Sanjaya Lall’s research while affiliated with University of Oxford and other places

There remains considerable controversy on the economic impact of TRIPS (interpreted here as the tightening of IPRs) in de veloping countries; needless to say, the new round of WTO negotiations adds considerable interest to this controversy. This paper focuses on the long- term structural issues concerning the impact of TRIPS on industrial and technology development in poor countries. It does not, therefore, deal with such important current issues as the cost of medicines, agricultural inputs or genetic materials. Even in the analysis of technology development, it has a limited objective. It seeks to indicate the potential significance of IPRs by differentiating developing countries according to the expected impact of stronger protection. It does not measure statistically the strength of IPR regimes or their impact on development as such.

No Trade data are often classified by product characteristics. We propose a new classification “sophistication” as a means of distinguishing between products. We construct a sophistication index based on the income levels of exporting economies. Sophistication captures a range of factors including technology, ease of product fragmentation, natural resource availability, and marketing. We calculate sophistication scores at the 3- and 4-digit levels and test how far the index relates to existing technological classifications of products. We use the index to examine trade patterns and illustrate how it can be applied in the analysis of export performance of individual economies.

This paper explores China's competitive threat to Latin America in trade in manufactured goods. The direct threat to exports to third country markets appears small: Latin America and the Caribbean's (LAC's) trade structure is largely complementary to that of China. In bilateral trade, several LAC countries are increasing primary and resource-based exports to China. However, the pattern of trade, with LAC specializing increasingly in resource-based products and China in manufactured goods, seems worrying. Given cumulative capability building, China's success in increasingly technology-based products with strong learning externalities can place it on a higher growth path than specialization in “simpler” goods, as in LAC. China may thus affect LAC's technological upgrading in exports and industrial production. The issue is not so much current competition as the “spaces” open for LAC in the emerging technology-based world.

We examine China's competitive threat to East Asian neighbors in the 1990s, benchmarking performance by technology and market. Market share losses are mainly in low-technology products; Japan is the most vulnerable market. China and its neighbors are raising high-technology exports in tandem: international production systems here are leading to complementarity rather than confrontation. In direct trade with its neighbors, China is acting as an engine of export growth, with imports outpacing exports. This may change, however, as China climbs the value chain and takes over activities that have driven East Asian export growth even within integrated production systems.

"Fragmentation", the relocation of processes or functions across countries in response to cost and other differences, has important implications for development. We discuss the drivers of fragmentation and map it for electronics and automotives in East Asia (EA) and Latin America. For technical reasons, electronics is fragmenting faster world-wide than the auto industry. Electronics networks are more advanced, widespread and integrated in EA than Latin America and the Caribbean (LAC), and are largely responsible for EA's rapid export growth. The auto network is more advanced in LAC but is slower growing and is not integrated into a regional system. Apart from Mexico, LAC lacks an electronics network, partly accounting for the region's weak export performance. We offer insights into the following: Why do industries fragment differently? How can fragmentation be measured? Why does fragmentation in developing countries concentrate on EA and LAC? Why has fragmentation evolved differently in these two regions? Can other developing regions attract and benefit from fragmentation?

No How have Latin American exporters been affected by the rapid increase in the PRC's exports to the USA and other large markets? Are PRC and Latin American exports complementary or competitive with each other? This paper examines detailed trade data to provide answers to these important questions. It examines the meaning of a "competitive threat" and provides a way of assessing the degree of threat from trade statistics. In general it finds that export structures in PRC and Latin American economies are sufficiently different for trade to be basically complementary with at present only a small portion of Latin American exports under a "direct threat" from PRC exporters. Mexico is the economy that is potentially at greatest risk; but as yet this has not shown up in the data.

Manufacturing in Latin America and the Caribbean region (LAC) faces severe competitive stresses as it integrates into the global economy. It is not, on the whole, coping well. Though it was the first region in the developing world - in the post-war era - to liberalize on international trade and investment flows and had the most advanced industrial base, it failed to tap fully the opportunities offered. As a result, it has steadily fallen behind the most competitive economies in the developing world, the Tigers of East Asia. What is behind LAC's under-performance? The dominant view in the region puts emphasis on the legacy of import substitution, macroeconomic mismanagement and on a costly business environment. Although important, these factors do not seem to tell the whole story. The heavy emphasis on government failures has led policymakers to overlook key market failures that stand on the way to sustained productivity growth, increasing technological capability and greater competitiveness. This paper can be seen as a first step to redress the balance of the policy debate and focus on benchmarking competitive performance and capabilities in the 1990s in LAC and East Asia, letting the comparisons speak for themselves. While it is known in the region that its recent industrial record has been poor, the dimensions are not well analyzed or understood. This benchmarking exercise, using a simple framework to measure performance and capabilities, should prove instructive to policy analysis.

China’s accession to the World Trade Organization (WTO), with the consequent liberalization of trade and investment, will have significant competitive repercussions on the developing world. Given the size and dynamism of the Chinese economy, these effects will be felt not only in the neighbouring region in Southeast Asia but also across the globe. The impact will have positive and negative aspects, depending on the country and activity concerned. Some countries will gain from the opening up of the Chinese market and from the opportunities offered to invest there, not just for selling locally but also for exporting to other markets. Other countries will be faced with intensified competition in both export and home markets, and may suffer erosion in market share and industrial performance.