Week 7.2 - Industrialisation and Trade Flashcards
(158 cards)
1
Q
What is selective industrial policy?
A
It deliberately favors specific industries or firms against market signals to enhance efficiency, promote productivity growth, and manage industrial decline
2
Q
What are the key tools of industrial policy?
A
Tariff protection, subsidies, public investment, government support, public-private partnerships, and even coercive measures
3
Q
Why did industrial policy become marginalized?
A
The rise of neoliberalism reduced state intervention in favor of free-market policies
4
Q
Why has industrial policy re-emerged?
A
Shifts in trade norms and the 2008 Financial Crisis renewed interest in active industrial policy
5
Q
Why is manufacturing essential for economic development?
A
No country has achieved high-income status without industrialization and structural transformation
6
Q
How should industrial policy evolve beyond traditional manufacturing?
A
It should include broader sectors and account for technological and economic shifts
7
Q
What defines manufacturing?
A
The use of mechanization and chemical processes to produce goods
8
Q
Why does agriculture have limited productivity growth?
A
It is constrained by natural factors like soil, climate, and seasonal variations
9
Q
How does service sector productivity growth differ from manufacturing?
A
Service productivity often increases by shifting costs to consumers, e.g., self-checkouts
10
Q
Why is manufacturing a strong driver of productivity growth?
A
It enables faster productivity improvements compared to agriculture and services
11
Q
How does manufacturing contribute to other sectors?
A
It diffuses technologies, improves efficiency, and introduces organizational innovations
12
Q
Why can relying on primary commodities be problematic?
A
They suffer from declining terms of trade, making industrial diversification crucial
13
Q
What is manufacturing’s role in the formal economy?
A
It provides stable jobs, higher wages, and structured economic development
14
Q
How does agriculture complement industrialization?
A
Through technological applications, skills transfer, and infrastructure development
15
Q
What role does agriculture play in financing industrialization?
A
Agricultural exports provide capital for industrial investments
16
Q
How does rural labor contribute to industrial growth?
A
Educated workers from rural areas transition to manufacturing jobs
17
Q
Which country successfully integrated agriculture with industrialization?
A
Malaysia is a notable example of balancing agricultural and industrial growth
18
Q
What do critics of industrial policy argue?
A
State intervention distorts markets, misallocates capital, and fosters rent-seeking
19
Q
What is the “anti-interventionist” argument regarding Japan and South Korea?
A
Some argue they would have grown even faster with less state intervention
20
Q
What do proponents of industrial policy argue?
A
Industrialization is not spontaneous; state intervention has historically played a key role
21
Q
What is meant by “embedded autonomy” in industrial policy?
A
A balance where the state supports industries while avoiding excessive interference
22
Q
How does industrial policy address market failures?
A
It corrects inefficiencies in capital allocation and promotes strategic sectors
23
Q
What is the role of FDI in industrial policy?
A
FDI should be aligned with industrial policy objectives, not replace them
24
Q
What examples support industrial policy’s effectiveness?
A
The US IT sector, European Airbus, Nokia, and Japan’s auto industry
25
What are productive capabilities?
They determine what an economy can produce based on its factors of production
26
How can productive capabilities be improved?
By developing infrastructure, skills, and technology to better utilize endowments
27
What is a key challenge to implementing industrial policy today?
Many argue that there is little policy space due to global trade rules, but some leeway still exists
28
Can tariffs still be used for industrial policy?
Yes, as long as they are within WTO-bound limits
29
How do WTO rules affect industrial policy?
They restrict direct protectionist measures but leave room for indirect strategies
30
How can tax incentives support industrial development?
Corporate tax exemptions, accelerated depreciation, and investment allowances can encourage strategic investments
31
How can industry-university collaborations aid industrial policy?
Governments can direct research funding towards industries with strategic potential
32
What role can state-owned enterprises (SOEs) play?
They can enter sectors where the private sector is unwilling to invest
33
Can countries still raise tariffs under WTO rules?
Yes, but only up to their bound tariff limits
34
Can countries renegotiate bound tariffs?
Yes, but it is costly and requires compensation to other WTO members
35
What role do Balance of Payments (BOP) provisions play in industrial policy?
Countries can impose quantitative restrictions on imports under BOP grounds
36
Are all subsidies prohibited under WTO rules?
No, non-export subsidies for R&D, regional development, and environmental goals are permitted
37
Can Least Developed Countries (LDCs) use export subsidies?
Yes, LDCs and some developing countries have more flexibility in using them
38
What protections exist for FDI under WTO rules?
The Trade-Related Investment Measures (TRIMS) agreement protects foreign investors but allows joint venture requirements and technology transfer mandates
39
How do BTAs and RTAs affect industrial policy?
They often impose stricter rules than the WTO, further limiting policy options
40
What does Shadlen argue about policy space under the WTO?
He acknowledges some remaining space but warns that BTAs and RTAs reduce it further
41
How have right-wing populists influenced global trade agreements?
Leaders like Trump have promoted even more asymmetrical trade relations than the neoliberal WTO
42
What global challenges necessitate new approaches to industrial policy?
Climate change, automation, and shifting global trade patterns
43
How does industrial policy need to adapt to changing power dynamics and the climate crisis?
By integrating environmental sustainability and resilience into economic strategies
44
Why should industrial policy link economic upgrading to social outcomes?
To ensure that economic growth translates into improved social conditions and well-being
45
What are horizontal industrial policies?
Policies that apply to all firms, such as R&D tax credits
46
What are vertical industrial policies?
Policies that favor specific sectors or firms, such as targeted renewable energy subsidies
47
What was the traditional focus of industrial policy?
Manufacturing, export competitiveness, and top-down policy instruments
48
How should industrial policy evolve to support good jobs?
By broadening into services, supporting SMEs, and adopting a collaborative approach
49
Why does Rodrik say, “Good jobs require good firms”?
Because improving job quality depends on strengthening firms’ capabilities and growth
50
What was Ethiopia’s GDP growth between 2003-2014?
An average of 11% per year
51
What was the impact of Ethiopia’s Growth and Transformation Plan (2011-2014)?
Manufacturing grew at an average of 20% annually
52
How did Ethiopia’s life expectancy change between 1992 and 2013?
It increased from 48 to 63 years
53
How was Ethiopia’s cement industry successful?
Through import substitution and strong state-private sector cooperation
54
Why was Ethiopia’s floriculture sector a success?
It became a major export-oriented agro-manufacturing industry with both foreign and domestic investment
55
Why did Ethiopia’s leather industry struggle despite its endowments?
Growth was sluggish due to industry challenges, but it is improving
56
What is a global value chain (GVC)?
The full range of activities needed to bring a product from conception to final disposal
57
How has globalization affected production processes?
It has led to fragmented production across multiple countries, creating international supply chains
58
What happens when different stages of production take place in different countries?
The supply chain becomes global, forming a Global Value Chain (GVC)
59
How can countries participate in GVCs?
Through backward participation (buying inputs from GVC firms) or forward participation (selling inputs to GVC firms)
60
What new challenges arise in global production networks?
"Friend-shoring" (favoring politically aligned partners) and industry-specific trade alliances
61
What are the four types of economic upgrading?
Process upgrading (improving production methods)
Product upgrading (higher-value goods)
Functional upgrading (moving to higher-value tasks)
Chain upgrading (shifting to more profitable sectors)
62
What does social upgrading involve, according to the ILO?
Better work access, improved working conditions, stronger labor rights, and social protection
63
What does Kaplinsky argue about economic rents in GVCs?
Developed countries capture most rents, maintaining control over innovation
64
Why is systemic efficiency important in GVCs?
To enhance competitiveness across the value chain
65
What does Kaplinsky conclude about competition in GVCs?
Where barriers to entry are low, competition increases, leading to worse outcomes
66
How do GVCs expose countries to new economic benefits?
Through increased trade, foreign direct investment (FDI), and technology spillovers
67
How does GVC participation improve national productivity?
By giving firms access to larger markets, pushing them to upgrade capabilities
68
How does GVC participation impact a country's reputation?
It enhances credibility, making it easier to establish new business relationships
69
What impact do GVCs have on female employment?
They create new job opportunities, reducing women's economic dependency
70
Why does GVC participation create an urgency to upgrade skills?
To remain competitive as global supply chains evolve
71
How can GVCs trap developing countries?
By keeping them stuck in low-value-added activities
72
Why are developing economies vulnerable in GVCs?
Demand and supply fluctuations can severely impact their industries
73
What is the "race to the bottom" in GVCs?
Countries may lower labor and environmental standards to attract foreign investment
74
How does GVC participation increase informal work?
It leads to outsourcing and precarious employment, making it harder to enforce labor rights
75
Why is skill upgrading urgent for developing economies in GVCs?
To avoid stagnation in low-skilled, low-wage sectors
76
How can governments assist local producers in entering GVCs?
By providing financial support, infrastructure, and training programs
77
How can industrial policy help firms move up the value chain?
By improving design capabilities, negotiating trade deals, and enhancing infrastructure
78
What kinds of investments can governments make to support GVC participation?
Transport, energy, ICT, worker training, and financial intermediation
79
Why must developing countries negotiate policy flexibility?
To retain space for industrial policy within multilateral and regional agreements
80
How can industrial policy be adapted to fragmented global trade systems?
By developing strategies that work around restrictions while maximizing national benefits
81
Why must industrial policy target good jobs and worker-friendly technologies?
To ensure that economic growth leads to equitable employment and sustainable development
82
Why should policymakers look beyond traditional "developmental states"?
Other models, such as Sweden and Finland, offer innovative industrial strategies
83
How should industrial policy align with environmental sustainability?
By incorporating green technologies and low-carbon industries
84
Why does agricultural development require industrial policy?
Because modernizing agriculture relies on industrial inputs like machinery, fertilizers, and logistics
85
Why does industrial policy involve risk-taking?
Successful policies require experimentation, and some initiatives may fail before succeeding
86
What will remain a challenge for industrial policy in the future?
The persistence of mismanaged states and governance failures
87
Does economic upgrading always lead to social upgrading?
No, firms can improve productivity and profitability without improving worker conditions
88
What are common problems faced by workers in global value chains?
Insecure employment, poor working conditions, and lack of worker protections
89
What role do lead firms play in Global Production Networks (GPNs)?
They dominate production chains and set conditions for suppliers
90
What countries have seen major production expansion in GPNs?
China, India, and Brazil have experienced significant growth
91
What are the opportunities from GPN participation?
Economic upgrading, access to larger markets, and technology transfer
92
What are the challenges of working in GPNs?
High commercial pressures, strict quality standards, and buyer-driven demands
93
How has employment changed due to GPNs?
Increased jobs in manufacturing, agriculture, and services, but with growing insecurity
94
How have GPNs impacted women and migrant workers?
They have gained more wage employment but often in low-paid and insecure jobs
95
What is economic upgrading?
Moving to higher-value activities that enhance technology, skills, and profitability
96
What is process upgrading?
Improving production efficiency, often reducing the need for unskilled labor
97
What is product upgrading?
Producing higher-quality or more advanced goods, requiring skilled workers
98
What is functional upgrading?
Expanding into higher-value activities like branding, logistics, and R&D
99
What is chain upgrading?
Shifting to more advanced industries or markets
100
What is social upgrading?
Improving workers' rights, job quality, and working conditions
101
What measurable standards define social upgrading?
Wages, working hours, employment type, and social protections
102
Why doesn’t economic upgrading always lead to social upgrading?
Firms can increase profits while maintaining poor working conditions
103
What example highlights this disconnect between economic upgrading and social upgrading?
Foxconn in China achieved economic success but faced severe worker exploitation
104
What determines a firm's access to upgrading opportunities?
Its position within the value chain
105
What are the challenges in low-skilled, labor-intensive jobs?
High job numbers but low wages, job insecurity, and poor conditions
106
What is medium-skilled, mixed-technology work like?
More stable jobs but under pressure from global buyers
107
What defines high-skilled, technology-intensive work?
Fewer jobs but higher pay and job security
108
What are the advantages of knowledge-intensive jobs?
High wages, stability, and career opportunities but require advanced education
109
How can economic upgrading lead to social downgrading?
By increasing job insecurity and labor exploitation despite business growth
110
What did the Moroccan garment industry case study show?
Skilled workers benefited from economic upgrading, but irregular workers were excluded
111
How does labor-intensive upgrading occur?
Workers transition from farming to factory jobs with better standards
112
What is higher-skill upgrading?
Workers move into technology- and knowledge-based industries
113
Why do some workers struggle to transition into better jobs?
Women, migrants, and casual workers often face barriers to skill upgrading
114
Why must social upgrading be actively promoted?
Market forces alone do not ensure better working conditions
115
What interventions can support social upgrading?
Trade unions, worker representation, and company-led ethical initiatives
116
What role do governments play in social upgrading?
Enforcing labor laws and workplace protections
117
How can international agreements promote better labor standards?
Through ILO and OECD guidelines that set global expectations for worker rights
118
How do regional-bilateral agreements affect industrial policy?
They impose stricter constraints, making it harder for developing countries to alter comparative advantages
119
Do developing countries have more flexibility under WTO or regional-bilateral agreements?
WTO allows some industrial policy flexibility, but regional-bilateral agreements severely restrict it
120
What industrial policy tools remain under WTO?
Limited tariff adjustments, R&D subsidies, human capital investment, and some investment regulations
121
How does WTO impact patent policies?
It allows limited flexibility, such as compulsory licenses under certain conditions
122
How do regional-bilateral agreements compare to WTO?
They offer better market access but impose stricter industrial policy constraints
123
What restrictions do regional-bilateral agreements impose?
No tariff flexibility, removal of subsidies, stronger investment and intellectual property protections
124
What are two key development strategies?
Exploiting existing comparative advantages (e.g. low-wage labor) and creating new comparative advantages (e.g. industrial policies)
125
How did Korea and Taiwan develop successfully?
By using tariffs, subsidies, FDI regulation, weak intellectual property laws, and local content requirements
126
Why is it harder for developing countries to follow Korea and Taiwan’s model today?
WTO and regional-bilateral agreements restrict these industrial policies
127
What are the positive aspects of WTO trade policy for developing countries?
Market access, removal of discriminatory barriers, and a dispute resolution system
128
What trade barriers must developing countries reduce under WTO?
Non-tariff barriers like quotas and import licenses must be replaced with bound tariffs
129
Are export subsidies allowed under WTO?
No, except for limited cases like research, development, and human capital subsidies
130
What is a "safeguard mechanism" under WTO?
A temporary trade restriction to protect industries but under strict regulations
131
What investment policies are still allowed under WTO?
Joint ventures, technology transfer requirements, and local hiring/training regulations
132
Does WTO eliminate all industrial policy space?
No, but it significantly limits the tools available to developing countries
133
What is the TRIPS Agreement?
A WTO rule requiring all countries to grant 20-year patents, including for pharmaceuticals
134
Can countries issue compulsory licenses for patents?
Yes, but only under strict conditions, such as public health emergencies
135
How can countries maintain flexibility in patent policies under WTO?
By setting stricter patent granting conditions or requiring local manufacturing (e.g. Brazil)
136
How do regional-bilateral agreements compare to WTO in terms of tariffs?
They require tariffs to be lowered even further, often to zero
137
Why are performance requirements banned in regional-bilateral agreements?
To prevent governments from forcing foreign firms to use local suppliers or transfer technology
138
How do clinical trial data exclusivity rules impact generic drugs?
They delay the production of generics by extending market exclusivity for brand-name drugs
139
What is the key trade-off for developing countries in regional-bilateral agreements?
Preferential market access versus losing industrial policy flexibility
140
Why do some developing countries sign regional-bilateral agreements despite the restrictions?
To attract foreign investment and secure immediate market access
141
How do major economies pressure developing countries into these agreements?
Through economic leverage and diplomatic influence (e.g., US, EU)
142
Why do analysts worry about these agreements?
They may trap developing countries in low-value production rather than allowing industrial upgrading
143
What led to the rise of industrial policy in the 1960s and 1970s?
Industrial policy rose due to the failure of market-focused policies and the recognition of market failures, with governments intervening to correct them, though outcomes varied, particularly in Latin America
144
Why was there a shift away from industrial policy in the 1980s?
The 1980s saw the rise of market fundamentalism and the Washington Consensus, which emphasized government failures and replaced industrial policies with liberalization and deregulation
145
What role did East Asia and Sub-Saharan Africa play in challenging the Washington Consensus?
The success of East Asian economies highlighted the value of industrial policy, while SSA’s declining per capita income and deindustrialization challenged the effectiveness of market fundamentalism
146
What caused the renewed focus on industrial policy after 2008?
The global recession exposed market failures, and countries like China and Brazil demonstrated the effectiveness of industrial policy, renewing interest even in advanced economies that had always used it, such as in the banking sector
147
How do economists today differ in their support for industrial policy?
While critics of vertical policies prefer broad horizontal interventions like exchange rate management, there is growing recognition that structural transformation requires more targeted strategies
148
What is the emerging consensus on structural transformation and economic growth?
Economic theory emphasizes the role of technological progress—accounting for 70% of per capita income growth—and the importance of reducing gaps between best and average practices through knowledge diffusion
149
Why are markets insufficient to drive knowledge-based growth?
Because markets underinvest in learning and knowledge-intensive activities, industrial policy is necessary to support innovation and diffusion, especially given that knowledge is a non-rival good vulnerable to copying
150
How can industrial policy help overcome both market and government failures?
By supporting institutions like Brazil’s BNDES, which resisted political pressure, and promoting knowledge spillovers and learning even amid poor governance
151
What is the importance of dynamic comparative advantage in industrial policy?
Countries should look beyond current comparative advantage and focus on building learning capabilities, promoting innovation, and absorbing technology to sustain long-term development
152
What causes the failure of industrial policy in developing countries?
Capabilities failures—such as weak institutions or lack of knowledge—are major obstacles, and policies must be feasible within current governance constraints and designed to improve these capacities
153
How did South Korea use industrial policy for transformation from the 1960s to 1980s?
The government and chaebols systematically studied and addressed missing links in global value chains, enabling targeted industrial upgrading and transformation
154
What are the four neglected theoretical issues in industrial policy identified by Chang & Andreoni (2020)?
The authors identify commitment under uncertainty, learning in production, macroeconomic management, and conflict management as critical but overlooked dimensions in industrial policy
155
How have global value chains (GVCs) reshaped industrial policy needs?
GVCs allow entry into manufacturing but often trap countries in low-value roles with limited learning; Chang & Andreoni suggest focusing on broad capability domains like ICT or food processing to enable cross-sectoral upgrading
156
What is the impact of financialization on industrial policy?
The shift to short-term returns has weakened reinvestment at corporate and national levels, while TNCs spread this logic into developing economies, requiring reforms in corporate governance, financial insulation, and incentive structures
157
What is meant by the "new imperialism" limiting industrial policy space?
Since the 1980s, WTO rules, FTAs, and investment treaties have restricted tools like tariffs and SOEs, but policy space still exists via weak enforcement, unbound tariffs, and tools like procurement and R&D subsidies
158
According to Chang & Andreoni, how should industrial policy be reconceptualized in the 21st century?
Industrial policy must reflect uncertainty and learning, align with macro conditions, manage conflicts, and respond to global changes like GVCs and financialization—not by returning to old models, but adapting them with new tools and alliances
