Trade is trumps, not technology

July 16, 1996|By Bharat Jhunjhunwala

THE U.S. HAS BEEN pressing China to afford greater protection to intellectual property rights. The belief is that protecting new technologies, rather than manufacturing competitiveness, would secure a decisive advantage.

Such confidence appears to be unfounded. A look at the history of human civilizations tells us that ultimate victory belongs to him who can excel at trade, not technology. A short tour of the ancient civilizations may help us develop a better perspective.

The earliest masonry walls have been found in Jericho in Palestine. Iraq is supposed to have developed the first wheeled cart. Earliest gold was found in West Asia. Copper and bronze, too, were first smelted there. India appears to have contributed nothing to these technological innovations. Yet Indian towns of Mohanjodaro and Harappa by far excelled those of Egypt and Iraq.

The secret lay in trade. India exported textiles, beads, statues, stone utensils, ivory, pearls, spices, perfumes and onions. In exchange she imported tin and gold, the former being essential for smelting bronze and the latter as a store of wealth. India made no technological innovations, yet acquired unparalleled wealth.

The same pattern repeated itself in the Iron Age. The first iron was smelted in Central Asia around 1500 B,C. The first blown-glass objects were made in Egypt. The Greeks pioneered the manufacture of iron armaments. India, once again, contributed little to these technological innovations. Instead, she manufactured those products cheaply and exported them.

Exports consisted of perfumes, jewels, sugar, rice, butter oil, dyes, spices, textiles, parrots, peacocks and lions. Indian Wootz steel was famous for making swords. In return she imported lots of gold. That country, which made no technological innovations and where no gold was then found, came to be known as the golden bird.''

What this means is this. Ultimately it is manufacturing and trade that win the day. It could be argued that the world has changed and that high-technology ''services'' occupy the center stage. This would be a short-sighted view. Another example from history might clarify the issue.

At some point in history the ''service'' of transport would have come into vogue. That did not create a civilization of transporters. In fact the world trade in ancient times was dominated by the traders from the Indus valley -- precisely where the manufacturing base lay. A ''service, as the word suggests, has to ''serve.'' And what would that be but manufacturing? Without a manufacturing base one cannot build a ''service'' empire.

Short-term gains

The result is that short-term gains do not pay. After a technology has been standardized, those who have excelled in adapting it to trade are the ones who win. Egypt may have made the first blown-glass objects, but India exported the beads. The Greeks may have made the first iron armaments, but it was India that made the Wootz steel to make the swords.

It would seem, therefore, that the U.S. may wind up as losers rather than gainers with its focus on intellectual property rights. She would certainly stand to gain where a few new products are concerned. But that may take the attention away from manufacturing competitiveness and she might ultimately lose out. Would that not be penny-wise and pound-foolish?

Technologies are like water. They have an inherent tendency to find their own levels. This flow can be restricted only for a short time and that, too, at considerable cost. It may not ultimately pay anyway. Rather than concentrating on protecting intellectual property, the United States must look inward and examine how to make its manufacturing industry internationally competitive.

Bharat Jhunjhunwala is a New Delhi-based economist and writer.

Pub Date: 7/16/96

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