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This paper studies the role of trade for the joint uptake of AI-enabled automation in manufacturing and engineering. It develops an agent-based model (ABM) where the agents are heterogeneous manufacturers and engineering firms. The model features two technology-related business models: engineering as a face-to-face consultancy service and engineering as automated software. Switching to the software technology is costly for both manufacturers and engineers, but the cost declines with the number of firms having made the leap due to network effects. The simulations start with a scenario where all firms are in the consultancy business model and trace out the path of software adoption over time. The software adoption rate follows an S-shaped curve for manufacturers and a boom and bust cycle for engineers. Trade affects the cut-off productivity rate at which manufacturers switch technology, the shape of the adoption rate curve, and the incentives for engineers to develop software. In a two-country model with a high and low-wage country, the low wage country adopts software early and import consultancy services from the high-wage country, a pattern similar to China's trade and AI development."

Standing at 24% in 2018, India's female labour force participation is only half of the global average (48%). At the same time, India has one of the widest gender wage gaps in the world and women are less likely to be employed in the formal sector compared to men. This study focuses on the role of international trade as a source of increased competitive pressure in domestic markets, and how it affects relative wages and formal employment between men and women. Using the Revealed Symmetrical Comparative Advantage index, sectors of comparative advantage and disadvantage are identified and matched on Indian labour force surveys that contain information on sectoral employment and earnings. We find that sectors of comparative advantage in services have the lowest gender wage gap, with women earning 24% less than their male counterpart, while women in manufacturing earned on average 40% less than male workers. The Oaxaca-Blinder decomposition shows that the total gender wage gap in sectors of comparative advantage in services are minor while it is quite substantial in manufacturing, regardless of the comparative advantage. The study concludes that trade goes hand in hand with a smaller gender wage gap in the services sectors as it allows women to leverage their skills better than in manufacturing.

The increasingly rapid uptake of digital technologies is launching the global economy into the ‘Fourth Industrial Revolution’ and the next transformative wave of globalisation. Trade in merchandise is in long-run relative decline; trade in services, especially e services, is on a long-term relative upward trend - and associated cross-border data flows are growing exponentially. These structural shifts, and their impacts on competitiveness, are set to intensify. The G20 must assert a leadership role by signalling best practice policy and regulatory settings, including sustained openness to international trade, investment and data flows, so every nation can reap the productivity gains of the digital age. This Working Paper has been prepared as background for a short Policy Brief for the 2020 THINK20 Taskforce 1: Trade and Investment.

This paper analyses the role of telecommunications as the means of transport for services exports with a focus on computer and other business services from India. Telecommunications are typically dominated by major suppliers which need to be regulated and exposed to competition to fulfil their role. The paper notes that India took sweeping unilateral reforms in the telecommunications sector in the 1990s, but has been reluctant to bind reforms in international trade agreements. It goes on to show that India is lagging other lower middle income countries on international measures of connectivity and that connectivity is strongly related to timely adjustment of policy to changing market conditions and technology. Second, using gravity estimates, I find that connectivity is an important driver for trade in computer and other business services. In particular, broadband connectivity significantly reduces the rate at which exports fall off with distance and extends the reach of exports to distant markets.

• Reduserte inntektsoverføringer og fall i turisme vil ha effekter for de norske hovedsamarbeidslandene. • Effektene er store og vil trolig vare en tid (flere år). • Bortfall av turisme kan i disse landene ramme 9 millioner direkte, og 23 millioner i et bredere perspektiv. • Fall i inntektsoverføringer kan ha store negative effekter, og er spesielt viktig for Nepal, Ghana, Myanmar og Uganda. • Økonomiske tiltak i OECD-landene er innrettet slik at de kompenserer arbeidsfolk og små bedrifter for tap som følge av nedstenging av aktivitetene de lever av. Et lignende prinsipp kan legges til grunn for kortsiktig bistand for å avverge at flere faller under fattigdomsgrensen.

Telecommunications constitute the core of the digital economy. EU regulation of the sector aims at promoting connectivity and access to very high capacity networks. To that end, and to keep up with technical developments, the regulatory framework is revised from time to time with a view to roll back regulation as competitive markets take hold. Whether or not an activity falls under the regulatory framework for telecommunications, which is the main category under electronic communications services, makes a huge difference as the recent ECJ decision on Skype illustrates. Is Skype a telecommunications company - and why does it matter?

About 40% of employment in manufacturing is in services functions. This paper develops a measure of narrow outsourcing, matching services functions performed by workers inside manufacturing firms to the same services functions provided by outside suppliers. Narrow outsourcing is entered into labour demand functions where labour is broken down on business functions using OECD data combined with the 2016 releases of the World Input Output Database (WIOD). The impact of narrow offshoring on manufacturing labour demand is small on average but depends strongly on the complexity of the value chain, the policy environment and technology. Manufacturing employment is more services intensive the longer the value chain. In-house IT functions complement and support offshored IT functions, while offshored R&D functions tend to replace in-house R&D. The results are largely driven by ICT mature manufacturing sectors.

This paper argues that regulatory measures affect the fixed cost of entering a market as well as the variable costs of servicing that market. Moreover, differences in regulation among countries often imply that firms have to incur entry costs in every new market. Indicators of regulatory intensity and heterogeneity are introduced in a gravity model and their impact on market entry and subsequent trade flows estimated for total services, business services and financial services. It is found that regulatory heterogeneity has a relatively large negative impact on both market entry and subsequent trade flows. Further, regulatory barriers have a negative effect on the local services sectors’ export performance. Finally it is found that regulations that aims at correcting market failure can have a positive impact on trade. It is concluded that services trade liberalization and regulatory reforms are complementary in creating competitive services markets.

This study seeks to clarify what vertical specialization/fragmented production/production sharing is, how widespread it is, how it is organized, its driving forces, and what the policy implications are. It presents six country case studies ( USA, Japan, Germany, Brazil, China and South Africa ) where the importance and nature of production sharing or vertical specialization in the automotive and electronics sectors are studied for each country. The automotive industry has always been a leading industry in terms of organizational innovations and recent developments in the sector raise interesting questions about the limits of vertical fragmentation. Electronics is the sector with the highest extent of vertical specialization among all industries. It is characterized by a high value to weight ratio and production of parts and components can easily be separated in time and space. The driving forces discussed are: technology that allows separation of activities in the supply chain in time and space; organizational innovations that take advantage of such new technologies; the role of services - notably the increasing service content of goods following expanding product diversity and customization to consumer demand - but also the rising demand for sophisticated logistics. It is indeed argued that services links make or break a supply chain. The paper argues that the proliferation of international production sharing requires a coherent policy response, particularly in developing countries, since a chain is as strong as its weakest link. It discusses the complementarities between trade liberalization in goods and services, investment policy, protection of intellectual property and competition policy, where it suggests that there may be a case for looking at the impact of lead firms´ buying power.

This paper discusses possible impacts of the Doha round negotiations in the WTO on the audiovisual services sector in Norway. Like most other countries, Norway has not made commitments, but has listed a number of MFN exemptions in the sector. These exemptions have now been brought to the negotiating table. The paper argues that if the MFN exemptions were lifted during the Doha round, this could imply extensive liberalization. The paper also argues that developments in other sectors (telecommunication, advertising, computer and related services, other recreational services), the horizontal agreement on e-commerce and technology affect both the relevance and the means of regulation in the audiovisual sector. It is suggested that supporting local production rather than restricting foreign market access is the most effective way of pursuing cultural policy objectives.

Dagens føringsprinsipp i statens budsjett og regnskap innebærer at inntekter og utgifter føres i samme år som de innbetales og utbetales (kontantprinsippet), mens føringsprinsippet i privat sektor krever at inntekter og utgifter føres i samme år som de påløper (periodiseringsprinsippet). Investeringer avskrives dermed i sin helhet i det året de foretas etter kontantprinsippet, mens de avskrives over anleggsmidlets levetid etter periodiseringsprinsippet. Denne rapporten diskuterer konsekvensen av innføring av periodiseringsprinsippet i statsbudsjettet for omfanget av statens investeringer i samferdselssektoren. Det konkluderes med at periodiseringsprinsippet gjør kapitalens bidrag til tjenesteproduksjon og kostnader mer synlige. Det gir et bedre informasjonsgrunnlag til å foreta investeringsbeslutninger. Dessuten gir synliggjør avskrivninger vedlikeholdsbehovet og gir grunnlag for en bedre avveining mellom nyinvesteringer og vedlikehold. Før periodiseringsprinsippet innføres må tekniske spørsmål som etablering av åpningsbalanse, avskrivningsmetode og avskrivningsperiode avklares. Erfaringer fra andre land tyder imidlertid på at implementeringskostnader kan være betydelige og at periodiseringsprinsippet derfor bør innføres gradvis.

This paper explores the role of producer services and ICT on international outsourcing. The motivation for outsourcing is to focus on core business and improve efficiency and outsourcing companies usually outsource a number of functions and the efficiency gains depend on the ability for the suppliers to deliver the required quality at the right time. If only one is late or delivers a substandard product, it will delay the entire process or reduce the quality of the final product. The timeliness of delivery and the fulfilment of quality standards depend critically on the availability of producer services. Transport, communication and other logistics services are obvious in this respect, but also services such as testing and technical services contribute to enable suppliers in low-cost countries to enter the outsourcing market. I therefore argue that international outsourcing can best be understood within an analysis framework of many suppliers that are interdependent, and the O-ring theory of production is such a theory. The paper first presents and modifies this model and then explores its predictions in an empirical analysis of the determinants of international vertical specialization as defined by an index developed by Hummels et al. (2001). The index is calculated for a cross-section of 52 countries and 5 sectors and regressed on a number of variables affecting the timeliness of delivery. It is found that vertical specialization is sensitive to trade barriers and infrastructure quality and cost of infrastructural services. The relative importance of trade barriers and various indicators of infrastructure vary between sectors. Vertical specialization in the electronics sector appears to be most sensitive to trade barriers and the density of the telecommunication network. This is also the case for the motor vehicles sector, but the size of the parameters is somewhat lower. The chemicals sector is most sensitive to the restriction on maritime services, while for textiles and clothing the aggregated measure of infrastructure had the highest explanatory power. Only in the electronics sector did the wage level (GDP per capita was used as a proxy) matter for vertical specialization.