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British electronics and competition with newly industrialising countries

Book/book chapter

This 1981 study of the consumer electronics industry in relation to competing trade between developing countries and the UK assesses the consumer electronics industry, the British electrical engineering and electronics industries, and their relevance to the global picture.

It deals with the nature of ‘comparative advantage’, and the impact of new technology and the terms and conditions under which this is transferred from developing to developed countries.

It drills down into the specifics of the ‘positive adjustment’ frequently encouraged in developing countries at this time to international competition rather than protection – in other words, working with the grain of market forces, rather than against.

It also outlines a question to be pursued, i.e. that there are seemingly irreconcilable assumptions behind two different views of the expansion of export industries in developing countries.

· One regards that this expansion is beneficial from the standpoint of employment and foreign-exchange earnings and regards with equanimity and even enthusiasm the prospect of their rapid growth.

· The other regards the particular form of export expansion as ‘dependent’, contributing little or nothing to development, is exploitative of labour, and has its apparent benefits negated by the wider economic and political costs of policies being tailored to attract foreign investment. On this interpretation the involvement of developing countries in international specialisation is only transitory and insecurely based.

This paper’s assessment is that the net benefits to current major exporters of electronics goods really are substantial but that there are dangers of extrapolating forward in time and to other countries. There are certainly genuine doubts about how far even the most sophisticated of newly industrialising countries can develop into the more technologically independent, higher value-added production to which they aspire. And the possibility that producers in developed countries are capable of 'saving' their industries by adopting highly capital intensive methods derived from process innovation is a warning to governments in developing countries which believe in the irreversibility of comparative advantage and may be unwittingly drawn into subsidising international competition to use the most advanced, labour-saving machinery.

Vincent Cable and Jeremy Clarke