Surpluses in technology balance of payments and international competitiveness

August 17, 2021

Technology Balance of Payments (TBP) records the international trade flows of intangibles, namely money flows paid or received for the use of patents, licenses, knowledge, brands, models, designs, industrial research and development (R&D), and technical services, including technical assistance. Thus, the balance of the TBP reflects the ability of a country to sell/ acquire technologies from abroad.

Does a TBP surplus determine the international competitiveness of a country. Such a surplus may increase with a country’s high degree of technological autonomy and a low level of technology imports. It may also decrease due to an inability to assimilate foreign technologies, a country’s effort to increase its competitiveness with an increase in foreign technology imports.

Enhancing international competitiveness by increasing innovative performance–most notably based on intangible assets–is considered as a fundamental factor for countries characterized by laggardness in innovation/ technological development with a heavy reliance on relatively low knowledge-intensive industries such as Portugal, but also Greece, Italy, and Spain.

Quantitative analyses performed demonstrate that, between 2000 and 2017, TBP surpluses fostered price-competitiveness, labor productivity, and Total Factor Productivity growth of the four Southern European countries (Greece, Italy, Portugal and Spain) analyzed.

From a policy viewpoint, the paper recommends that Southern European governments undertake initiatives to encourage technological trade, besides protecting intellectual property rights and fostering R&D intensive services. Investments should be directed to knowledge- and technology-intensive activities aimed at improving intellectual capacity, which has direct impact on companies, sustaining their competitive advantage, as well as an indirect impact by generating new ideas/knowledge and even greater ease of absorption of foreign technologies.

Click here to go to the paper by Diana Barros and Aurora A.C. Teixeira.