Nordic Export Economies in the Next Phase of Globalization Klas

Nordic Export Economies in the
Next Phase of Globalization
Helsinki, November 4, 2013
Klas Eklund
Senior Economist SEB
Nordic competitiveness: so-so
Norway: Still in a league of its own
 Huge surpluses
Denmark: On track for a modest recovery
 Current account surplus moving up
Sweden: Not bad at all
• Big current account surplus – too big?
Finland: Slow recovery, structural weakness
• Current account stuck in deficit
• Falling manufacturing production
• Low capacity utilization
• Bank lending slowing
2
New trade patterns will challenge us
Slowing of trade: cyclical or structural?
The growth of emerging markets
The growth of services
Unbundling and global value chains
Growth of intra-firm trade
Competition of tasks
Competition between cities and clusters rather than
between nations
Challenges for policy makers
3
Global economy moving slowly up
US: Recovery despite fiscal headwinds
Household deleveraging ends – improving
risk appetite
BRIC: Slowing down from position of
strength
Experiments with uncertain outcomes, need
for structural reforms
Euro zone: Promising changes – from
dangerous levels
The euro zone crisis is not over
4
A weak rebalancing act
Source: IMF World Economic Outlook, Oct 2013
5
Not one euro crisis, but several

Growth
Deflation
Housing
Financial stability
Liquidity
Sovereign solvency
Competitiveness
Social strife
Political worry
Euro risk








?
6
BRIC stagnation?
7
Is trade slowing?
Source: FT, Oct 25, 2013
8
The ”old world” in decline
Share of world GDP (ppp), per cent
70
60
Developed eco.
EM
USA
Euro zone
EU
Japan
China
India
50
40
30
20
10
0
1995
Source: IMF
2012
2017
What world in 2050?
Economic power
…begets political
power
…military strength
…and “soft power”
The world in 1950
The world in 2050
Source: Citigroup
10
Manufacturing share of total employment
Germany
Japan
Korea
UK
India
Mexico
Taiwan
US
Sweden
Manufacturing employment
Per cent of total employment
40
35
30
25
20
15
10
5
0
0
10 000
20 000
30 000
40 000
50 000
GDP per capita
PPP-adjusted USD
Services grow, linked to manufacturing
US manufacturing employment, 2010
Manufacturing employment = 100
149%
49%
100%
37%
63%
Assembly jobs
Service-type
jobs in
manufacturing
Source: McKinsey
Manufacturing
employment
Service and
other jobs
linked to
manufacturing
Total
manufacturingrelated
employment
Swedish exports: Services growing
Net exports
Per cent of GDP
9
8
7
6
Manufacturing
5
4
3
2
1
0
-1
-2
-3
-4
1994
Knowledgeintensive
services
Primary resources
2000
2005
2009
Do we need to rethink trade?
14
Intra-firm trade is growing
Source: OECD
15
Finland and Sweden are typical
16
Two “unbundlings” of production
High
High
High
=
Preglobalised
world
High
=
1st
unbundling
=
2nd
unbundling
Steam revolution
High
Low
Stage
A
Stage
B
Stage
C
ICT revolution
High
Low
Low
Stage
A
Stage
B
Stage C
‘Smile curve’: Distribution of value
Share of
value added
Post-1990 value
distribution
1970s &
1980s value
distribution
Pre-fab Fabrication
services
Post-fab
services
Stage
Global value chains
Know-how becomes firm-specific, not nationspecific
Countries do not compete – but regions and
cities do
North know-how combined with South labour
International movement of firm-specific knowhow
“Kaleidoscopic comparative advantages”
Regional trade is growing rapidly
Competition of tasks
19
Competiton of tasks
”Regional globalization”
Source: OECD
21
The small Nordics mean less to big
multinational companies
Sweden: 1000 biggest employers: number of employees
Source: Globaliseringsrådet
Six trend breaks
From…
▪
To
▪ Aging and the productivity imperative
▪ High absolute growth in emerging
economy cities
▪ Demand fragmentation
1
Demand
▪
Demographic dividend driving
growth
High growth but low volume in
emerging economies
2
Factor inputs
▪
Decreasing global cost
▪ Increasing scarcity of talent,
resources, and (risk) capital
3
Policy
▪
Ultimate trust in market efficiency;
liberalization and deregulation
▪ Re-regulation, intervention…
in nation states
Automation and efficiency in
production and transactions
Several new technologies hyped but
in infancy
▪ Big data and knowledge-worker
effectiveness
▪ Gaining scale in advanced materials,
robotics, nanotech, biotech, etc.
Emerging economies as low cost
production centers
▪ New rules for competition
▪ Blurring of manufacturing and
services
‘Great Moderation’
▪ ‘Great Uncertainty’
▪
4
Technology
5
Industry and
competition
6
Volatility
2013-11-05
▪
▪
▪
Source: McKinsey
23
Rapid market growth in EM
Consumption, trillion USD
Source: Citi
24
Too few skilled workers, too many
unskilled
Gap between demand and supply 2020, millions
Source: McKinsey
25
Trend breaks require shifts
Demand shift
 Exploit new markets in emerging economies
Secure factor inputs
 Recruit and educate!
 Secure energy supply
Global value chains
 Build links and matrixes
 Exploit and expand clusters, link to global networks
Be prepared for increased volatility
 Flexibility! Put pressure on government
Push for broader trade policy
 Industrial policy, education, deregulation, infrastructure etc
26
Can the Nordic vikings handle?
27