of the relevant excerpt from the Register in electronic form for the mandatory consideration of state interests at all levels of government.
Article
Full-text available
Background Resilient pharmaceutical systems and supply chains are critical in the control of COVID-19, a pandemic that has mostly devastated public health systems and livelihoods in resource-limited countries in sub-Saharan Africa. Objective To evaluate the impact of COVID-19 on pharmaceutical systems and supply chain in a resource-limited setting. Methods A descriptive qualitative survey using a phenomenological approach was conducted among key informants in the public and private pharmaceutical sectors of Namibia. Data were collected on the perceived impact of COVID-19 pandemic on the supply chain, as well as access and availability of essential medicines among the distributors and points of care in the private and public sectors. Qualitative themes of the impact were analyzed using Tesch's approach. Results Of the 21 key-informants, 57.1% were female and 85% were from the private versus the public pharmaceutical sector. Overall, key informants reported a negative impact on access and availability of essential medicines, particularly sanitation and hygiene products, and antimicrobials. Most medicine outlets, experienced longer lead times, attributed to reduced inter-country transportation of goods and services and limited in-country capacity and capabilities to manufacture. The main thematic challenges included bureaucratic bottlenecks and lack of emergency readiness of the medicine's logistics supply chain in Namibia. Conclusion COVID-19 pandemic aggravated the inequitable access to essential medicines in the public and private sectors of Namibia. Governments in resource-limited countries need to strengthen in-country Private-Public Partnerships as well as regional treaties for Universal Health Coverage in context of the COVID-19 pandemic.
Article
Full-text available
Human being is currently dealing with a pandemic known as COVID-19, a highly contagious pandemic with unprecedented health crisis worldwide. This crisis has seriously affected communications, jobs, manufactures, commerce, consumption and human life. Affected international transport sector resulted in the disruptions of shipping, along with the new policies toward economy, travel restriction and border shutdowns, led to a dramatic increase in the trade costs. In the first quarter of 2020, this had a significant impact on global trade. This paper is utilizing an analytical methodology that aggregates, collects and categorizes relevant domestic and international reports on the COVID-19 pandemic, government policies, the degree of uncertainty of economic policies and its effect on trade costs. In the present study, we first brightly described the travel restriction measures taken by WTO members, secondly, the impact of the COVID-19 pandemic on trade costs, government pandemic response policies in the early stages of the COVID-19 pandemic were discussed ultimately we analyzed the effect of the significant increased trade costs on the global trade and its relevant roots. In this paper we used an integrated analysis method to collect and classify domestic and international reports on the COVID-19 pandemic through reports of WTO and the member countries.
Article
Full-text available
Аuthor proposed new approaches to determining international comparative advantages, which was the first one to propose a weighted coefficient to be used in calculating the high-tech component in the country’s exports of goods and to introduce new indicators of comparative advantages based on the specialization criterion. These indicators include: Revealed Specialization of Production (RSP); Comparative Advantage in Value Added Activity (CAVA); Revealed Effective Export (REX). The dynamics of production, value added and high-tech processing industries export of 26 countries is being analysed. Author revealed, that countries supplying high-tech products to international market has different production efficiency. Weighted coefficient - value added share in total sales - is being suggested for using while calculating high-tech share in total export.
Article
Full-text available
The global production and supply chain system is mostly disrupted due to widespread of the coronavirus pandemic (COVID-19). Most of the industrial managers and policymakers are searching for adequate strategies and policies for revamping production patterns and meet consumer demand. Form global supply chain perspectives, the majority of raw materials are imported from China and other Asian developing nations. The COVID-19 pandemic has broken the most of transportation links and distribution mechanisms between suppliers, production facilities and customers. Therefore, it is imperative to discuss sustainable production and consumption pattern in the post-COVID-19 pandemic era. Most of the prominent economies around the world enforced a total lockdown, and the focus has since shifted to surge in demand for essential products and services. This has led to a decline in demand for some nonessential products and services. The production and operations management challenges of the pandemic situations are discussed and adequately proposes policy strategies for improving the resilience and sustainability of the system. This paper also discusses the different operations and supply chain perspectives for handling such disruptions in the future.
Article
Full-text available
The article identifies the determinants of the asymmetry of foreign trade turnover between Ukraine and Poland based on an analysis of competitiveness indicators of the studied countries in the period 2003–2017. The emphasis is on calculation of the comparative advantages of particular commodity headings in Polish exports in the domestic market of Ukraine. Potential directions of the intensification of bilateral trade were evaluated.
Article
Full-text available
Research background: The position of a country in the international division of labour is determined by the competitiveness of its trade, the structure of which may both reveal and perpetuate the comparative advantages possessed. This is particularly true for Dutch disease economies such as Russia. Recently, economic literature has seen a growing interest in the topic of Russia’s economic relations with the European Union and China. This article is aimed at being the Author’s contribution to this discussion. Purposes of the article: (1) to discuss the existing trade interdependence between Russia and the EU28, and Russia and China; (2) to try to assess the extent to which the current structure of Russian trade with these two partners corresponds with the competitiveness of the Russian economy. Methods: An in-depth analysis of Russia-EU28 and Russia-China trade interdependencies in 2007-2015 has been conducted, with emphasis on the categories of goods within the spectrum from low- to high-technology, according to the OECD classification. Furthermore, in order to analyse Russia’s competitive profile with regard to the same categories of goods, Balassa’s methodology of revealed comparative advantages has been applied. Findings & Value added: In the recent years, a growing importance of China in Russian trade turnover can be observed, being the effect of dynamic growth of Chinese economy, cooling political relations between Moscow and Brussels and the drop in oil prices in international markets. The existing structure of Russian trade with the EU28 and China seems likely to preserve its traditional competitive advantages in the medium-low-technology goods and oil, which, in turn, will only further exacerbate the negative consequences of the so-called Dutch disease affecting the Russian economy.
Article
Full-text available
The aim of the article is to assess the international competitiveness of the Baltic States (Estonia, Latvia, Lithuania) in high-technology goods trade. To this end, Balassa’s method of analysing revealed comparative advantages (RCA) was applied. An in-depth analysis of the dynamics of RCAs in the Baltic States’ exports between 1997 and 2014 has shown that their international competitiveness in this regard is relatively low, the direct consequence of which is the growing negative trade balance in high-technology goods. Also, during the analysed period Lithuania possessed no RCAs in trading high-technology goods, while the number of advantages for Estonia and Latvia was relatively small. Still, among the three Baltic States, Estonia was found to be most competitive in this regard, although in Latvia some progress was observed. In contrast, Lithuania not only had the lowest values of RCA, but also it did not record any improvement in the analysed period.