© 2009 Pankaj Ghemawat What Are the Real Gains from a Successful Doha Round? Pankaj Ghemawat WTO Workshop November 2, 2010.

© 2009 Pankaj Ghemawat

What Are the Real Gains from a Successful Doha

Round?

Pankaj GhemawatWTO Workshop

November 2, 2010

The Way Forward

1. Understanding how global we really are

2. Understanding all the barriers that constrain trade

3. Thinking broadly about the gains from trade


How Global Are We?

A. In real estate, the mantra is 'location, location, location.' For global brand managers, it might be 'localise, localise, localise.‘ —A consultant

B. There is a balance on the spectrum between “local” and “global” that represents the “sweet spot”…[and makes for] “the race to the middle. —A manager

C. The world got flat…[creating] a global, Web-enabled playing field that allows for…collaboration on research and work in real time, without regard to geography, distance or, in the near future, even language. —A journalist


20% 10% 0% 30% 40% 50% 60% 70% 80% 90% 100%

FDI/Gross Fixed Capital Formation


© 2010Pankaj Ghemawat

Levels of Internationalization

Telephone calls

Immigrants (to Population)

Direct investment

Equity investment

Exports (to GDP)

20% 40% 60% 80% 100%

The Way Forward





What Are the Barriers to Trade?The Mystery of the Missing Trade

In 1988, Canadian provinces traded 20 times as much merchandise with each other as with U.S. states

By the mid-1990s, this multiple had come down to 12

After a decade of NAFTA, this multiple still exceeds 5—and this is just for merchandise!

Note free trade agreement, common border, mostly common language/ colonizer, generally friendly relations etc. making U.S.-Canadian trade largest bilateral trade relationship in the world


Influences on Bilateral Trade (%)

Common Language

Common Regional Trading Bloc

Colony/Colonizer Relationship

Common Currency

Common Land Border

+42%

+188%

+47%

+125%+114%

Cha

nge

in T

rade

(%

)


The CAGE Distance Framework

Cultural Distance

Administrative Distance

Economic Distance

GeographicDistance


•Exploit language bridges

•Encourage interregional

networks/exchanges

-students

•Promotional efforts

•Improve regional

transportation/communications

infrastructure

•Create an efficient energy network

•Coordinate infrastructural investment

•Improve interregional market linkages

-employee mobility

-capital markets

-information about

interregional flows

•Exploit scale/scope

-business networks/ events

-joint embassies

-process for upgrading cross-border clusters

•Collect and disseminate

information about

interregional flows

•Harmonize:

-foreign investment promotion to avoid races to the bottom

-public procurement processes

-health, safety, environmental standards

•Simplify cross-border regulations and paperwork

•Bilateral/multilateral summits

-share best practices in government operations

-review regional institutions

CULTURAL ADMINISTRATIVE GEOGRAPHIC ECONOMIC

Expanded Conception of Policy LeversThe Case of Catalonia

The Way Forward





TCS Latin America: A Case Study


Global Delivery Centers

Local Solution Center

MontevideoBuenos Aires

San Pablo

Brasilia

Santiago

Lima

Guadalajara

Quito

MedellínBogotá

QuerétaroMonterrey

DF

7000+ Associates 150+ Active Clients. 16 of Fortune 100 4 of 11 Latin firms in the Global 500™

ADDING Value: The Case of TCS Latin America TCS Latin AmericaVALUE COMPONENT


BuzzMulticulturalismPropagating delivery capabilities

Generating and Deploying Knowledge/Other Resources

Reduction in India riskNormalizing Risk

Judo economics vis-à-vis IBM, AccentureImproving Industry

Attractiveness

Language advantages

Time zone/local presence advantages

Claim to be truly global

Differentiating

(Increasing Willingness to Pay)

Increase in absolute cost levels

Dynamics of Indian costs/availability

Pursuit of large global dealsAdding Volume

Decreasing Costs

ADDING Value vs. Standard Approaches

DECREASING COSTS

ECONOMIES OF SCALE,UTILIZATION…

DIFFERENTIATING

GENERATING KNOWLEDGE

NORMALIZING RISK

INTENSIFYING COMPETITION

ADDING VOLUME

SourcesofValue


ADDING Value through Merchandise Trade: Some Additions

AdditionsVALUE COMPONENT


Technological progress/capabilities literatureImitation as well as innovationComplementarities with investment

Generating and Deploying Knowledge/Other Resources

Case studies (e.g., food)Normalizing Risk

Productivity studies (decomposition, turnover…) Rent-seeking/DUP activitiesEntrenchment effects

Intensifying Competition

Economics of missing products

The moving quality window

Differentiating


Scale economiesInvestments in cost reductionOther cost drivers (e.g., utilization)

Adding Volume

Decreasing Costs

Unimpressive Projected Gains?

Agree and abandon

Avert gaze and carry on

Adjust baseline

Add to the categories of effects considered



Adding Economic Value by Opening up


ADDING ECONOMIC VALUE THROUGH MERCHANDISE

TRADE

ADDING ECONOMIC VALUE THROUGH SERVICES TRADE

ADDING ECONOMIC VALUE THROUGH OTHER CROSS-BORDER FLOWS (CAPITAL, PEOPLE, KNOWLEDGE)

ADDING VALUE CULTURALLY

ADDING VALUE POLITICALLY

COMPLEMENTARITIES

Levers of Value

EconomicValue

Margin

Volume Competitive Advantage

• Cost drivers• Differentiation

drivers

IndustryAttractiveness/

Bargaining Power+

Uncertainty/ Risk

Dynamics (Learning)


A Key Question

How far to cast our nets in identifying

the gains from a successful Doha round

(or, more broadly opening up)?

“If I’m not able to pin down the

numbers precisely, I report just

the qualitative effects”


ADDING Value vs. Standard Approaches

DECREASING COSTS

ECONOMIES OF SCALE,UTILIZATION…

DIFFERENTIATING

GENERATING KNOWLEDGE (AND OTHER RESOURCES)

NORMALIZING RISK

INTENSIFYING COMPETITION

ADDING VOLUME

SourcesofValue


The Way Forward





ADDING ValueLEVERS


Generating and Using

Knowledge/Other Resources

Normalizing Risk

Improving Industry

Attractiveness

Differentiating


Adding Volume

Decreasing Costs

Strategic Headroom


© 2010 Pankaj Ghemawat Source: www.cartoonstock.com

0%

1%

2%

3%

4%

5%

6%

1860 1880 1900 1920 1940 1960 1980 2000 2020

Size of Net Capital Flows Since 1870(current account as % of GDP)


© 2009 Pankaj Ghemawat What Are the Real Gains from a Successful Doha Round? Pankaj Ghemawat WTO Workshop November 2, 2010.

Documents

pankaj ghemawat slide

merchandise trade

missing trade

pankaj ghemawat wto

case of catalonia slide

global d ifferentiating

free trade agreement

common border