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The Role of the BRIICS in the Globalisation Process
Three interconnected factors have conspired to drive the benefits of international trade since 1945 – innovation, business development and government policies. Process and business innovation grew rapidly after 1945, with the result that in the 1960’s offshoring processes and trading in tasks started to move to lower wage countries. Real prices of manufactured goods and some services immediately began to fall rapidly and host countries like Korea rapidly closed the income gap. More recently, the new waves of information and communications technology have assisted in accelerating these processes in an environment of lower trade barriers, exclusive export zones and other outward looking policies.
The China and India factors are so large in this equation that people are apt to forget the complex cross-country relationships that have resulted from the specialisation (supply fragmentation) that has occurred and the efficiency gains that have resulted. R&D, production and marketing processes are now more highly fragmented along supply chains and across countries. Many of the most highly traded products and services in the world are “components and parts”. Component parts now commonly cross the same borders a number of times in the process of completion. Many more countries are involved in each supply chain than formerly and many firms are involved in each country stage. Assembly firms in China are highly dependant on component suppliers from around the globe. They are also highly dependent on export demand for their final products.
The incidence of multinational firms has increased rapidly along with supply fragmentation and reduction in communication costs. Furthermore, the home bases and shareholding of multinationals are increasingly diverse to include middle income countries. Accordingly, the interdependencies between nations increasingly extend to the corporate dimension itself. Emerging country exports are heavily driven by OECD based MNE’s. Increasingly, OECD and developing countries’ exports will be driven by emerging nation MNE’s. What does this imply for international trade responsibilities and trade policies?
Questions for discussion:
● What has been (and will be) the role of the BRIICS in the evolution of supply chains management and corporate structures?
● How do the trade and policy challenges facing the BRIICS differ from those confronting OECD countries on the one hand, and other developing countries on the other?
● What areas of market and “government” failure appear to be emerging in world trade and what does this imply for the BRIICS and OECD countries?
Back to the Programme of the Global Forum on Trade, June 2008
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