Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
4. Spatial Development –
Regional and Global Specialization
Andreas P. Cornett
Within the last 10 years the characteristics of the Baltic Rim region have
changed fundamentally. A region once divided by the iron curtain into
two different societal and economic areas has become a region of
political and economic cooperation, and is now considered simply to be a
European region both politically and in a planning context (Baltic
Institute 1994, European Commission 1994). This development has to be
seen in connection with the overall changes taking place in the European
and global political and economic system. On the global level we have
seen a tendency toward the liberalization of the international regime for
trade and capital movements. Regionally, the integrative framework of
the European Union has been extended towards the Baltic Rim, to
countries not belonging to the EU such as Norway, while the transition
economies of the region have obtained also special agreements. The latter
– with the exception of Russia – have applied for EU membership and
are covered by various types of pre-accession programmes. One result of
this development is that the Baltic Rim countries have been affected
economically not only by the forces of globalisation but also within the
context of the rather narrower environment of regional integration.
The purpose of this article is to shed some light on the economic
impact of this process with regard to changes in the specialization of the
regional system of production. Economic linkages and the patterns of the
international division of labour are important parameters not only for the
future economic potential of countries but also for policy-processes and
planning. These processes take place in an environment characterized by
global as well as regional changes. The central issues addressed in this
article are:
• To what extent is regional specialization an alternative to
globalisation?
• Are we dealing with competitive or complementary processes?
• What are the likely impacts on specific sectors and regions?
51
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
A framework of analysis
Globalisation and regional integration have altered the spatial dimensions
of regional activities. The main consequence of the former is that, with
regard to economic activity, adjacency now seems to be less important.
The importance of international trade has increased tremendously over
the last five decades, and has roughly speaking grown twice as fast as
production since the 1950s (Cornett 1996, p.8). Apart from that, other
types of international exchange have also perceptively increased. The
latter concerns in particular direct foreign investment (FDI), and in the
last decade or so particularly the cross-border trade in services. Indeed
this is now probably the fastest growing segment of international
commercial exchange. In a study published by the EU commissions’
Directorate-General for Economic and Financial Affairs (European
Economy 1997, p. 1) this trend toward globalisation was summarized:
“Globalisation is a multidimensional phenomenon. It principally
includes four components:
− The increasing integration of financial markets and growth of
−
−
−
financial flows.
The unification of the international market into a unique space of
production and trade.
The multiplication of firms implementing transnational or even
global strategies.
The emergence of a transnational regulatory framework.”
These trends obviously also affect the Baltic Sea region. In
particular, the globalisation of the international economic system
becomes an important factor for the development of the new market
economies in line with the ongoing alterations of the EU and the
regulatory systems.
This section summarizes the nature of this process with a point of
departure in the concepts of regional integration. The starting point of the
analysis is embedded in certain approaches to international regional
integration which enable us to form an explicit spatial perspective on
economic, social and political integration1 whilst indirectly also
illuminating a networking approach. These theories of economic
integration are thus used to develop an approach based on a
comprehensive analytical framework that seeks to understand change
and development in regional systems.
1
For further details on these approaches, see Pentland 1973, Robson 1987 and
Cornett 1999.
52
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Historically we see that there is a significant correlation between
geographic adjacency and strong economic ties. In economic theory
however this view has not always been central to mainstream economic
thinking and analysis (Tichy, 1998). Any empirical application of
concepts developed in a different environment requires an outline of the
basic assumptions and axioms of the involved theories and approaches.
The purpose of this section is then to discuss the impact of regional
integration on regional development. In many respects regional
integration is an ambivalent notion, varying from a very general concept
that describes cooperation between nations or regions, to very specific
social theories of human or organizational behaviour.
Spatial integration is not a commonly used phrase, but rather is a
kind of summarizing description of a comprehensive notion dealing with
an overall assessment of regional changes. Spatial integration includes
features such as :
• The development of specific geographically defined systems of
production such as industrial districts, clusters of industries, or
systems of innovation.
• A system of urban networks defined according to specific
functional links.
• The availability of a relevant regional infrastructure linking the
analysed areas together.
• Last but not least, the intensity of intra-regional flows relative to
outside flows can be considered the “conditio sine non quo” when
we talk of a spatially integrated area.
The final condition in particular is restrictive. In this notion the
concept of spatial integration has to be understood as the most farreaching concept of integration. In this analysis the spatial concept is not
merely a consequence of the physical environment, but also the result of
economic and political integration.
In a continental or regional perspective we have strong evidence
that political and economic integration is “powered” by spatial proximity
and adjacency, but at the same time political and economic integration
reinforces the other aspect of spatial integration, accessibility.
Figure 1 provides a brief summary of this approach focusing on the
main factors leading to spatial integration, and the impact of this process
on future developments through a feedback mechanism reinforcing
accessibility. The final result could be a kind of “network based” (spatial)
theory of integration. (Gidlund 1990, p.145ff).
53
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
The system outlined in figure 1 describes a framework of analysis
for a specific regional sub-system. The result of this process of “spatial
integration” has to be seen from a dynamic perspective bound together
by the indicated feed–back loops in the lower portion of the figure.
Global & regional system:
Int. Trade
Spatial
environment
Specialization
Economic integration
Spatial
integration
Political integration
Pol. & cult.
Factors
accessibility
Feed-back loop
Figure 1. The concept of spatial integration
(Source: Adapted from Cornett 2001a)
The purpose of this article is of course more limited, and in what
remains we will focus on the processes highlighted in the upper half of
the above figure, namely economic integration and specialization. After a
brief introduction of the concepts and measures of specialization, recent
trends in trade and specialization are reviewed in section 3. Section 4
provides a closer look at some of the sectoral and regional impacts of
this process based on a case study of the Danish textile industry.
Economic links between, and within, the Baltic Sea Region
(BSR)
Trade is usually the first type of linkage between independent economic
units2, and therefore it is also often the most sensitive indicator of
2
Foreign direct investment can be the result of barriers to trade (i.e. the case of
the automobile industries’ investments in Brazil or Mexico in the sixties, or
many joint ventures with state trade countries before 1990), or it can be the result
54
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
changes in the economic environment (Cornett 1996, p. 57). Trade flows
in the Baltic Rim have suffered from the artificial economic borders
between economies in the area. This is not however to imply that the
region historically – at least not for the last hundred years – has
constituted a functional internal coherent region.
In the 1970s and 1980s the region was divided between three
different economic associations, the market based EU, its erstwhile
though increasingly moribund competitor EFTA, and the CMEA, which
was based on non-market principles. The economic border between the
EU and EFTA did not have a major impact on trade flows for most
groups of commodities. The division between market and non-market
based trading frameworks was much more important, and the redirection
of trade flows took mainly place with regard to trade between the
countries belonging to the former East block, the Nordic countries, and
Germany (Cornett & Iversen 1993). Figure 2 below illuminates the
pattern and flow of trade in the late 1990s. Only Estonia imported more
commodities from the Baltic Rim countries than from countries outside
the region. However, the external linkages are more important than intraregional links for Baltic Countries in general. Therefore, it must be
stressed that the Baltic Sea Region is a subsystem of a larger economic
and political system rather than a functional economic system of its own.
The countries most integrated into the BSR are the three Baltic States
themselves, followed by the Nordic countries and Poland.
of an integrative process beginning with trade and ending up in the creation of an
integrated system of production. For a detailed record see (Cornett 2001).
Nevertheless, the Baltic Rim economies’ importance for FDI in the tree Baltic
States is evident. This can be considered to be at least a weak indication of
increased participation in the regional system of the division of production, due
to the fact that most trade barriers have been removed or are in the process of
becoming obsolete.
55
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Figure 2. Trade in the BSR (Exports 1997)
(Source: Quoted from Cornett 2001a)
56
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Measures for specialization (intra-industry trade)
A simple examination of foreign trade in the industrialized world adds
empirical weight to the methodological weaknesses of classical trade
theory with regard to actually explaining real trade patterns. Already a
cursory inspection of the commodities actually traded between the
developed part of the world shows that comparative advantages cannot
necessarily explain the pattern trade-flows. An inspection of the
merchandise trade in Western Europe in the 1990s shows that apart from
mining products, dominated by fuels, the overall picture is one of
balanced import and export patterns in most of the main categories
reported (WTO 1998, p.40). This leads to the next step in the analysis of
the factors determining international trade, often labelled as competitive
advantages. The purpose of this section is to analyse to what extent the
trade between western and eastern parts of the Baltic Sea region have
evolved in a similar direction to that of the trading system found in
Western Europe.
International trade, with regard to a country’s imports and exports, is
usually divided into at least two major sections according to the nature of
the traded commodities in question. A more complex measure of
specialization and international trade can be obtained through the
estimation of an index that measures the degree of intra-industry trade
(here defined as trade in similar product groups) as a percentage of total
3
trade .
The degree of Intra Industry Trade for a particular industry
according to Grubel and Lloyd is:
GLi =
(1 -
Xi - Mi
------------ ) * 100
Xi +Mi
3
[1]
For further elaborations on this topic see standard textbooks on international
trade or international economics in general. This section is based on Ulf-Møller
Nielsen et al. 1995 and Lüthje 1997. For a discussion of the Grubel & Lloyd
index and probable modifications to it see Lüthje, 1997. The analysis in this
chapter is based on the simple version of the index for all industries, equation
[2]. It is important to stress that this analysis does not provide insight with regard
to whether the specialization takes place on the import or export side (Lüthje p.
290.
57
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
The average degree of Intra Industry Trade for all industries can be
defined as:
(Xi +Mi) Xi - Mi
GLi =
--------------------------[2]
(Xi +Mi)
GLi = 0 (all trade inter-industry)
GLi = 100 or 1 in equation 2 (all trade intra-industry)
An analysis of intra-industry trade based on the Grubel-Lloyd type
of index is sensitive to the level of dis-aggregation of the data chosen for
the analysis. If the dis-aggregation is very high, i.e. at a 4 or 5 digit level
of the SITC (Standard International Trade Classification) the analysis
provides detailed insight into the nature of bi-lateral trade and particularly
into the nature of the distribution of competitive advantages between
4
countries .
As this analysis is conducted on a rather modest level of disaggregation however, the results obtained have to be interpreted rather
carefully. A high level – or increasing share – of intra-industry trade in
this case is only an indication of the sectoral convergence of the foreign
trade sectors of the economies in question. The figures reported in figure
3 below have to be seen in this context. The highest level of intraindustry trade can be found within the group of “old” market economies
of the BSR. The share of this group’s intra-trade with the EU as a whole
is only slightly lower than that prevailing within the BSR itself. This
result is well within the parameters of conventional wisdom that states
that neighbouring countries trade more intensively with each other than
with countries located at a distance away. The most important result of
the analysis is probably the significantly lower, but increasing share of
intra-industry trade found between the transition economies and the “old”
market economies. The latter is but one indication of an emerging trend
towards the integration of the regional system of production in our
notion. With regard to East-West trade however intra-trade is
significantly lower, but generally on the increase over the period in
question. This latter can be seen as an indicator of the increasing
integration of the transition economies into the regional system of
4
An analysis of low-level SITC-data on bilateral trade flows, together with an indepth study of the economic system in the transition of the Baltic Rim, will
contribute to a better understanding of the process of the integration of the
transition economies into the regional system of production.
58
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
production and specialization. An examination of non-agricultural trade
confirms the pattern reported in table three, with generally slightly higher
5
scores on the Grubel Lloyd index for most countries.
100
Index
80
60
40
20
1988
1989
Baltic East
1990
1991
1992
1993
Baltic West
1994
1995
1996
1997
1998
1999
EU-total
Figure 3. Intra Industry Trade of the “old” marked economies in the Baltic Rim
Region with: BSR –WEST, BSR- EAST and BSR-EU totals.
Note: Data according to Harmonized System Rev.1 1988-1999, Grubel Lloyd
index estimated on 2-digit level 100 (100 commodities), Figures based on values
in US-$ 1999 figures do not include trade figures reported from Sweden.
(Source: OECD, ITCS 1998 & 2000)
5
For details, see Cornett (2001) (forthcoming). For a technical discussion of the
Grubel-Lloyd index, see Lüthje (1997).
59
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Table 1. Intra-industry trade in the Baltic Rim Region (100 commodity groups)
TIME
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Denmark
Baltic East
Baltic West
Baltic Rim
EU-total
World
15,5
67,2
67,2
66,4
68,1
18,4
70,2
70,0
68,2
69,0
20,1
71,3
71,0
68,3
69,8
28,3
70,4
71,1
69,3
70,1
26,2
70,1
70,2
68,9
69,2
31,7
70,8
70,7
69,4
70,2
27,4
69,8
69,5
67,3
69,2
28,6
70,8
70,5
66,1
70,8
31,2
72,1
72,5
66,5
72,1
31,3
72,3
72,2
66,9
72,3
32,7
73,0
73,2
67,5
73,8
35,5
75,2
76,3
70,9
75,4
Finland
Baltic East
Baltic West
Baltic Rim
EU-total
World
15,7
57,9
58,9
47,6
52,4
14,5
59,4
59,7
49,8
54,8
13,3
61,5
61,9
51,8
57,1
23,0
66,5
66,9
55,0
57,6
29,2
67,4
69,9
57,4
61,0
21,2
64,0
65,2
57,1
59,3
26,5
64,5
65,7
56,2
61,2
28,6
61,5
68,7
54,7
62,4
30,4
65,6
70,3
56,6
61,6
29,3
64,7
69,4
56,2
61,4
30,1
65,9
70,0
55,0
62,6
29,0
63,8
67,8
52,9
60,9
Germany
Baltic East
Baltic West
Baltic Rim
EU-total
World
17,4
48,1
45,1
70,7
68,3
18,3
49,9
45,8
72,1
68,6
25,5
51,7
48,6
75,1
72,4
28,5
57,7
51,6
80,2
76,0
28,7
58,3
52,4
79,4
75,9
27,4
56,7
50,0
77,9
74,0
28,1
55,5
49,3
78,9
74,1
31,9
52,2
49,7
78,1
74,7
31,9
52,2
48,6
76,8
73,1
32,1
51,5
48,6
75,3
72,6
35,6
53,0
50,9
75,6
75,4
38,4
51,8
51,5
73,8
75,1
60
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
TIME
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Sweden
Baltic East
Baltic West
Baltic Rim
EU-total
World
19,1
72,4
72,8
70,1
72,1
23,6
71,2
71,5
69,8
72,8
24,2
72,1
72,3
71,0
71,8
31,0
74,2
75,0
70,8
70,1
28,3
74,3
75,1
70,2
69,9
36,1
74,7
76,1
69,8
69,4
32,8
74,4
76,0
71,9
70,8
36,5
71,8
74,6
70,3
71,8
38,6
73,4
75,4
72,1
70,2
44,0
73,5
76,0
72,2
71,5
45,0
74,9
77,3
74,2
72,4
...
...
...
...
...
Norway
Baltic East
Baltic West
Baltic Rim
EU-total
World
26,0
46,5
47,7
37,8
41,3
22,5
51,3
53,2
38,3
40,2
43,0
46,7
48,1
36,8
40,7
29,0
47,0
48,5
34,7
40,8
28,2
44,4
46,7
32,9
37,4
34,1
41,3
44,4
32,2
38,3
32,5
43,4
47,0
33,2
38,1
41,1
43,7
46,9
34,8
38,6
43,6
43,9
47,0
33,1
38,0
40,4
43,8
47,0
33,2
37,7
47,4
41,8
44,8
36,6
40,4
49,7
42,9
47,0
34,5
39,5
Poland
Baltic East
Baltic West
Baltic Rim
EU-total
World
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
21,1
44,5
45,5
48,8
54,6
11,0
40,3
42,3
43,4
49,4
11,6
41,5
44,0
43,2
50,2
13,8
42,7
45,8
45,9
53,7
13,2
43,9
46,3
47,5
52,2
11,4
46,6
48,5
49,3
53,6
11,6
47,5
50,7
50,2
54,7
...
...
...
...
...
Note: Data according to Harmonized System Rev.1 1988-1997, Grubel Lloyd index estimated on 2-digit level 100 (100
commodities). Figures based on available data: D; DK; FIN; NOR 1988-99, SWE 1988-1998. Source: OECD, ITCS 1998 & 2000
61
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Table 1 provides a deeper insight into the development of bi-lateral
trade and into the level of intra-industry trade of the 6 OECD member
countries in the region. Apart from Germany, the level of intra industry
trade for the “old” market economies in the Baltic Rim area as a whole is
higher when compared to the total of foreign trade. The high share of
crude oil and fuel in Norway’s exports causes the considerably lower
level of intra-industrial trade in that particular case.
Indications of inter-and intra-regional specialization (case
study on textiles)
The analysis of intra-industry trade in the previous section highlighted a
tendency towards the “normalization” of the composition of trade
between the former state economies of Eastern Europe and the “old”
market economies in the BSR, measured on a rather rough level of
classification. Using this aggregated data has both its advantages and its
disadvantages. The main advantage is that similarities are identified
within the same branch or group of data. The result is that emerging joint
systems of production become visible. The obvious disadvantage is that
persistent significant differences in imports and exports are disguised by
the high level of aggregation of the trade data as a whole. For the purpose
of this paper then the former aspects are the most important.
According to the European Agreements between the EU and the
applicant countries market access for merchandize trade for the East
European partner countries is one of the principal objectives within the
pre-accession strategy. The development of sustainable economies is
another. The latter issue is moreover highlighted in the latest reforms of
the EU structural policy and in particular of the ISPA (European
Commission 2000a). The problems and indeed the in-built contradictions
of this policy is the topic of the following section.
Traditionally, the textile industry has been protected against
external competition in most industrial countries. The so-called Multi
Fibre Agreements (MFA, for details see Kenis & Schneider 1987) are the
best example of this policy in action. The policy is continued in the
above-mentioned EA/IM agreements where textile, steel and agriculture
received the major exemptions from free trade.
In spite of the exemptions for textiles, trade in textile products
plays an important role in some of the bi-lateral trade relations within the
BSR. The reasons are many (see Illeriis 2000), but the most important are
low production costs due to low wages, the availability of a skilled labour
force, and probably most important of all, proximity to markets, and the
out-sourcing firms in Western Europe. This latter point being the main
competitive edge held by the East European transition economies as
62
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
compared to the low-cost producers in Southeast Asia. Given the everchanging dictates of fashion, short delivery times are essential for
competitiveness.
This unique combination of advantages is one reason for choosing
the textile sector as an illuminary case in the analysis of the impact of
the reintegration of Eastern and Central European countries into the
traditional western system of production. The second reason is the
geographical concentration6 of the Danish textile industry. The case study
of the structural changes in the Danish textile industry in the aftermath of
the fall of the iron curtain illuminates how the adaptation process takes
place not only in the transition economies, but also in Denmark. The
particular structure of the Danish apparel and textile business and the
geographic concentration (about 50% of the industry is located in few
municipalities in Central Jutland, see next section) enables us to analyse
not only overall changes but also the regional impacts of changes in the
competitive environment.
The outsourcing of production from the Danish core region of the
textile industry accelerated from the beginning of the 1990s (Illeriis 2000,
p.61). The impact on employment and on the structure of the textile
industry in the Herning-Ikast area, the closest Denmark comes to an
industrial district (see Hansen 1991) was tremendous, as the figures in the
next section will illustrate.
Figure 4 summarizes the development of textile trade between
Denmark and the two most important target countries for the outsourcing
of the Danish textile industry, namely Poland and Lithuania.
The impressive growth in the textile trade reflects the outsourcing
of production as well as the change in the international division of labour
taking place in the North European textile business. A closer look on the
composition of the trade flows can shed new light on the nature of the
restructuring process.
The analysis of the textile trade between Denmark and Poland
reported in figure 2 shows an extensive growth, but the trends reported in
table 4 show that the textile trade has only increased its share of total
trade to a rather modest extent, due to the tremendous increase of East
West trade in the BSR. Nevertheless, textiles are still an important factor
in bi-lateral trade relations between Denmark and Poland. With regard to
Lithuania, the same relationship takes place, though on a much higher
level. Half of Denmark’s imports from Lithuania in 1999 were textiles,
and more than 27 % of their exports also belonged to the textile sector.
6
For an overview of the textile industry in Central Jutland before the major
changes took place in the first half of the 1990s see Hjalager (1990).
63
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Textiles are the single most important commodity in the bi-lateral trade
regime between Denmark and Lithuania.
Poland and Lithuania
300000
1000 US-$
250000
200000
150000
100000
50000
0
1988
1990
1992
1994
Imports
1996
1998
Exports
100000
1000 US-$
80000
60000
40000
20000
0
1992
1993
1994
1995
1996
Imports
1997
1998
1999
Exports
Figure 4. The Trade in Textiles between Denmark and both Poland and
Lithuania (1000 US-$)
(Source: OECD-ITCS 1998 & 2000)
64
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Table 2. Danish textile trade with selected BSR partners (in thousand US-$)
Group of Commodity
Largest
Second largest
% of total textiles trade
Textiles as % of total trade
Group of Commodity
Largest
Second largest
% of total textiles trade
Textiles as % of total trade
1992
1995
1999
Denmark’s Import from Poland:
94119,4 (62) 116729,7
103692,1
(62)
(61)
35300,3 (61) 88532,4 (61) 102982,3
(62)
92,7
92,9
86,8
30,5
30,2
34,8
Denmark’s Export to Poland:
23641,4 (55) 25334,5 (60) 39305,8 (60)
14459,8 (61) 20670,1 (55) 35080,6 (61)
39,4
30,9
42,6
19,0
22,5
21,7
Notes: Data according to Harmonised system, 100 commodity groups.
54
Man-made filaments
55
Man-made staple fibres
60
Knitted or crocheted fabrics.
61 Art of apparel & clothing access, knitted or crocheted
62 Art of apparel & clothing access, not knitted/crocheted
63
Other made up textile articles; sets; worn clothing etc.
(Source: OECD-ITCS 2000)
65
1992
1995
1999
Denmark’s Import from Lithuania:
957,3 (61)
29123,4 (61) 57714,1 (61)
611,4 (63)
10917,9 (62) 30944,7 (62)
63,7
95,0
96,6
4,2
44,4
50,1
Denmark’s Export to Lithuania:
277,4 (62)
3559,8 (55) 26211,6 (61)
154,5 (54)
14461,1 (61) 10946,7 (55)
25,3
62,8
57,5
3,8
21,3
27,7
Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
Comparing imports and exports between Denmark and Poland we found
a slightly higher concentration of commodity groups in Danish exports
than imports. The most interesting point is that the latest figures for 1999
seem to reflect a change with respect to the dominating commodity
groups. In 1999 the same groups (61 & 62, see notes table 4) dominate
imports as well as exports, though with a significantly higher share in
exports. This can be taken as a sign of the further integration of the two
systems of production as compared to the previously reported years. 1992
and 1995 “man made stable fibres” group 55, played a major role in
Danish exports to Poland. In many respects the trade figures illuminate
the point made by Illeriis (Illeriis 2000, p.60):
“ It is primarily the sewing work which has been outsourced: This
means that the Danish firm typically still buys woven cloth or carries
out the knitting work, organizes the dying and cutting operations in
Denmark, ships the pieces to Poland or another transition country where
they are sewn (but remain the property of the Danish firm), and has the
clothes transported back to Denmark where they are quality controlled,
finished and marketed.”
Without overstating the statistics it seems as if the pattern has
changed with regard to Poland towards a more balanced system of trade,
measured by group of commodity. This could be taken as an indication
that Danish companies are still doing the marketing, design and control
work, but that many of the raw materials are no longer shipped from
Denmark.
Danish-Lithuanian trade follows the same pattern, but the
dominance of textiles is much higher, and the dominance of the two most
important commodity groups is significantly higher than in the Polish
case. The content of semi-manufactures is also still much higher in this
case than in the Polish one, reflecting a cost-advantage held by Lithuania
as compared not only to Denmark, but also to Poland.
Overall, the analysis of the textile trade between Denmark and the
two countries seems to support the tendency mentioned in the
introduction that the Danish textile industry has undergone a significant
structural change, becoming in the process a “value added” industry, and
thus also a less labour intensive one. In the next section the impact of this
change on the regional production system of the core district of the
Danish textile industry will be analysed.
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Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
The regional impact of changes in the production system
The tremendous increase in the textile trade between Denmark and in
particular Poland and Lithuania has not been without consequences for
the textiles branch of the economy in Denmark. In particular, the core of
the Danish textile area, the county of Ringkoebing in the centre of Jutland
has seen a decline in employment opportunities. The centre of the textile
industry district is encompassed by the municipalities of Brande and Ikast
and by the city of Herning. Figure 3 below summarizes the decreases in
employment in Denmark and in particular those in the core areas of
Danish textile industry. In Denmark employment in textiles was reduced
by 43 % from 1993 to 2000, but in the core area of the textile industry,
employment was reduced to 52 % of the 1993 level. Only Brande kept a
significantly higher employment level (78 % of the 1993 level), probably
due to the efforts of one particularly successful company.
From a regional point of view the change of job content and
qualifications of the remaining labour force, and the increase in
productivity is probably more important. This is primarily a consequence
of the upward shift in the value chain of the textile sector in the area and
a coordinated private-public sector effort to increase the level of
qualifications within the branch. Figures 4 and 5 below illuminate the
successful structural adaptation of the industry. In addition to the figures
relating to Denmark as a whole, the trends reported are also valid for the
core area itself, probably to a higher extent, since many textile chains
have their headquarters in the BHI-area.
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Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
30000
25000
Employees
20000
15000
10000
5000
0
1993
1994
Denmark
1995
1996
1997
Ringkoebing County
1998
1999
2000
Core district (BHI)
Figure 5. Employment in the Danish Textile Industry
(Source: Danmarks Statistik, Statistikbanken 2001)
Note: Core district: Brande, Herning, Ikast
20000
18000
Mill. DKK
16000
14000
12000
10000
8000
6000
4000
1990
1992
1994
Value of production
1996
1998
2000
Gross value added
Figure 6. Production value and cross value added for the Danish textile industry
since 1990 (Mill. DKK, 1995 prices)
(Source: Danmarks Statistik, Statistikbanken 2001)
According to figure 4, the value of production and gross value
added in the textile business have remained almost stable in fixed prices
despite the fact that employment has been reduced significantly. This was
only possible because of a significant increase in productivity and output
per employee during the period, see figure 7 below.
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Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
The reason for this successful process of restructuring has to be
sought on both the firm and industry level, and also in the cooperation of
public authorities and educational institutions in the area. The textile
design school is probably the single most important example, but
proactive adaptations of regional development initiatives from abroad
like the business links system (Ministry of Industry, 1995) or the strong
local involvement in the business community are important features of
the industrial district, and have contributed to an extension of the
economic base of the region beyond that of textiles and related services.
The result is a good employment record with low unemployment, though
in some areas, there remains a shortage of skilled labour.
1000000
DKK
800000
600000
400000
200000
0
1993 1994 1995 1996 1997 1998 1999 2000
Value of production per employee
Gross value added per employee
Figure 7. Gross value added and value of production per employee in the Danish
Textile Industry (1995 prices)
(Source: Danmarks Statistik, Statistikbanken 2001)
Within the textile branch significant changes in the value chain
took place during the 1990s. According to Illeriis (2000, p.64):
“the typical Danish textile and clothing firm has been transformed from a
manufacturing firm into a firm whose economic values are created in
knowledge-intensive service functions:
− Finding out where the demand from various market segments is
heading;
− Designing clothes accordingly (which is of paramount
importance in this sector);
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Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
−
−
−
−
−
Buying appropriate materials;
Arranging for physical production and the connected logistics
(punctual delivery is extremely important due to rapidly
changing fashions);
Securing the quality of the products;
Selling and distributing them;
Above all, managing this whole system in a sufficiently flexible
way, so as to meet the turbulent fashions and tastes.”
In this system the Baltic Rim transition economies found a
significant role throughout the 1990s, becoming part of the value chain of
the textile industry in the centre of Jutland.
Summary and perspectives
No simple path exists leading from isolated non-market based economic
systems to fully-fledged members of the western market based economic
system. The purpose of this article is to identify some of the trends and to
illuminate whether or not it is possible to overcome the remaining
barriers. Overall, the analysis of the patterns of trade – and to some extent
also the case study of the textile industry shows a tendency towards an
adaptation of the patterns found in the western part of the Baltic Rim.
The most important tendency identified in the results presented
here is that trade patterns and economic links in the BSR are undergoing
a significant change, and patterns are converging towards the West
European norm, at least when measured as gross figure and shares of
foreign trade. A closer look at the underlying nature of this trade proves
however that huge differences persist, though there are now signs of a
real levelling of these disparities.
For the transition economies in the BSR (i.e. Latvia, Estonia,
Lithuania and Poland) the analysis of intra-industry trade indicates that
they have embarked upon a game of “catch-up” with regard to their
adaptation to the European market based system of production.
The case study of the linkages of the textile sectors between in
particular (Northern) Poland, Lithuania, and Denmark has proved that the
intra-branch approach is a feasible way of integrating into the established
international division of labour. The textile case highlights the
consequences that this process has on trade and on the regional system of
production. This takes place in the out-sourcing country, mainly by
increasing the content of “know how” and by developing new
competencies within the sector on the one hand, and through a reduction
in the number of employed “blue-collar” workers on the other. In the “insourcing” regions the process creates employment as well as new
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Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
competencies, and beneficial regional spin-offs can be expected. In
particular with regard to the latter, further investigation is required to map
the linkages between the “in-sourcing” process and genuine regional
development7.
Overall, the results of the analysis presented here point toward a
number of conclusions:
•
•
•
•
Reorientation of trade flows and changes in the international
division of labour. The latter is not a zero sum game. Out-sourcing
as well as “in-sourcing” regions or countries can benefit.
The analysis of intra-industry trade has identified a tendency
toward adaptation and integration of the transition economies
since the early 1990s, though the latest figures point towards a
slow down in the speed of this process.
The integration of the production system can lead to the creation
of new competencies and positive spin-offs with regard to income
and growth.
Within the textile sector and the linkages established, it seems
possible to identify a tendency toward higher-level co-operation
due to the nature of the traded goods between, in particular,
Denmark and Poland, at least as far as the latest trade statistics are
concerned.
Overall this means that an analysis of a sub-system based on a
concept of integration seems to be fruitful and can contribute to the
understanding of the problems and potentials of the Baltic Sea region
system. With regard to the question as to whether regional specialization
can be a substitute for global “specialization” however the answer is
ambiguous. A tentative conclusion is that the processes are
complementary rather than mutually exclusive. The textile case indicates
a potential for regional solutions in situations where it was simply not
feasible to explore global, comparative advantages due to distances in
space and time. The results seem to be industry specific, and in other
industries and sectors such as for example that of information technology
and software development, other outcomes remain possible.
7
That the out-sourcing not only has an impact on the outsourcing region but also
on the receiving countries can be seen in a recent Nordregio report: “The textile
industry is another branch, which has attracted large foreign investments. The
main locations of significant production include regions such as Utena,
Marijampole, Ida-Viru and Allytus” (Nordregio 2000, p.4). Three of the four
regions mentioned here are located in Lithuania, Ida-Viru is the exception, being
in the northeastern corner of Estonia.
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Facing ESPON. Editor Christer Bengs. Stockholm 2002. (Nordregio Report 2002:1)
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