© 2009 pankaj ghemawat what are the real gains from a successful doha round? pankaj ghemawat wto...
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© 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
© 2010 Pankaj Ghemawat
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
© 2010 Pankaj Ghemawat
20% 10% 0% 30% 40% 50% 60% 70% 80% 90% 100%
FDI/Gross Fixed Capital Formation
© 2010 Pankaj Ghemawat
© 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
1. Understanding how global we really are
2. Understanding all the barriers that constrain trade
3. Thinking broadly about the gains from trade
© 2010 Pankaj Ghemawat
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
© 2010 Pankaj Ghemawat
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
(%
)
© 2010 Pankaj Ghemawat
The CAGE Distance Framework
Cultural Distance
Administrative Distance
Economic Distance
GeographicDistance
© 2010 Pankaj Ghemawat
•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
1. Understanding how global we really are
2. Understanding all the barriers that constrain trade
3. Thinking broadly about the gains from trade
© 2010 Pankaj Ghemawat
TCS Latin America: A Case Study
© 2010 Pankaj Ghemawat
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
© 2010 Pankaj Ghemawat
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
© 2010 Pankaj Ghemawat
ADDING Value through Merchandise Trade: Some Additions
AdditionsVALUE COMPONENT
© 2010 Pankaj Ghemawat
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
(Increasing Willingness to Pay)
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
© 2010 Pankaj Ghemawat
© 2010 Pankaj Ghemawat
Adding Economic Value by Opening up
© 2010 Pankaj Ghemawat
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)
© 2010 Pankaj Ghemawat
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”
© 2010 Pankaj Ghemawat
ADDING Value vs. Standard Approaches
DECREASING COSTS
ECONOMIES OF SCALE,UTILIZATION…
DIFFERENTIATING
GENERATING KNOWLEDGE (AND OTHER RESOURCES)
NORMALIZING RISK
INTENSIFYING COMPETITION
ADDING VOLUME
SourcesofValue
© 2010 Pankaj Ghemawat
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
© 2010 Pankaj Ghemawat
ADDING ValueLEVERS
© 2010 Pankaj Ghemawat
Generating and Using
Knowledge/Other Resources
Normalizing Risk
Improving Industry
Attractiveness
Differentiating
(Increasing Willingness to Pay)
Adding Volume
Decreasing Costs
Strategic Headroom
© 2010 Pankaj Ghemawat
© 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)
© 2010 Pankaj Ghemawat
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