Trade and Innovation within Global Networks: Transforming US-Asia Economic Relations

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Participants came to the first East-West Center Workshop on Mega-Regionalism from China, Germany, Japan, Sweden, Switzerland, Taiwan, the United Kingdom, and the United States

Debates about globalization are focused on offshore outsourcing of manufacturing and services. This approach, however, neglects an important change in the geography of knowledge—the globalization of innovation that results from an accelerated dispersion of scientific and technological knowledge and capabilities across geographic borders. This accelerated dispersion is occurring through international trade and corporate networks of production and research and development. These networks integrate dispersed production, engineering, product development, and research across geographic borders and hence transform US-Asia economic relations. Equally important are national trade and innovation policies that seek to enhance economic growth, competitiveness, and prosperity.

Asia’s role, quite minor until recently, has become critical. Of particular importance is the resurgence of China as a leading production site and market for high-tech industries and as a new competitor in technology markets. In the United States (US), there are concerns that Asia’s new role in innovation, and especially China’s indigenous innovation policy, will threaten US leadership in science and technology and hence erode its long-term growth potential.

Mega-regional trade agreements such as the Transpacific Partnership Trade Agreement (TPP) signal the beginning of big changes in international commercial governance, moving beyond tariff reduction toward the harmonization of rules, regulations, and policies. This has far-reaching implications for national policies and for the link between trade and innovation. For instance, the provisions of the TPP, released on 5 November 2015, allow enforcement of contracts and intellectual-property rights across borders. These mega-regional agreements also exceed commitments covered by the World Trade Organization (WTO) in areas such as free movement of capital linked to foreign direct investment, technical barriers to trade, liberalization of services, dispute settlement, customs cooperation, and government procurement.

A fundamental objective of East-West Center research on trade and innovation within global networks is to study the impact on economic relations between the US and Asia. Research examines how these global transformations interact with national innovation policies both in the US and across Asia. The objective is to provide informed policy suggestions on how to minimize any negative effects on economic growth and employment and on how to share the benefits of science, technology, and other innovation through enhanced US-Asian cooperation agreements.

Ongoing projects/activities with international partner organizations include:

1. East-West Center cooperation with a Centre for International Governance Innovation (CIGI) Program on Innovation and Trade Research: A series of workshops will be conducted, starting in 2017, on unresolved challenges for the global governance of trade, intellectual property (IP), and innovation. The workshops will address two issues in particular: (1) Identifying what adjustments are needed in the development and use of IP, especially patents and trade secrets, ini light of the requirements of increasingly complex and diverse global corporate networks of production and innovation; and (2) dealing with the effects of the proliferation of strategic patenting behavior on the organization and governance of global networks

3. East-West Center cooperation with Tsinghua University and the China National Institute for Stadardization (CNIS) in Beijing, and Hunan University in Changsha, China: Following an initial symposium on the International Governance of Standardization, held on 20-21 November 2016, a series of international conferences will explore unresolved issues of international strandardization governance, with a focus on US-China relations.

3. Funding proposals will be submitted during 2017 to the National Science Foundation and other funding aagencies to support follow-on workshops on Megaregionalism—Innovation and Trade within Global Networks.

The East-West Center's work on Trade and Innovation within Global Networks focuses on three areas:

  1. A series of agenda-setting workshops on Mega-Regionalism—New Challenges for Trade and Innovation, starting with an initial workshop held at the Center on 20–21 January 2016 and funded by the National Science Foundation
  2. China’s innovation policy and its impact on economic relations between China and the US
  3. Innovation and trade policies and corporate strategies in other Asian countries that are major exporters of information and communications technology—India, South Korea, Taiwan, and Malaysia

1. Mega-Regionalism —New Challenges for Trade and Innovation

A series of workshops on Mega-Regionalism —New Challenges for Trade and Innovation focuses on emerging trends in mega-regional trade agreements, such as the Transpacific Partnership (TPP) agreement, and their impact on innovation. Workshops will be held once or twice a year at the East-West Center and at partner institutions in the US, Asia, and Europe. The first workshop in this series, held at the East-West Center in January 2016, brought together trade economists with experts on innovation, intellectual property rights, competition law, technical standards, and industrial development.

To create maximum opportunity for multi-disciplinary discussion, each workshop will be structured around invited papers that highlight important under-researched topics and lay out possible agendas for policy-related research. A selection of revised versions of these papers will be published, making a continuous stream of policy-relevant research findings available to relevant audiences in the US and Asia.

Related Publications

Ernst, Dieter (2016). Standard-essential patents within global networks—An emerging economies perspective. Paper presented at the First International Symposium on Standardization and Governance, Hunan University, Changsha, China, 20 November 2016.

Ernst, Dieter (2016). Techno-nationalism 2.0: A new grand strategy for semiconductors. China Economic Quarterly 3:15-22.

Ernst, Dieter (2016). China’s bold strategy for semiconductors—zero-sum game or catalyst for cooperation? East-West Center Working Papers: Innovation and Economic Growth Series, no. 9. Honolulu: East-West Center.

Ernst, Dieter (2016).  From catching up to forging ahead: China's new role in the semiconductor industry. Solid State Technology 59(3): 16–19.

Ernst, Dieter (2016).  Beyond value capture—exploring innovation gains from global networks. Paper presented at the Workshop on Mega-Regionalism—New Challenges for Trade and Innovation (MCTI), East-West Center, Honolulu, 20–21 January. Forthcoming in Dieter Ernst and Michael Plummer (eds). Megaregionalism—innovation and irade within global networks. Hackensack, NJ: World Scientific Studies in International Economics/Imperial College Press.

Plummer, Michael (2016).The Transpacific Partnership: Potential gains and impediments in a global context. Forthcoming in Dieter Ernst and Michael Plummer (eds). Megaregionalism—innovation and irade within global networks. Hackensack, NJ: World Scientific Studies in International Economics/Imperial College Press.

Ernst, Dieter (2016).  From catching up to forging ahead in advanced manufacturing—reflections on China’s future of jobs. Paper prepared at the Conference on The Future of Jobs: The Dual Challenges of Globalization and Robotization, Mount Holyoke College, South Hadley, MA, 19-20 February. Forthcoming in Eva Paus (ed.). The new technological revolution: What future for jobs and Livelihoods? Ithaca, NY: Cornell University Press.

Ernst, Dieter (2016).  The Information Technology Agreement, manufacturing and innovation—China’s and India’s contrasting experiences. Paper presented at the Workshop on Mega-Regionalism—New Challenges for Trade and Innovation (MCTI), East-West Center, Honolulu, 20–21 January. Forthcoming in Dieter Ernst and Michael Plummer (eds). Megaregionalism—innovation and irade within global networks. Hackensack, NJ: World Scientific Studies in International Economics/Imperial College Press.

Ernst, Dieter (2015). From catching up to forging ahead: China’s policies for semiconductors. Special Study. Honolulu, East-West Center.

Ernst, Dieter (2015).  Global strategic patenting and innovation—policy and research implications. East-West Center Working Papers: Innovation and Economic Growth Series, No. 2. Honolulu: East-West Center.

Ernst, Dieter (2015).  Xi's visit highlights US and Chinese expectations in the semiconductor industry. Honolulu: East-West Center.

Wang Ping, Liang Zheng, and Dieter Ernst (2015). The vision and challenges of voluntary standardization institutional reform of China. China Standardization Magazine 9: 49–56 [in Chinese] (Honored as an Excellent Paper by the China Association for Standardization (CAS)).

Ernst, Dieter (2014). The information technology agreement, industrial development and innovation—India’s and China’s diverse experiences. Geneva: International Center for Trade and Sustainable Development (ICTSD) and World Economic Forum.

Ernst, Dieter (2014). Trade and innovation in global networksregional policy implications. In Annelieke van der Giessen, Claire Stolwijk, and Jos Leijten, eds. Can policy follow the dynamics of global innovation platforms? Delft: Six Countries Programme.

Ernst, Dieter, Heejin Lee, and Jooyoung Kwak (2014). Standards, innovation, and latecomer economic development: Conceptual issues and policy challenges. Telecommunications Policy 38(10): 853–62.

Ernst, Dieter (2013). America’s voluntary standards system—a “best practice” model for Asian innovation policies? Policy Studies No. 66. Honolulu: East-West Center.

Committee on Global Approaches to Advanced Computing (2012). The new global ecosystem in advanced computing: Implications for U.S. competitiveness and national security. Washington, DC: National Research Council.

Ernst, Dieter (2012). Production and innovation networks, global. In Helmut K. Anheier and Mark Juergensmeyer, eds. Encyclopedia of global studies (pp. 1393–97). Thousand Oaks, CA: Sage.

 Ernst, Dieter, contributor (2011). China's Five-Year Plan, indigenous innovation, and technology transfers and outsourcing: Hearing before the US-China Economic and Security Review Commission. Washington, DC: United States-China Economic and Security Review Commission.

Ernst, Dieter (2011). Indigenous innovation and globalization: The challenge for China's standardization strategy. , La Jolla, CA: University of California Institute on Global Conflict and Cooperation; and Honolulu: East-West Center [Published in Chinese by the University of International Business and Economics Press in Beijing].

Ernst, Dieter (2009). A new geography of knowledge in the electronics industry? Asia’s role in global Innovation networks. East-West Center Policy Studies, no. 54. Honolulu: East-West Center.

Ernst, Dieter (2005). Complexity and Internationalization of Innovation—why is chip design moving to Asia? International Journal of Innovation Management 9(1): 47–73.

Ernst, Dieter (2005). Limits to modularity—reflections on recent developments in chip design. Industry and Innovation 12(3): 303-35.

Ernst, Dieter, and Linsu Kim (2002). Global production networks, knowledge diffusion, and local capability formation. Research Policy 31:1417–29.

Borrus, Michael, Dieter Ernst, and Stephen Haggard, eds. (2000).  International production networks in Asia: Rivalry or riches? London: Routledge.

2. China’s Innovation Policy and its Impact on Economic Relations Between China and the US

Funded by the US Department of Defense MINERVA Program, this project examines recent developments in China’s indigenous innovation policy and asks how serious a challenge China’s innovation push is for the United States. Extensive interviews with key players in China’s innovation system are used to examine the tension between China’s innovation policy and the surprisingly fragmented Chinese innovation system that includes diverse stakeholders with conflicting interests. Research focuses on major Chinese policies on intellectual property rights, government procurement, and the use of standardization as a tool of innovation policy, with a focus on high-tech industries. At the center of analysis is China’s fundamental challenge: How can China reconcile its primary objective of strengthening indigenous innovation with its leading role in international trade and its deep integration into global corporate networks of production and innovation?

Related Publications

Ernst, Dieter (2015). From catching up to forging ahead: China’s policies for semiconductors. Special Study. Honolulu: East-West Center.

Ernst, Dieter, and B. Naughton (2012). Global technology sourcing and China’s integrated circuit design industry: A Conceptual framework and preliminary research findings. Economics Working Paper No. 131. Honolulu: East-West Center.

Ernst,. Dieter (2011). China’s innovation policy is a wake-up call for America. AsiaPacific Issues, no.100. Honolulu: East-West Center.

Ernst, Dieter (2011). Indigenous innovation and globalization: The challenge for China's standardization strategy. La Jolla, CA: University of California at San Diego, Institute on Global Conflict and Cooperation; and East-West Center [Published in Chinese by the University of International Business and Economics Press in Beijing].

Ernst, Dieter (2011). Toward greater pragmatism? China’s approach to innovation and standardization. IGCC Policy Brief 18. San Diego, CA: University of California, Institute on Global Conflict and Cooperation.

Ernst, Dieter (2008). Can Chinese IT firms develop innovative capabilities within global knowledge networks? In Marguerite Gong Hancock, Henry S. Rowen, and William F. Miller, eds. China's quest for independent innovation (pp. 197–216). Stanford, CA: Walter H. Shorenstein Asia-Pacific Research Center.

Ernst, Dieter, and Barry Naugthon (2008). China’s emergent political economy—Insights from the IT industry. In C. McNally, ed. China’s emergent political economy—capitalism in the dragon’s lair (pp. 39–59). New York: Routledge.

Ernst, Dieter (2007). Beyond the global factory model: Innovative capabilities for upgrading China's IT industry. International Journal of Technology and Globalization 3(4): 437–60.

3. Innovation and Trade Policies and Corporate Strategies in Other Asian Countries That Are Major Exporters of Information and Communications Technology—India, South Korea, Taiwan, and Malaysia

Upgrading India’s Electronics Industry—Regulatory Reform and Industrial Policy

Drawing on extensive survey questionnaires, workshops and interviews with key industry players (both domestic and foreign), and relevant government agencies, this study identifies major challenges that India-based companies face in electronics manufacturing. The analysis culminates in detailed policy suggestions for regulatory reform and support policies needed to unblock barriers to investment in this industry and to stimulate innovation.

Related Publications

Ernst, Dieter (2015). Fast tracking India’s electronics manufacturing industry: Business environment and industrial policy. Report prepared for the World Bank. Washington, D.C: World Bank Group.

Ernst, Dieter (2014). Upgrading India’s electronics industry—regulatory reform and industrial policy. Special Study. Honolulu: East-West Center.

Trade and Innovation in Global Networks—Challenges for Asian Innovation Policies

As countries across Asia are progressively integrated into global networks of production and innovation—some more than others—they are faced with a fundamental challenge: How might progressive integration into global networks affect learning, capacity development, and innovation? Will network integration unlock new sources of industrial innovation through global technology sourcing? Or will it sap and erode the region’s accumulated capabilities? And what policies are needed to reconcile global network integration with national innovation goals?

This project explores how global corporate networks that integrate dispersed production, engineering, product development, and research across geographic borders create new challenges and opportunities for Asian innovation policies. The focus is on Taiwan, South Korea, and Malaysia.

Related Publications

Ernst, Dieter (forthcoming). The role of innovation for Malaysia’s economic development. Background study for the OECD innovation policy study on Malaysia. Paris: Organization for Economic Cooperation and Development.

Ernst, Dieter (2013). Industrial upgrading through low-cost and fast innovation—Taiwan's experience. Working Papers, Economics Series No. 133. Honolulu: East-West Center.

Ernst, Dieter (2012). Production and innovation networks, global. In Helmut K. Anheier and Mark Juergensmeyer, eds. Encyclopedia of global studies (pp. 1393–97). Thousand Oaks, CA: Sage.

Ernst, Dieter (2009). A new geography of knowledge in the electronics industry? Asia’s role in global innovation networks. Policy Studies No. 54. Honolulu: East-West Center.

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See all current East-West Center Research Projects.