Cluster collaboration
For the soon-to-be-established ten industry innovation clusters, such global integration is important. These clusters must go beyond geographical co-location and collaborate with other clusters in the region to take advantage of new markets. The internationalisation of clusters is paramount specifically in the context of integrating small and medium enterprises in global value chains.
The recently released OECD-WTO Trade in Value Added (TiVA) data shows how well Australia has integrated into the value chains of international economies.
The table below illustrates that Australia’s “sweet spot” is in the value chain integration of four countries – China, India, Japan and Korea. Australia has a significant competitive advantage in these countries, with five or less competitors and with trading value that exceeds $8 billion. For instance, in the case of China this integration is valued at almost $30B. Australia shares a similar value-based trading relationship with the US, but finds itself among a pack of 16-20 other international economies competing for the attention of the US consumer.
Table 2: Australia’s Competitive Positioning in Key Markets Data adapted by the author from the OECD-WTO TiVA Database
Australia’s relationship with Chinese Taipei, Indonesia, Thailand and New Zealand also indicate similar competitive advantages, facing five or less competitors and with trading value ranging from $1.5 billion to $8 billion. The value chain integration in these countries is strong but more needs to be done to grow alongside these partners.
It is clear that Australia enjoys a privileged relationship with most economies in the Asian region by virtue of the integrated global value chain. However, this position may soon come under pressure, with other international economies wanting to take advantage of the burgeoning Asian economies. This is already evident in countries like Malaysia and Singapore, where Australia has integrated well (trade value between $1.5 billion and $8 billion) but is now starting to face stiff competition from a higher number of countries.
The Eurozone is clearly where Australia has the least competitive advantage, with a playing field of over 20 competitors. Despite such competition, Australia has generated significant trade value that is quite similar to that of its partners in Indonesia and Thailand.
The message is clear. Australia has started to face competition from other developed economies looking to the East and South Asian region, as well as the Asian countries themselves. As countries in this region develop, they will identify their own ways of adding value to the goods and services produced. We have already seen this in the example of India and the Tata Nano Car, which has 34 design patents to its name and is priced at US$2,500.
What does all this mean? It means we need to think smart, match rhetoric with action and act fast to move up the value chain.
This article first appeared on The Conversation. Dr Christopher Vas is the Policy Research Program Leader at the HC Coombs Policy Forum – Crawford School of Public Policy at the Australian National University (ANU).
