The late President John F. Kennedy, in 1962, underscored the catalytic role successful technology transfer can play in the development of poorer countries when he said: “There is not enough money in all America to relieve the misery of the underdeveloped world in a giant and endless soup kitchen…. But there is enough know-how and knowledgeable people to help those nations help themselves” (2). From this perspective, technology transfer is seen as key in enabling developing countries meet their health and nutritional needs, improve their productivity, diversify their exports and create jobs and wealth, among others, in a sustainable manner.
However, technology transfer is largely a transaction between the transferor and the transferee for their mutual benefit. This trade (or transaction) in technology products or services has increased in value and importance. Developed and developing countries alike are increasingly interested in gaining a share of this trade. As a result, a conflict of interest has emerged between trade in technology assets and facilitating technology transfer to developing countries to enable them to protect and exploit their biodiversity in a sustainable manner.
Valuing global transactions It is difficult to measure the total global value of technology transactions. However, it is possible, using a number of proxies, to provide an indication of the rate of growth. It has been observed that royalty and licensing fee payments, a proxy for trade in knowledge assets, increased from USD 61bn in 1998 to USD 120bn in 2004, globally (3). This is almost a two-fold increase in trade over a 5 year period. Although France, Germany, Japan, the UK and the United States of America accounted for 82% of royalty and licensing fee receipts in 2004, there are also other emerging exporters of technology, such as Canada, the Republic of Korea and Sweden.
At the regional level, Asia’s royalty and licensing fee payments have increased almost 3-fold between 1998 and 2004 while those of Latin America and the Caribbean increased about 2-fold. Africa’s payments for royalties fell from about USD 0.84bn to USD 0.77bn during the same period.
Another indirect trade in knowledge assets may take place through the export and import of sophisticated machinery needed to manufacture goods or deliver services (also referred to as capital goods). In a way, capital goods imports are one way of benefiting from the Research and Development (R&D) investments of and knowledge accumulated by others through the ‘knowledge’ content of machines.
The United Nations Conference on Trade and Development (UNCTAD) has also observed that, between 1983 and 2003, capital goods imports increased 8-fold for Asia, 7-fold for North America, 6-fold for both the EU-15 and Latin America and the Caribbean, and 2-fold for Africa. In absolute terms, imports of capital goods by Asia and Latin America in 2003 were about USD 164bn and USD 30bn, respectively, while that of the EU-15 and North America reached USD 202bn and USD 111bn, respectively (4).
Technology transfer through trade in services is difficult to measure and data is often not available. Based on United States of America’s data, trade in other technology related services such as architecture, engineering, consulting, installation, management, operational leasing, financial and analytical testing services (also referred to as business and professional services), among others, grew rapidly: exports grew from USD 58.9bn to USD 71bn and imports from USD 30.4bn to USD 40.7bn between 2001 and 2005. Europe accounts for over a third of the exports to and about 40% of the imports from the United States (5).
The key drivers There are several drivers of these trends. The rapid developments in information and communication technologies and transport systems have reduced distance and time between places. They have enabled firms to operate almost virtually and deliver goods and services on demand, cutting down costs considerably. These trends have also allowed firms to work with less expensive knowledge centres abroad and to coordinate ‘satellite’ facilities in real time, irrespective of the location or distance.
The liberalization of trade rules and investment policies has promoted investment. This has led to more conducive business environments in many countries. However, it is important to point out that investors seem to prefer countries where firms they know have already performed well than countries simply promising a good business environment. Opportunities and concerns The global trade in knowledge assets presents many opportunities for those developing countries that are rich in biodiversity. Such opportunities may include partnerships and alliances with technology owners to develop and own technologies based on their natural endowment, develop alternative energy sources (e.g. biofuels) and new production systems (e.g. water saving technologies), among others. Environmentally sound technologies thus developed could benefit both developed and developing countries. Technology transfer could also enhance biodiversity-based sectors in the isolation, processing, production, distribution and marketing of their products and services. It may also help biodiversity-based industries in the evaluation and registration of their products on domestic and international markets as well as ownership and protection of the knowledge generated in these processes.
These are easier to attain in countries such as Brazil, China and India that are benefiting from this global trade in technology. These countries are also favoured destinations for R&D projects and performance. The technologies developed in such countries by subsidiaries of transnational corporations (TNCs) will help build up their technology stock and enable them, in future, to compete in the global trade. These are largely countries that have developed some technological base of their own.
There are, however, two major concerns:
Most of the technology is transferred or traded within the network of TNCs (i.e. intra-firm). Over 70% of the royalties and licensing fees received by the major technology exporters are intra-firm. That is not necessarily bad at a global level if all regions were benefiting from foreign direct investment (FDI) in a similar fashion. For example, Africa accounts for about or just below 3% of global FDI, GDP and trade but its proportion of royalty and licensing payments is only 0.7%.
Very few countries are benefiting from this trade. Most developing countries that do not have a technological base or do not represent a major market for technology owners are likely to be further marginalized.
Traditionally, public institutions were largely seen as centres for the development of substantial environmentally friendly technologies. Currently, most of the technologies related to industries such as agriculture, biotechnology, information and communication technologies and energy are largely in the hands of or are being commercialized by TNCs. Given the current concerns on climate change, a large market is likely to be created for environmentally sound technologies. Most of the transfers are likely to be intra-firm and the price tag may be high for many developing countries. Such technologies are becoming part of corporate strategies and represent the competitive edge of the firm.
There is little doubt that technology transfer has had a positive an impact on trade and national development. Countries that are major importers of technology, such as Japan and the Republic of Korea, traditionally with large royalty and licensing payment bills for use of intangible assets have grown rapidly. Today, the Republic of Korea is emerging as an exporter of technology (even though it is still a net importer) while Japan has, since 2003, graduated as a net exporter of technology. There are concerns that the emphasis on trade in knowledge assets may overshadow the needs of poor countries to access technology for development. It is perhaps important that efforts to help developing countries build a sound and dynamic technological base may be needed to enable them integrate in the global economy and develop in a sustainable manner.
Mongi Hamdi (
mongi.hamdi@unctad.org) is Chief, Science and Technology Section, Policy and Capacity Building Branch,
Division on Investment, Technology and Enterprise Development, United Nations Conference on Trade and Development (UNCTAD). Victor Konde (
victor.konde@unctad.org) is Economic Affairs Officer, UNCTAD.
(2) See Staffing a Foreign Policy for Peace, Speech of Senator John F. Kennedy, Cow Palace, San Francisco, CA, The American Presidency Project
http://www.presidency.ucsb.edu/ws/index.php?pid=25927. Santa Barbara, CA: University of California.
(3) Based on World Development Indicators, 2006.
(4) Based on UNCTAD International Handbook of Statistics.
(5) Based on United States Bureau of Economic Analysis, Table 7 (Business, professional, and technical services).
This article is based on a forthcoming study by UNCTAD on “Trends in cross-border flows of technology”.
