Guy Quaden: International trade - threats and opportunities in a
globalised world
Introduction by Mr Guy Quaden, Governor of the National Bank of Belgium, at the International
Conference 2010, Brussels, 14 October 2010.
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Ladies and Gentlemen,
On behalf of Governor Quaden and also on my behalf, as member of the Board of Directors
in charge of the Research Department, I am pleased and I indeed feel it an honour to have
the opportunity to welcome you to the sixth National Bank of Belgium Conference. As you will
have seen in the programme, Governor Quaden was initially scheduled to open the
Conference. Unfortunately, in view of unforeseen circumstances, he cannot be here with us
this morning. He kindly asked me to offer his apologies in that respect. Instead, he will
address you tomorrow at the closure of Conference, drawing the conclusions from the
discussions, and will outline his views on a topic he thinks is of the utmost importance.
At present, I would like to bid you once more a hearty welcome to our Conference. Held once
every two years since the year 2000, this regular event is one of the initiatives taken by the
Bank to promote scientific research in fields that lie at the heart of the concerns of all those
involved in economic life, and also to expand its own understanding of the functioning of the
economy.
The theme that has been chosen for this sixth edition, namely international trade and capital
flows, is of particular importance for our institution, just as it is for other observers of the
Belgian economy. Indeed, our country owes a good part of its prosperity to its particularly
high level of openness to trade. One consequence of being so open to the rest of the world is
of course the fact that our economy's growth depends heavily on world demand and on the
capacity of our domestic firms to tap new opportunities on foreign markets.
The close relationship linking economic growth to firms' performance on external markets
obviously does not only concern Belgium. Against a backdrop of the increased globalisation
that has rapidly taken hold over the last twenty years, it is a topic followed very closely by
economic stakeholders in all the industrialised nations. That can be mainly explained by the
rise in power of emerging countries, notably the central and eastern European states, India,
Brazil and, above all, China. Having benefited from both a strong trade liberalisation and
large foreign investment inflows, while taking advantage of low production costs and raising
their level of technological know-how, these economies now seem like fearsome competitors
for European and North American companies. These firms must therefore take up many
challenges in order to safeguard their competitive edge, both on their domestic markets and
their foreign outlets. At the same time, the emerging countries are large in size and exhibit
strong economic growth, too. Therefore, they also offer many opportunities for firms that are
able to seize them.
All these developments linked to the increasing globalisation of the economy obviously raise
a good many questions. These include the determinants of trade flows, strategies enabling
companies to gain a foothold in external markets, or the employment consequences of
importing goods from low-cost countries.
These issues have been extensively discussed in both the theoretical and empirical
economic literature. Since the mid-nineties, a growing segment of this literature has been
paying particular attention to the microeconomic determinants of international trade and
foreign investment. Researchers have made intensive use of firm-level databases specific to
different countries that have gradually become available for them.
This microeconomic approach has brought an important contribution to our understanding of
the causes and consequences of the globalisation, mainly because firm-level data make it
possible to point up things that do not show up in aggregate statistics.
If only one example had to be given, it would of course be the fact that trade is concentrated
among a few firms, which are in a better position than the others to bear the high costs
associated with entering foreign markets. Indeed, within each industry, firms of different
sizes, with different performances, and with different behaviour in terms of innovation and
international involvement, operate alongside each other. It is important to take this
heterogeneity into consideration to understand the dynamics of foreign trade.
This heterogeneity also has very important implications for economic policy, in the sense that
it helps to identify two levers that are likely to be activated as a means of boosting firms'
international involvement. The first consists of encouraging their expansion - and especially
that of SMEs - so as to give them the best preparation to go international, including policies
designed to foster their research and development efforts. The second lever concerns
measures aimed at cutting the costs of entering foreign markets, for instance by helping firms
to find potential new customers there or by removing administrative and regulatory barriers.
Another undeniable advantage of the microeconomic approach is that it helps bring out the
scale of reallocation of production factors from the weakest-performing firms towards those
whose business is more flourishing. Among other things, this enables economists to gain a
better understanding of the impact of globalisation on the labour market. Issues related to
this subject are naturally of paramount interest for policy-makers. Although resource
reallocation has always been a key determinant of economic growth, it also involves costs
that need to be taken into account. These costs are mainly related to updating workers' skills
and to innovation efforts that firms have to undertake to adapt to changes in comparative
advantages.
By organising this conference, the National Bank of Belgium is hoping to contribute to the
enrichment of this growing area of economics. To this end, we have invited several top
economists to present the findings of part of their research work here today. Four of them,
who will be keynote speakers, have already made a very significant contribution to the
literature on international trade over the last fifteen years. It is a great privilege for us to
welcome here today Andrew Bernard, Jonathan Eaton, Marc Melitz and Gianmarco
Ottaviano, who will give their perspective on the various questions dealt with during this
conference, and I would like to thank them warmly for accepting our invitation.
These two days will also be largely devoted to the presentation of eight original contributions
by research teams from different Belgian universities and the National Bank. The papers to
be presented are the outcome of research work started about a year and a half ago, under
the supervision of the Research Department, with the help of the Statistics Department and
the Microeconomic Analysis Service. All these projects use microeconomic data on Belgian
firms that we have made available for the different research teams. Moreover, these teams
have been meeting regularly to discuss the progress made with their work. These exchanges
of views also give the Bank a way of encouraging the sharing of knowledge and scientific
research. I hope that they have been beneficial for the participants and enabled them to
optimise the quality of their work.
Four of the contributions look in particular at the strategies put into place by internationally
active firms. In so doing, they tackle some very relevant questions on the factors that enable
firms to maintain their international competitiveness. For instance, do firms that go into many
different markets at once perform differently from those that only start exporting to a very
small number of destinations? What determines the supply of products that are sold on these
markets? What conditions make it more efficient for a firm to resort to foreign direct
investment rather than supplying markets through exports? How can firms keep their place
on the export markets in the face of competition from the emerging economies? These are
just some of the questions that will be dealt with in four of the presentations featured at this
conference.
Two other contributions should help to further deepen our understanding of the interaction
between firms' characteristics and the costs of entering foreign markets. One of them looks
more specifically at the influence of technological change on trade in services. The other one
deals with spillover effects, that is, the influence exporters are likely to have on the
productivity of other firms, as well as on their propensity to export in their turn.
And two last contributions focus on the impact of globalisation on the labour market. The first
of these endeavours to study its influence on demand for labour. The second one addresses
the question whether the costs related to employment adjustments vary significantly between
local firms and multinational enterprises.
In my opinion, the issues that will be debated today and tomorrow, during the four sessions
of the conference, are extremely interesting, not just for academic circles but also for those
involved either closely or indirectly in economic policy decision-making processes. And I
strongly urge members of the audience to join in with the discussants, who will be
commenting on each paper, and voice their own remarks and ideas.
May I take this early opportunity to thank the keynote speakers, the university researchers
and those from the Bank who have contributed to this conference, as well as the discussants
for stimulating the exchange of ideas over the next two days.
All that's left for me to do is to hand the floor to Peter Praet, who will be chairing the first
session of this 2010 Conference, and to wish you all two very pleasant and instructive days.
Thank you for your attention.