Remarks to Chapter Two of the 2010 European Competitiveness Report Miklós Szanyi Institute for World Economics, Debrecen University Budapest, 25 January, 2011

 Techno-economic paradigm shift: - Modular production, enhanced communication systems, organizational innovations - Production segmentation – global sourcing  Relevance for trade data: trade elasticity grew (2,5) - In crisis: trade declines 2-3 times more than output or sales

 Global competition: the role of growth centers (TRIAD)  Labor division within the TRIAD poles (Europe)  EU 10 integration into the European economic space (above average growth in trade)  Roles of EU 15 and EU 10 (market, assembly, basic material supply, components, services, strategic functions)

 Competitive unit is OEM and its supplier network  Factors of competitiveness: country-specific (comparative advantage), firm specific (competitive advantage)  EU 10 role depends on comparative advantages, but their competitiveness also depends on OEMs’ competitive advantages  EU overall competitiveness decline also deteriorates EU 10 performance

 To foster both country and firm level advantages (activity up-grading of MNEs in EU 10)  EU 15 interests: - enhanced overall competitiveness - concentration on core competencies (outsourcing) - job creation in higher value added activities - increased income generation, tax revenues

 EU 10 interests: - technological up-grading and new investments - quality job creation - spillovers (demonstration effect, technology and knowledge transfer, competition, etc.) - economic growth, income and tax generation

 EU 15: - rigid labor markets, slow employment restructuring - political opposition due to employment and welfare issues - obsession with development levels - decline in integration momentum

 EU-10: - dual structure of the economy - weak local business - less than possible spillover effects - declining reproduction of the sources of comparative advantage - political sentiments (populism)

 EU 10 role did not decline (few closures, new investments)  EU 10 comparative advantages (low cost) are crucial in global competition  EU business is aware of the opportunities (policy not always)  Clear difference in the roles of EU 10 and other less developed countries (long-term production platforms)