The Impact Of Trade Protection On Technological Progress Under An Open Economy

Under an open economy, the technology progress has already become the key competitiveness of an economy all over the world. The improvement of the technology level mainly comes from the domestic technology innovation (R&D activity) and the usage of various kinds of technology diffusion (technology transfer and technology spillover) channel to introduce and study, absorb and imitate to advanced knowledge. With the economic globalization being accelerated day by day, international trade, as one of the main channels transmitting and spreading international technology, the development of international trade has not only offered the sufficient fund which has been carried on technology innovation for developed country, but also provided the opportunities of studying advanced technology for developing country.However, during the course of economic globalization, a country must considers domestic politics, economy, culture and some other factors when she makes economic and trade policies since the essence of a country's foreign trade policies are the outcome of the nation. China has been the member of WTO. China's entry to WTO predicates that she has to open her domestic market to the outside, and reduce the tariff and non-tariff barriers so as to bring her domestic market into the world-economy system. However, the trade barriers among the countries are still increasing though WTO and all countries in the world have been made great efforts for trade liberalization. At the same time, trade conflicts between China and her trading opponents and trading partners are increasing. Moreover, with the rapid economy-development in some newly industrializing countries and regions, some developed countries and regions such as U.S.A. and EU started a new protectionism-trend by taking non-tariff barriers as the main measures since 1970s. We may say that the existence of trade protection policy is the result of instability and imbalance of world economy and politics.China is a developing country and the level of industrialization is in the initial stages. The overall situation is that there is a gap between China and the advanced countries in production technology and production efficiency. Therefore, China must implement temperate trade-protection policies on some certain industries and enterprises. Furthermore, in fact, WTO admits and accepts trade protection. And this embodies not only in the basic principles but also in the dispute settlement system and its practices. Under the conditions of variable trade barriers and drastic trade conflicts in world, it is a theoretical and realistic issue for China how to recognize and deal with the relation between trade protection and technology innovation or diffusion well as well as how to effectively use technology diffusion's (technology transfer&technology spillover) technology transition channels in order to enjoy more benefit of the technology progress. Therefore, this dissertation choose one of the vehicles of technology progress——international trade channels as a specific analyzed object, and may be firstly having a more systematic study to the impact of trade protection on technology progress from the view of trade protection, around the core concept "technology progress", along the technology innovation, technology transfer, technology spillover channels of technology progress, having a proposition that assessment of the impact of trade protection on technology progress is the evaluation of dynamic costs of trade protection. Thus my article-research, on one hand, has a certain theoretical significance, and is beneficial to understanding inherent mechanism of trade protection promoting or inhibiting technology innovation and technology diffusion, and it will enrich the technology progress theory and international trade theory (mainly the impact of trade protection on technology progress and technology communication theory); on the other hand, it also has some practical significance. Corresponding countermeasure may be taken according to the relationship between trade protection and technology innovation, technology transfer, technology spillover. It is beneficial for China to provide a reference of making a strategic trade policy; It facilitates for China to transform its comparative advantage into a competitive advantage; It provide references of international experiences; This dissertation make us aware of the rationalities of China's current effective tariff protection structure and its existing problems.This dissertation will extensively apply methodologies of the combination of normative analysis and empirical analysis, the combination of static analysis and dynamic analysis and the unity of logical and historical, and synthetically use economy theories such as new international trade theory, game theory, new classical economics, new economic growth theory, technological progress theory, econometrics etc to analyze and discuss, among which, gives emphasis on quantitative analysis and empirical analysis. This dissertation will collect, calculate data or draw graphics such as R&D input and output, goods and service trade, technology trade, sub-national trade in intermediate goods and capital goods, tariff collection rate and the capital stock, labor input, human capital stock and other data, and construct and estimate trade openness, intellectual property protection degree, synthetic technology innovation indicator, composite technology transfer index, total factor productivity indicators etc to do quantitative and empirical analysis on the impact of trade protection on technology progress, and use current analysis tools applied to commonly in the file in domestic and abroad, such as the Pearson correlation analysis, Granger causality test, Johansen cointegration test and vector error correction model, vector auto-regression (VAR) model as well as econometrics and statistics methods less used such as structural vector auto-regression (SVAR) model, impulse response function analysis, input-output analysis, apply Eviews6.0 commonly used and Matlab mathematical software rarely used as a computing tool, then cite trade restrictiveness indices and the TFP growth rate to explain the impact of trade protection on technology progress. In order to ensure the robustness of the conclusions of this dissertation in the empirical analysis, the same variable has used different proxy measurements, such as indicators of capturing technology innovation include national financial research funding, R&D investment expenditure and built technology innovation indicators; indicators of reflecting trade protection degree has trade dependence degree and real tariff collection ratios indicator. These methods are somewhat systematic and innovative.The main contents of this dissertation are as follows:Firstly, this dissertation has explored the background, purpose and problem and defined the concept of technology innovation, technology transfer, technology spillover, trade protection and technology progress. Then it has surveyed the relevant research of the technology innovation, technology transfer, technology spillover and trade protection, international trade, and introduced the recent theory development of technology innovation and technology diffusion especially. Chapter Three of this dissertation has proposed several theory analysis models such as technology innovation, technology transfer, technology spillover and trade protection, intellectual property protection. Among them it successively discussed the development orbit of the trade protection theory, the theory contact of technology innovation, international technology transfer, technology spillover and trade protection, the technology innovation and technology diffusion effects on the basis of international trade protection, the main influencing factor of the technology progress effects of trade protection, and the relevant models of trade protection impacting technology progress. After the above theories have been analyzed, Chapter Four to Six have carried on the empirical study of China. On the basis of the current situation of China's technology innovation and foreign trade as well as trade openness, this dissertation has investigated the degrees of the impacts of trade protection on technology innovation, transfer and spillover in detail. And with the angles such as total import trade openness, intermediate import trade openness structure, capital goods import trade openness etc, we have investigated the technology spillover effect through import trade protection especially.Finally, on the basis of new growth theory, this dissertation has empirically analyzed the effect of trade protection and human capital factors on the overall technology progress of China. Moreover, we have a cross-country analysis on the relations between trade protection and national income, technology progress through the obtainable cross-section data of trade restrictiveness indices which can reflect trade restrictiveness more comprehensively. Considering China's situation and real influence of various technology progress channels on her, when this dissertation discuss technology progress effects based on trade protection, we pay more important attention to the technology innovation and diffusion based on trade protection.I can draw the following core conclusion and sub-conclusions by my profound study on the impact of trade protection on technology progress under an open economy in this dissertation. My core conclusion is that trade protection of north and south have a positive or negative impact on technology innovation, technology imitation and technology transfer; China's trade protection has significantly inhibited its technology innovation, technology transfer and technology spillover, so generally speaking, China is in the status of technology imitation in the world; The technology spillover effect based on middling-tech and high-tech intermediate goods and capital goods import trade openness is positive in China, while the technology spillover effect based on the low-tech intermediate goods import trade openness is negative; The effective protection structure of China's tariff and China's technology progress effects are adaptive, but are still incompatible with the dynamic changes of China's comparative advantage in international trade and the adjustment direction of industrial structure. Accordingly, we must make countermeasures of promoting technology innovation, technology transfer, technology spillover.And my sub-conclusions are stated respectively as follows:Firstly, Trade protection in China has a two-side significance to R&D activities. Trade protection in China not only has impeded R&D activities, but also impeded the promotion of the imitative and absorptive capacity to foreign technology.Secondly, International technology transfer in. China is adversely affected by trade protection. Theoretical analyses show that an increase in trade protection degree in technology introduction countries may lead to "tariff-jumping" technology transfer; while "entry-deterring" technology transfer may occur in the case of tariff-reductions. In particular, our policy implication that the South countries should take pro-competitive policies to facilitate technology transfer seems to be novel in the development economics literature. Empirical studies have shown that there is a competitive "entry-deterring" technology transfer in China's nation level, and that trade openness and the degree of intellectual property protection in China are technology transfer's Granger causes.Thirdly, Trade protection has an adverse impact for China to international technology spillovers. Empirical analyses also show that the effects of total import trade openness or middle-and high-tech intermediate goods and capital goods import trade openness on China's technology progress are significantly positive, and their technology spillover effects are very significant, while the low-tech intermediate goods import trade openness have a negative impact on technology progress. This confirms our assume that the higher the intermediate goods trade openness, the more significant the technology spillover effects, further confirms the important role of intermediate goods import trade openness in technology spillovers, also shows that China is in a status of net importer of intermediate products and the status quo of processing trade-based trade pattern, China overall is in a lower end of the value chain of production and trade.Fourthly, It is necessary for China to optimize the structure of trade protection of intermediate goods (including capital goods). This dissertation empirically measures the price effects of trade protection on intermediate products (including capital goods) through the Input/Output table analysis and yields the conclusion that trade protection on intermediate products affects downstream products negatively, distorts the allocation of resources throughout the industry chain, curbs import trade, then hinders technology spillovers. China should take the effects of technology spillovers into consideration in trade protection on intermediate products. Therefore, how to arrange the existing structure of trade protection on intermediate goods so as to reduce the inhibitory effects of trade protection on technology progress is an important issue on trade policy.Fifthly, Human capital on technology progress in China has an important promoting role. As one of carriers of technology progress, human capital in the new growth theory has become a main expression form of endogenous technology progress (Lucas,1988). Empirical analysis in Chapter VII shows that human capital significantly promotes technology progress, and the combination of human capital and labor has a greater impact than the combination of human capital and physical capital in promoting technology progress. The quantity and quality of the human capital of host country are the key factors of developing countries carrying on innovation and obtaining technology diffusion successfully.Sixthly, National characteristics of trade protection and its impacts on technology progress in every country. More developed countries have lower trade restrictiveness, and have higher equivalent of core non-tariff barrier and agriculture domestic support. Those countries having lower trade restrictiveness obtained higher technology improvement.Seventhly, Current structure of effective tariff protection in China has some rationalities and irrationalities. From the view of structure:on one hand, the structure of effective tariff protection in China adapts to the effects of technology progress. On the other hand, the structure of effective tariff protection in China is incompatible with dynamic change and development of trade advantages. These two aspects have a certain contradiction, and we must be coordinated well in the policy practice.Although I have innovative research perspectives, research methods, research contents and conclusions in the dissertation, some shortcomings (research prospects) do exist:First, This dissertation failed to analysis the effects of trade protection on technology progress based on regional or industrial level so as to provide some viable policy recommendations. Of course, this is relative to the subject of this dissertation being too ambitious, but also due to the limitation of systematization and acquisition of datas about regions or industries. This is one of the issues which I attend to further research.Second, Trade protection measurement failed to adopt trade restrictiveness indices which can more objectively or directly capture trade protection degree, instead of, using trade dependence ratios as a proxy as well as using real collected tariff ratios indicators to partially reflect trade protection degree. This is mainly due to data of trade protection being not continuous time series, but intermittent, and the estimation on ad-valorem equivalents of non-tariff barriers (AVEs of NTBs) is difficult. This is also one of the issues which I attend to further research.