file42877

Trade, offshoring and the knowledge economy : 

Trade, offshoring and the knowledge economy

Definitions of the knowledge economy: 

“… one in which the generation and exploitation of knowledge has come to play the predominant part in the creation of wealth. It is not simply about pushing back the frontiers of knowledge; it is also about the most effective use and exploitation of all types of knowledge in all manner of economic activity” (DTI Competitiveness White Paper 1998).   “ economic success is increasingly based on upon the effective utilisation of intangible assets such as knowledge, skills and innovative potential as the key resource for competitive advantage. The term “knowledge economy” is used to describe this emerging economic structure” (ESRC, 2005).   Definitions of the knowledge economy

BUSINESS INVESTMENT IN INTANGIBLE ASSETSratio of investment in tangible assets (machines, buildings) to intangible assets (R&D, software, design and development, human and organisational capital): Source: HMT Economic Working Paper No.1, October 2007.: 

BUSINESS INVESTMENT IN INTANGIBLE ASSETS ratio of investment in tangible assets (machines, buildings) to intangible assets (R&D, software, design and development, human and organisational capital): Source: HMT Economic Working Paper No.1, October 2007.

Business investment in intangibles in 2004 Notes: development includes copyright and licence fees; mineral exploitation;new products in financial industry, new designs in architecture and engineering; R&D in social sciences; Brand equity is long term advertising, market research; human capital is firm provided training; organisational capital measured by spending on management consultancy and executive time spent on organisational tasks. Source: Marrano and Haskell, QMC WP November 2006.: 

Business investment in intangibles in 2004 Notes: development includes copyright and licence fees; mineral exploitation;new products in financial industry, new designs in architecture and engineering; R&D in social sciences; Brand equity is long term advertising, market research; human capital is firm provided training; organisational capital measured by spending on management consultancy and executive time spent on organisational tasks. Source: Marrano and Haskell, QMC WP November 2006.

Share of national income from knowledge based industries across the OECD in 2002share of knowledge based industries in gross value added (current OECD definition: high to medium tech manufacturing; financial services; telecommunications; business services; education and health services): 

Share of national income from knowledge based industries across the OECD in 2002 share of knowledge based industries in gross value added (current OECD definition: high to medium tech manufacturing; financial services; telecommunications; business services; education and health services)

Employment in knowledge based industries in 2005EU15 is share of total employment using Eurostat definitions (high to medium tech manufacturing, finance, business services, communications, health, education, cultural services, air and sea travel). US estimate is Work Foundation estimate for share of employees derived from US Bureau of Labor Statistics for similar industries and is not directly comparable.: 

Employment in knowledge based industries in 2005 EU15 is share of total employment using Eurostat definitions (high to medium tech manufacturing, finance, business services, communications, health, education, cultural services, air and sea travel). US estimate is Work Foundation estimate for share of employees derived from US Bureau of Labor Statistics for similar industries and is not directly comparable.

Most new jobs in knowledge industry serviceschange in total employment 1995-2005, European Labour Force Survey, Eurostat definitions. HMT is high to medium tech manufacturing, LMT is low to medium tech manufacturing. Non knowledge economy total includes agriculture, energy and water, and construction.: 

Most new jobs in knowledge industry services change in total employment 1995-2005, European Labour Force Survey, Eurostat definitions. HMT is high to medium tech manufacturing, LMT is low to medium tech manufacturing. Non knowledge economy total includes agriculture, energy and water, and construction.

Growth of “knowledge workers” in the UK 1995-2005Share of total employment. Education is degree or higher; occupational is managers, professionals and associate jobs. Source: WF estimates from the Labour Force Survey: 

Growth of “knowledge workers” in the UK 1995-2005 Share of total employment. Education is degree or higher; occupational is managers, professionals and associate jobs. Source: WF estimates from the Labour Force Survey

OFFSHORING AND THE KNOWLEDGE ECONOMY – POSSIBLE SCENARIOS: 

OFFSHORING AND THE KNOWLEDGE ECONOMY – POSSIBLE SCENARIOS

Britain world leader in trade in knowledge based servicesShare of GDP, 2004. knowledge based services defined as all services minus transport and travel and includes trade in intellectual property (R&D services, fees, royalties), computer and information services, financial services, business services, creative and cultural services (WF estimates from OECD in Figures, 2005 and 2006-2007 editions: all figures $US at current exchange rates).: 

Britain world leader in trade in knowledge based services Share of GDP, 2004. knowledge based services defined as all services minus transport and travel and includes trade in intellectual property (R&D services, fees, royalties), computer and information services, financial services, business services, creative and cultural services (WF estimates from OECD in Figures, 2005 and 2006-2007 editions: all figures $US at current exchange rates).

Knowledge service exports and trade surplus as share of GDP 1991-2006knowledge services defined as communications, insurance, financial, computer and information, royalties and licence fees, other business, recreational, cultural, personal.Non-knowledge services are transport, travel, construction, government services. Source: Pink Book, 2002 and 2007;Blue Book, GDP at market prices.: 

Knowledge service exports and trade surplus as share of GDP 1991-2006 knowledge services defined as communications, insurance, financial, computer and information, royalties and licence fees, other business, recreational, cultural, personal. Non-knowledge services are transport, travel, construction, government services. Source: Pink Book, 2002 and 2007;Blue Book, GDP at market prices.

Knowledge service exports in 2006share of total knowledge service exports: Pink Book 2007: 

Knowledge service exports in 2006 share of total knowledge service exports: Pink Book 2007

Manufacturing major producer of knowledge based servicesShare of service sector exports produced by manufacturing companies 1997-2003 (A Portrait of Trade in Services, Report for the DTI 2006) : 

Manufacturing major producer of knowledge based services Share of service sector exports produced by manufacturing companies 1997-2003 (A Portrait of Trade in Services, Report for the DTI 2006)

Balance of trade on total services 1996-2006Note: Europe includes all non-EU; OECD Asia is Japan and S. Korea; non-OECD Asia includes India: 

Balance of trade on total services 1996-2006 Note: Europe includes all non-EU; OECD Asia is Japan and S. Korea; non-OECD Asia includes India

Service sector imports from India in 2006Non-KE services are travel and transport; KE services are all other services, mainly computer and information and other business servicesSource: Pink Book, 2007: table 9.11.: 

Service sector imports from India in 2006 Non-KE services are travel and transport; KE services are all other services, mainly computer and information and other business services Source: Pink Book, 2007: table 9.11.

Employment change in occupations vulnerable to offshoring 2001-2007Note: occupations as identified by Gavin Heckley, ONS Labour Market Division, in Labour Market Trends, Sept 2005 (SOCs 1136, 2132, 3131, 7211, 7212). All figures UK employees. 2001 is Spring quarter, 2007 is Q1. Source: Labour Force Survey: 

Employment change in occupations vulnerable to offshoring 2001-2007 Note: occupations as identified by Gavin Heckley, ONS Labour Market Division, in Labour Market Trends, Sept 2005 (SOCs 1136, 2132, 3131, 7211, 7212). All figures UK employees. 2001 is Spring quarter, 2007 is Q1. Source: Labour Force Survey

UK falls behind in some forms of knowledge investmentOECD definition of investment in knowledge: share of GDP in R&D, software, higher education. UK and Sweden are 2003.Sources: OECD Science and Technology Scoreboards 2005 and 2007.: 

UK falls behind in some forms of knowledge investment OECD definition of investment in knowledge: share of GDP in R&D, software, higher education. UK and Sweden are 2003. Sources: OECD Science and Technology Scoreboards 2005 and 2007.

Offshoring and the knowledge economy - conclusions: 

Offshoring and the knowledge economy - conclusions Offshoring does not constitute a major threat to the UK’s transition to a more knowledge based economy; However, as international trade in knowledge services grows as a share of GDP, likely to see more widespread trade-driven structural change across a wider range of occupations than in the past; Whether structural change is driven by technology or trade, question is whether we have sufficiently robust and effective policy responses in place to compensate losers and help individuals, sectors and communities to adjust; The UK’s position as a world-leader in trade knowledge based services rests on the promotion of liberal trade policies and our ability to exploit a world-class science, technology and educational base.