Industrial Policy Tools Research Articles

Patent policy and public health in developing countries: lessons from Japan

The relevance of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement to developing countries has been widely discussed at international fora particularly regarding the impact of pharmaceutical product patents. Product patents restrict the ability of local firms to manufacture copies of new drugs possibly leading to less competition higher drug prices and lower welfare in developing countries. These are the unintended public health consequences of what is primarily an industrial policy tool. In this context we examine the Japanese experience of introducing product patents in 1976 which also attracted heated discussion at that time. The anticipated price increase and product shortage were largely avoided while the number of available products increased. Negative consequences of product patents were largely averted through a series of well-coordinated policy instruments the examination of which may provide suggestions for developing countries. (excerpt)

Executioner or Disciplinarian: WTO Accession and the Chinese Auto Industry

Negotiations for China's accession to the WTO provoked a debate between pessimists who believed that opening the economy would lead to a flood of imports and a de-nationalization of manufacturing industry, and those who believed that it would spur rationalization of state-owned enterprises, lock in domestic reforms, attract foreign investment, and open the way for trade expansion. The industry most frequently mentioned as endangered was motor vehicles, where an awkward combination of Stalinist central planning with localized autarky had resulted in a proliferation of inefficient producers. With the partial exception of two investments by Volkswagen, initial joint ventures in assembly operations failed miserably. China's commitments on joining the WTO banned (or at least complicated) many of the most important industrial policy tools it had used to promote the auto industry since the opening to joint ventures in the early 1980s'including performance requirements, high tariffs, and numerical quotas. After accession in 2001, tariffs fell steadily while output and foreign investment soared. The Chinese government moved towards a lighter-handed but more effective form of industrial policy that reduced top-down planning while expanding market incentives and scope for managerial freedom. Rather than destroying industrial policy for the auto industry, WTO accession constrained and disciplined it. When foreign auto firms and their governments pushed for more aggressive protection of trademarks and other intellectual property rights under the WTO, the Chinese government initially stalled. Continuing pressure then tilted the balance of state policy toward promotion of independent design, whether by state-owned enterprises testing the boundaries of their joint ventures with foreign multinationals, or by audacious smaller firms purchasing foreign designs and technology to complement inexpensive local parts and assembly, thereby creating the conditions for the emergence of a more competitive industry.

Picking Winners: From Technology Catch-up to the Space Race in Japan

Picking Winners: From Technology Catch-up to the Space Race in Japan. By Saadia Pekkanen. Stanford: Stanford University Press, 2003. 304 pages, $45.00.The purpose of this book is to use the postwar Japanese political-economic experience to answer a question that has divided Japan and other Asian scholars for over two decades, namely, how governments choose which industries to favor. This is an important question for both intellectual and policy reasons. Indeed, answering this question will help determine which of two very different points of view better explains Japan's postwar trajectory and will assist the governments of the developing world to design and enact policies that best serve their economic development goals. Saadia Pekkanen addresses this question with a rich variety of quantitative and qualitative data, the former captured in an expanded data set that breaks down the Japanese economy and trade and industrial policy tools by two-digit economic sectors, and the latter involving short case discussions of specific industrial sectors and an extended case study of the commercial space industry.

What Happened to the Japanese Model?

AbstractJapan's steep postwar growth was nested in a political economy built around producer‐oriented policies: by fostering the growth of large firms using the tools of industrial policy, the government could jumpstart development. Many large firms, and their employees, benefited indirectly from this growth program, and very small firms and industries not included in the growth model were compensated through preferential policies or subsidies. Japan's social contract evolved around this system, having as its centerpiece lifetime employment. The government spent more resources on supporting exporting industries and compensating domestic ones than on building a forward‐looking welfare system. Japan's decade‐long economic downturn marks a structural transition towards a postindustrial society. While excelling in producing tangibles, Japan has fallen behind in fostering modern industries, including services; the country also lacks a welfare system to handle increasing structural unemployment that this transition brings about. Without a commitment towards a welfare system and a welfare society, and a reorientation of the social contract towards citizens, Japan is unlikely to transition successfully.

Better Than a Casino: Some Good News from the Frontline of China's Capital Market Reforms

Throughout the 1990s, China's stock market was developed as a tool of industrial policy. It was used to supply capital to state-owned enterprises that remained controlled by the state and whose performance usually declined after listing. Secondary market trading was poorly regulated, again partly for political reasons. As a result, the market has become infamous for extreme volatility, price manipulation and grossly unreliable accounting. This is a problem for the government since, with the withering of the SOE sector, the stock market is ill-equipped to support other important economic policies. The government now needs to improve the efficiency of industry, to raise capital to finance its own liabilities and to put into place a modern pensions system. As a result, the stock market is being quietly but radically reformed. Listed companies are quietly being allowed to privatise. The national regulatory framework has been rationalised and shareholders have been allowed to pursue civil compensation claims against firms in the courts. Financial intermediaries are being privatised and the fund sector is being rapidly expanded. These changes will have an important effect over the next decade, though their immediate impact is negative.

Property Tax in a City-State: The Case of Singapore

This paper examines the nature and structure of property tax in Singapore, an affluent and rapidly ageing city state in Southeast Asia. While the property tax based on annual rental value has a long history and is a well accepted tax in Singapore, it is only about two decades ago that the process of modernizing the tax began. The paper highlights three characteristics of Singapore's property tax. The first concerns the activist and aggressive use of the property tax as an industrial policy and macroeconomic stabilization tool. The second is the close relationship between public housing, property tax, and mandatory savings scheme. As a result, this scheme has essentially substituted for the mortgage finance market in Singapore. Third, there exist large disparities in property tax treatment of public housing which is very lightly taxed, and the treatment of non-residential properties, which are relatively more heavily taxed. The paper suggests a need for more transparent assessment procedures, particularly in the current scenario of deflationary pressures in the property sector. The paper also suggests that the future revenue potential of Singapore's property tax is limited.

Mise en évidence d'une cartographie des technologies du futur sur la base d'une enquête Delphi : une application au domaine du vivant

Recent works in the theory of technical change show the effect of irreversibility and lock-in in the diffusion and creation of innovation processes, which are able to stop the development of a generic technology. Therefore, industrial politics have a major role in selecting and supporting the innovative process. The purpose of this paper is to prove the possibility to derive from a Delphi type technology survey a typology of future innovations in terms of generic technology. In such a way it is possible to get a better understanding of the industrial dynamics and design an interesting tool for industrial policy as far as the target is to develop stable technological trajectories..

Antidumping in Supercomputers or Supercomputing in Antidumping? The Cray-NEC Case

The U.S. antidumping case in vector supercomputers – the Cray-NEC case – resulted in the imposition of the highest antidumping duties in the entire U.S. antidumping history (454% for NEC, the main defendant). This, along with the considerable attention attracted by the dispute, would be suff icient ground for a closer examination of the case. Three additional aspects of the Cray -NEC case, however, render it particularly relevant to the economics and law of antidumping: (1) the Cray-NEC case offers an opportunity to look at cases of dumping in the context of a product where antidumping could be a likely policy option – though such a policy is probably a second best option. There are, indeed, two situations where dumping could be considered as a serious source of concern and cause of policy intervent ion: predatory and strategic dumping. Predatory dumping is more likely to occur where only a few firms are involved, such as in the supercomputer industry. Strategic dumping requires static or dynamic scale economies which seem also likely in this case; (2) the Cray-NEC case offers an opportunity to look at antidumping policy as a component of industrial policy. The supercomputer industry has so far been shaped by two other industrial policy tools: active subsidy through RD (3) the supercomputer case raises key issues about antidumping procedures per se, from the point of view of both determination and enforcement. Supercomputers as a product do not seem really subject to markets. The number of transactions, realized through auctioning, is very small, and the products sold are highly diversified. In these circumstances, is it meaningful to talk about a «market» for supercomputers – hence to apply GATT antidumping rules which presuppose that there is a market? Turning to enforcement, the Cray -NEC case offers an interesting development: if Japanese supercomputers cannot be sold in the U.S. market, they can be located in Japan, and the ir services sold to U.S. potential buyers from there (through appropriate telecommunications). In other words, the Cray-NEC case may offer the first clear example of trade in services as a substitute to trade in goods – raising a host of issues regarding a ntidumping procedures.

Japan--the system that soured: the rise and fall of the Japanese economic miracle

After seven long years of economic malaise, it is clear that something has gone awry in Japan. Unless Japan undertakes sweeping reform, official forecasts now warn, growth will steadily dwindle. How could the world's most acclaimed economic miracle have stumbled so badly? As this important book explains, the root of the problem is that Japan is still mired in the structures, policies, and mental habits of the 1950s-1960s. Four decades ago while in the phase of its economic evolution, policies that gave rise to Japan, Inc. made a lot of sense. By the 1970s and 1980s, when Japan had become a more mature economy, catch-up economics had become passe, even counterproductive. Even worse, in response to the oil shocks, Japan increasingly used its industrial policy tools. not to promote winners, but to shield losers from competition at home and abroad. Japan's well-known aversion to imports is part and parcel of this politically understandable, but economically self-defeating, pattern. The end result is a deformed dual economy unique in the industrial world. Now this dualism is sapping the strength of the entire economy. The protection of the weak is driving Japan's most inefficient companies to invest offshore instead of at home. Without sweeping reform, real recovery will prove elusive. The challenging thesis articulated in this book is receiving widespread media attention in the United States and Japan and is sure to provoke continuing debate and controversy.

Defence procurement as an industrial policy tool: The Spanish experience

The procurement of military systems may be used as a tool to achieve industrial objectives. Medium‐sized industrialised countries have the choice of procuring foreign systems on the best economic terms available, or instead using defence procurement as a tool to build up domestic industrial and technological capabilities. The Spanish experience illustrates the difficulties in moving from a procurement approach that only occasionally considered industrial policy issues, to procedures that systematically attempted to use defence procurement to support domestic industries. The problems that emerged suggest the limits to using defence procurement as an industrial policy tool, and provide an indication of the range of feasible objectives attainable by the defence procurement policies of a middle‐sized, industrialised country.

Growth, Economies of Scale, and Targeting in Japan (1955-1990)

This paper explores the usage of various industrial policy tools in Japan. Contrary to the conventional wisdom, the authors find that a disproportionate amount of Japanese targeting occurred in low-growth sectors and sectors with decreasing returns to scale. In addition, they find no evidence that productivity was enhanced as a result of industrial policy measures. Copyright 1996 by MIT Press.

From Failure to Fortune? European Electronics in a Changing World Economy

European industrial policy for high technology must be reformulated. First, past support of producers over users has undermined producers by not creating a sophisticated market, the single most powerful industrial policy tool. Second, global trade and investment are regionalizing. Policies aimed at rejuvenating sectors such as electronics must consider that regionalization will make access to technology and markets increasingly asymmetrical. The concepts of supply base and architecture of supply clarify this understanding. Europe must not just refocus domestic support but also secure access to the supply bases of the other two regions, America and Asia.

Innovation in Products and Production Systems: The European Community Programmes and Eureka Famos Projects

Abstract Market globalization calls for continuous improvements in products performances and qualities. This depends on evolution-innovation in design and manufacturing. In this paper, following the presentation of the technological change matrix, it is shown how EC Programmes and the EUREKA Initiative, related to Research and Innovation, are acting as tools of Industrial Policy in Europe. A model is presented that links: the evolution-innovation cycles; the actors involved (from Companies to Research Institutions); the activation mechanisms (Programmes and Initiatives). By using such a model, EC Programmes and EUREKA FAMOS Projects, promoting Research and Innovation in design and manufacturing, are presented and discussed.

Procurement policy as a tool of industrial policy

(1990). Procurement policy as a tool of industrial policy. International Review of Applied Economics: Vol. 4, No. 2, pp. 182-198.