European Economic Integration: The Role of Technology PDF
Preview European Economic Integration: The Role of Technology
European Economic Integration Tbe Role of Tecbnology European Economic Integration The Role of Technology Edited by Gerald R. Faulhaber University of Pennsylvania Gaultiero Tamburini University of Bologna ~. " Springer Science+Business Media, LLC Llbrary of Congress Cataloglng-in-Publication Data European economic integration : the role of technology / edited by Gerald R. Faulhaber, Gualtiero Tamburini. p. cm. Includes bibliographical references and index. ISBN 978-94-010-5744-8 ISBN 978-94-011-3919-9 (eBook) DOI 10.1007/978-94-011-3919-9 1. Technological innovations-Economic aspects-European Economic Community countries. 2. Technology-Economic aspects-European Economic Community countries. 3. Europe 1992. I. Faulhaber, Gerald R. II. Tamburini, Gualtiero. HC240.9.T4E93 1990 337.1 •4 2-dc20 90-42063 CIP Copyright © 1991 by Springer Science+Business Media New York Originally published by Kluwer Academic Publishers in 1991 Softcover reprint of the hardcover 1s t edition 1991 AII rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher, Springer Science+Business Media, LLC. Printed an acid-free paper. Contents Chapter 1 Introduction Chapter 2 European Economic Integration: Technological Prospects 15 Chapter 3 1992 Europe as a Unified Customer Market 39 Chapter 4 Implications of 'Europe 1992' in aChanging World Economy 49 Chapter 5 European Perspectives: The Role of Services in the New Technical System 65 Chapter 6 Stagnation and Competition in the European Economy 83 Chapter 7 MNEs, Technology, and the Competitiveness of European Industries 117 Chapter 8 Competition Dynamics Behind the Mask of Maturity 149 Chapter 9 Reconceptualizing the Corporation and Competition 177 v Chapter 10 Collusive Behavior, R&D, and European Competition Policy 201 Chapter 11 Integration of Financial Services in the European Community: Lessons from the Experience in the United States 237 Chapter 12 Creating an Integrated EEC Market for Financial Services 263 Chapter 13 Telecommunications and the Scope of the Market in Services 289 Chapter 14 Implications of 1992 for European Telecommunications 301 Chapter 15 New Technology, Physical Distribution, and a Single EC Market 319 Index 335 vi CONTRIBUTING AUTHORS lürgen Müller, DIW, Germany Alexis lacquemin, University of Louvain, Belgium lohn H. Ounning, University of Reading, England Henry W. de long, University of Amsterdam, The Netherlands lacques Oe Bandt, C.N.R.S., France Brian Bayliss, University of Bath, England Charles Baden-Fuller, The London School of Economics and Political Science, England Brian Hindley, The London School of Economics and Political Science, England Oavid l. Teece, University of California, Berkeley, U.S.A. Almarin Phillips, The Wharton School, University of Pennsylvania, U.S.A. Edmund S. Phelps, Columbia University, U.S.A. F. Gerard Adams, University of Pennsylvania, U.S.A. Chapter 1 Introduction Gerald R. Faulhaber and Gualtiero Tamburini University of Pennsylvania and Universita Delgi Studi di Bologna This book brings together chapters by a group of European and North American economists, all of which focus on a single aspect of the ongoing plan for European economic integration - the role of technology. Indeed, the plan for European integration has many aspects social, institutional, and political. From a broad standpoint, the program approved by the 12 member states of the European Economic Community (Single European Act) in 1986 addresses these problems. Among other things, the Act pro vi des for the progressive establishment of a single internal market by 1992. At its most basic, this single European market means the unrestricted circulation of goods, people, services, and capital, unhindered by borders, tariffs, or restrictive national practices. The actual economic integration as planned by the Single Act will have a variety of consequences. On the whole, there will be the consolidation of the benefits already gained over the 2 Introduction previous 30 years due to the progressive lowering of tariff barriers within the Common Market. In particular, there has a been a shift away from Iimited national markets toward the wider market of the Community. In turn, this expansion of the market promises improved economies of scale and scope for many industries and a more efficient geographic allocation of production. Furthermore, the sharper competition among European firms should stimulate the introduction and acceleration of technical innovation, resulting in more competitive European exports as compared with Japanese and North American exports. According to the European Economic Community Commission's forecasts, by 1992 there should already be an increase in the Community's GDP of about 5 percent. This increase is comprised of various different advantages: (I) reduction of delays in the exchange of goods and in transportation due to the elimination of border formaIities; (2) reduction in costs and prices due to increased competition, followed by an increase in the Community's output; (3) reduced inefficiencies in public stock offering, as weil as in essential services like transportation, energy, and telecommunications. Public stock offerings will be deprived of protectionism and national restrictions, and opened up to competition from all of Europe. Significant positive effects should follow from the liberalization of the financial services. This should also yield a reduction in costs, both in interest and transactions, for financing government operations for all member states. Many analysts see as a principal positive factor of European integration improvements in the economic performance of firm, entrepreneurs, and the labor force, via expanded opportunities for economies of scale and scope as weil as more thorough exploitation of the experience curve. These effects should lead to greater productivity and lower unit costs. Introduction 3 In summary, increases in the European Community's (EC's) economic welfare due to integration are anticipated to f10w from greater productivity, improved infrastructure, and increased competitiveness of European exports in world markets. But, as with all change, the anticipated economic benefits are accompanied by anticipated problems and costs. It is the technological dimension of this tradeoff that the chapters of this book address. Tamburini's chapter describes the stages of the integration process. He analyzes the economic principles underpinning the decision to eliminate the nontariff barriers that still hinder intra European trade. The roots of these principles run deep: Adam Smith first postulated that the greater the scope of the market, the greater the opportunities for efficiencies from the division of labor. The global economy of the 1990s adds greater competitiveness and a faster rate of innovation to Smith's basic insight. Profits and losses that derive from the European integration process are examined, with particular reference to information goods and product markets in the chapter by Edmund Phelps. After having highlighted several of the negative effects that may occur as a result of the 1992 program (such as the social costs that derive from a new spatial distribution of work, costs Iinked to mobility because of the new competition), Phelps concentrates on the effects that 1992 will have on the industries producing information goods. As the latter are characterized by incremental costs (for the additional information distributed to consumers) which are virtually nit, with the opening of the European market information industries will be exposed to greater competition (tower markups) compared to the companies producing traditional goods. So the countries with the greater share of information goods will gain more benefits (in terms of price reductions) than 4 Introduction the ones that can be obtained by less advanced countries. However, the conclusion regarding the effects of 1992 is, on the whole, positive and in harmony with the studies on Europe 1992 carried out by the Cecchini Report. According to Phelps, the heightened competition should actually lead to lower prices, higher output, and a higher real wage. As a result, the European market expands because Europeans will be bigger earners and thus bigger spenders. In this regard, European economic welfare unambiguously improves. Overseas, welfare mayaiso improve, due to increased savings by Europeans and lower real interest rates. However, the impact of European integration on the rest of the world is less clear than the impact on Europe itself. The impact of integration on technological innovation would appear, according to Phelps, to favor the more technologically advanced European communities such as France and Italy at the (possible) expense of those less advanced, such as Greece and Spain. He notes, however, that these countries stand to gain from the ability of firms to locate plants within their borders post integration, thus providing employment for their citizens. On balance, then, integration will not only lead to greater efficiency will also narrow the income gap within the EC. Achanging world economy has strong implications for the outcome of the Europe 1992 program, but the creation of a bigger internal market than the one in the United States of America may in turn have strong repercussions outside of the European Community. The problem of the economic growth of the European countries and the United States in the international arena is, according to Adams, basically linked to the development of many industries that have lost ground in the competition with Japan and the NICs (Newly Industrialized Countries). On the basis of ample evidence, Adams analyzes the possible alternatives and scenarios of the changing world economy, in
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