Lectures 9&10 Flashcards
After the 2nd unbundling, what did Baldwin (2016) see?
He saw a continuation of the 2nd unbundling and a move toward a 3rd unbundling
After the 2nd unbundling, what did Livesey (2017) see?
Saw the end of the 2nd unbundling and a return to more bundling (production goes back closer to consumption) -> Trump times… Now Biden’s time
Three forces of future globalization
- Forces that may deepen or slow down the 2nd unbundling
- 3rd unbundling: lower face-to-face costs
- The “robotization” or “compufacturing” of industries (possible new industrial revolution affecting the future of jobs, and likely to have large impacts on international trade and on economic policies in developed and emerging counties)
5 forces that may deepen or slow down the 2nd unbundling
A) ICT costs (Information and Communication Technology) B) Transportation costs C) Barriers to trade D) Issues related to production E) Issues related to demand
A) ICT costs (Information and Communication Technology)
- Moore’s, Gilder’s and Metcalfe’s Laws point to continued reduction in the cost of collecting, managing and transmitting data -> With communication costs down, fragmenting and offshoring are likely to continue
- BUT lower IT costs: more computing power -> More automation, more robots, less need to reply on cheap labor -> Less offshoring and thus more “onshoring”
B) Transportation costs
- Oil is a significant part of transportation and will continue to be so
- Oil price uncertainty and volatility make fragmentation of production uncertain
- Falling oil prices facilitated the 2nd unbundling during its early years but hindered it after 2000
- From the turn of the century, however, the 2nd unbundling has progressed despite sharply raising oil prices
Production unbundling started in an era of _______________. Oil prices were quite _________, falling gently for 10 years.
- low energy costs
- stable
True or false?
Oil price uncertainty and volatility make fragmentation of production uncertain
True
C) Barriers to trade
- The 2008 financial crises has not led to protectionism despite similarities with the Great Depression era
- But barriers to trade have started to increase over the recent months
True or false?
Barriers to trade have started to decrease over the recent months
False!
*Increase
Protectionism and trade
- World trade climbed back to pre-financial crises levels after a few years without widespread protectionist policies
- But there is a lot of uncertainty today about the future of the international trade environment (share of aggregate risks)
What will the current “trade war” between the US and China do to supply chains?
- Will it make firms stay in China because they have invested there?
- Will it induce firms to shift back production in the US and avoid US tariffs on imports from China?
- Will it induce firms to produce in other countries such as Vietnam, Cambodia, etc to avoid US tariffs on imports from China?
- How will it change with the new US president Joe Biden?
D) Issues related to production (4)
- Climate change:
— Increasing risks of natural disasters perturbing supply chain coordination - Smaller differences in wages around the world:
— China wages increase, making production in China less interesting than it used to be
— The same is/will be happening in other parts of the world - Cheaper/more efficient robots:
— Location of production less determined by supply considerations -> The first robots were expensive and specific (only large firms (automobiles) could use them. Robots are becoming cheaper and more versatile, leading to more widespread use - 3D printing: Fewer pieces needed to be assembled thanks to 3D printing and other technologies decreasing trade in intermediate products
True or false?
Robots are becoming cheaper and more versatile, leading to more widespread use
True
True or false?
Technological changes are making the supply chains shorter (less production stages) and less reliant on low-skilled labor. They are also decreasing the share/role of international trade for manufacturing products
True
E) Issues related to demand (3)
- Environmental protection and constraints favouring quality and long lasting products at the expense of cheap and dirty products
- Customization of products
- Planned product obsolescence
E) Issues related to demand - Environmental protection
Environmental protection and constraints favouring quality and long lasting products at the expense of cheap and dirty products
E) Issues related to demand - Customization of products
Customization of products: It is increasingly easier and cheaper to produce any good specifically to each customer’s tastes
- Economies of scale still exist but it is less necessary to produce the same products over and over to exploit them
- With customization, it is more important to be near the consumers
- Technology makes it possible to re-bundle production and consumption
E) Issues related to demand - Planned product obsolescence
Planned product obsolescence is becoming less acceptable
- See the controversy about Apple and its battery life, also about the regular introduction of new models
- Planned obsolescence is useful to have additional demand for a product in a saturated market (and thus protection lower average cost, etc.)
- Less acceptable planned obsolescence and higher product quality/durability might affect how and where production takes place (smaller scale of production)
True or false?
Consumers’ demand for higher quality/more durable products that are specific to their individual tastes may also contribute to affect the 2nd unbundling
True
The direction of globalization is increasingly uncertain due to ______________.
The likely outcome of all this is a wider distribution of different strategies adopted by firms and sectors regarding where to produce, how to produce and what to produce.
This may spell troubles for some emerging/developing countries regarding their development/attractiveness.
- Technological changes making unbundling increasingly cheaper but also increasingly unnecessary
- Political forces making countries increasingly nationalist and for some protectionist
- Consumers being increasingly torn between buying more and cheaper products and their impacts on the environment
3rd unbundling: What happens when the face-to-face constraint is relaxed by technology?
- Telepresence makes widely separated conference facilities look like everyone is in the same room
- Cisco telepresence technology (makes widely separated conference facilities look like everyone is in the same room)
- Zoom and related software fulfill the same purpose
- New collaborative platforms are rising fast: Skype for Business, Slack, Trello, Basecamp, Zoom, Discord
Telerobotics and remote intelligence
- Tele-operation indicates operation of a machine at a distance
- The robot avatar can move or look around at the command of the remote person
- Long distance surgery (Canada)
- But also remote warfare
