Trade in intangibles and the global trade imbalance

Xiaolan Fu,Pervez Ghauri

doi:10.1111/twec.13038

Abstract

AbstractThe emergence of intangibles has brought significant challenges for our understanding of capitalism and international trade. This paper develops a framework for the measurement of global trade that integrates trade in intangibles and trade in goods and services to analyse the global trade imbalance. Through in‐depth discussions of the five modes through which trade in tangibles are carried out, it develops an integrated framework for the measurement of international trade. Applying this framework to the estimation of trade imbalance of a group of the world's top innovative countries, we see significant adjustments of their trade balance. The overall trade deficit of the United States reduces by nearly half of its size from USD763 billion to 390 billion in 2015, the year for which we have the latest trade in value‐added data. The paper argues that the true picture of global trade imbalance is of much smaller scale than the traditional trade statistics suggest. Policy responses to rebalance should be discussed using a framework that fully incorporates different types of trade activities in the twenty‐first century. Implications of the new conundrum of globalisation are also discussed.

Highlights

Trade imbalances have been a major issue that ignited the recent wave of anti-globalisation in some industrialised countries
An important question arises with regard to the channels and the measurement of the trade in intangibles, which include a range of intellectual properties such as patents, know-how, trademarks, copyrights, brands and trade secrets
While the trade literature has evolved from classical theory of trade in goods to theories of intra-industry trade, and recently to trade in tasks, trade in intangibles has not been fully integrated into the theory of international trade

Summary

| INTRODUCTION

Trade imbalances have been a major issue that ignited the recent wave of anti-globalisation in some industrialised countries. These other mechanisms include FDI, outsourcing, innovation collaboration and overseas R&D investment as part of the globalisation of R&D This is often organised by lead firms in global value chains or Global Corporate Innovation and Production Systems (Rikap & Lundvall, 2019) to gain benefits or even “extra profit” from the intangibles they control. In the case of Apple, the outsourcing company owns intellectual properties in the form of patents, designs, and branding and marketing channels and controls the GVC Such outsourcing manufacturing firms increasingly provide intellectual services rather than physical goods (Fort et al, 2018; Leamer, 2009). Other examples in addition to Apple include IBM, which increasingly offers data solutions rather than mainframes, and Pitney Bowes, which has abandoned the production of postage metres to offer logistics services Such intangible assets-intensive services capture a large proportion of trade flows.

11. Israel

Findings

| CONCLUSIONS