TECHNOLOGY TRADE IN INDIA-CHINA RELATIONS: DIVERGENT DYNAMICS AND IMPLICATIONS

Abstract

The recent and growing technology trade among India, China and the rest of the world is punctuated with distinctive trajectories and dynamics. Propelled by the simultaneous phenomena of impressive economic growth and increasing technological capabilities, the two countries under review have made a paradigmatic shift from being predominantly technology-importing countries in the 1980s to technology-exporting countries at the beginning of the 21st century. The consequent outcome of this process is the changing composition of technology exports wherein the share of technology-intensive products is increasing in their overall export baskets, which is a clear indication of the two countries' growing technological prowess. A key element in this growth is that the technology component in the overall bilateral trade between India and China is increasing both in volume and diversification. A considerable part of China's exports to India consists of technology-intensive products, but primary goods dominate Indian exports to China, revealing China's edge over India. This is likely to change as India strengthens its comparative advantage in software and begins to catch up with China in sectors such as manufacturing. These developments have several implications not only for their economies, but also for those in both developed and developing countries. [PUBLICATION ABSTRACT]

Headnote

The recent and growing technology trade among India, China and the rest of the world is punctuated with distinctive trajectories and dynamics. Propelled by the simultaneous phenomena of impressive economic growth and increasing technological capabilities, the two countries under review have made a paradigmatic shift from being predominantly technology-importing countries in the 1980s to technology-exporting countries at the beginning of the 21st century. The consequent outcome of this process is the changing composition of technology exports wherein the share of technology-intensive products is increasing in their overall export baskets, which is a clear indication of the two countries' growing technological prowess. A key element in this growth is that the technology component in the overall bilateral trade between India and China is increasing both in volume and diversification. A considerable part of China's exports to India consists of technology-intensive products, but primary goods dominate Indian exports to China, revealing China's edge over India. This is likely to change as India strengthens its comparative advantage in software and begins to catch up with China in sectors such as manufacturing. These developments have several implications not only for their economies, but also for those in both developed and developing countries.

Technology trade, a critical component of trade of late, is recognized as a key indicator of the development of economies that are increasingly knowledgedriven and information-based. Acknowledging this, India and China have been orienting their trade architectures to factor technology into their global and bilateral trade relations, and they are benefiting from the process. India and China have emerged as the twenty-first and largest merchandise exporters with trade-to-GDP ratios of 46.2 and 58.6 respectively during 2007-2009. A trend worth noting is the growing size of technology-intensive exports in their export baskets, a potent sign of the maturing of their technological capabilities.' Another trend is that technology trade between India and China is beginning to acquire a competitive dimension as both countries witness a steady rise in their technological capabilities.

As these trends evolve, the future of technology trade among India, China and the rest of the world will be much more complex and variegated. One of the implications of the growing Indian and Chinese technology trade is that hitherto established technology giants such as the United States and Japan find their technology trade diminished, putting enormous pressure on their current technological capabilities. The result is that they are trying to find ways and means to further climb the technological ladder. This is an excellent opportunity for tne growth not only of technology, but also of trade. At tne same time> the tecrmological rise of India and China, has motivated some technology laggards such as ^?> Nepal, Jordan and Kenya, to name a few, to invest in the development of technology, which in turn will impact the growing Indian and Chinese technology trade.

Given these remarkable developments, examining tne techn°l°gy trade between the two countries will provide interesting clues to the unfolding global technology trade, which is growing in its share of overall trade. Prior to this examination, two qualifications need to be made. First, a discussion on the nature of the symbiotic relationship between technology and trade is required in order to locate technology trade between India and China in the larger context of the increasing role of technology in trade. Second, a brief analysis of their technological capabilities, with a focus on their foundations and strengths in specific areas, and of their global technology trade more generally is imperative to better understanding technology trade between the two countries.2

TECHNOLOGY AND TRADE: CHANGING TRENDS

A number of recent studies have convincingly articulated the mutuality between technology and trade, particularly in terms of impact.3 According to Hans Verhulst, this mutuality is determined by the availability of technology "in technology rich countries, where there is a vast pool of know how, waiting to be untapped. In emerging markets, there is an enormous demand for know how, waiting to be filled. This 'trade in technology' could well be one of the answers to a changing world."4 As new studies continue to unravel the unfolding trends, there is a clear consensus on the increasing role of technology in the growth of trade. The more technology - especially sophisticated and capital-intensive technology - a country possesses, the more capable it is of exporting. Moreover, when a country lacks technology, including advanced technology, and is able to successfully import it in large quantities, assimilate it and translate it into productivity, that country's ability to export increases. In fact, importing technology itself constitutes a kind of trade in technology. At the same time, trade also contributes to the augmentation of technological capabilities. As trade gets robust and increases its ratio to GDP, there is an enhanced ability to upgrade existing technology through greater investment in technology development and innovation in order to remain a steady and strong trading country. Andersson and Ejermo further find that the export specialization of regions corresponds to their technology specialization. Regions with more sophisticated technology export products of higher quality. Furthermore, export flows to countries with high technology specialization include products of higher quality in the specific technology.5 More recently, the exponential growth of information and communication technologies (ICTs) and the current phase of globalization in general, and globalization of science and technology (S&T) in particular, have added a new dimension to the mutuality between technology and trade. They provide robust linkages between the two by facilitating a faster flow of technology and trade. This phenomenon is likely to continue as new processes and innovations are introduced into the market.

Of the two - technology and trade - technological capability is a prerequisite for emergence as a strong trading country. The countries that have developed their national technological capabilities by carefully calibrating S&T policy, laying strong foundations for research and development (R&D), enhancing scientific skills, and acquiring and assimilating advanced technologies have seen the indelible impact of these measures on their trade. This, in turn, is dependent on the larger context of S&T and human resource development through education. The countries that strike a fine balance between technology and trade thus reap rich dividends in the world economy. This is amply demonstrated by countries like Japan in the 1960s and some of the newly industrializing economies (NIEs) like South Korea, Taiwan and Singapore in the 1970s and 1980s, which imported advanced technologies from technology leaders such as the United States, Germany, Britain and France. Japan has been the most successful in maintaining a balance between technological advancement and trade - with the exception of the 1990s and thereafter - leading to some deceleration of its economic growth. Chances are that it can improve provided that the balance between technology and trade is maintained by strengthening both in today's ever-changing context. Since the 1990s, some developing countries have joined this club, making technology and trade much more diverse.

The impact of these developments can be seen in the growth of global technology trade in terms of volume, the scope of technology fields and the diversification of regional specificities. In the realm of volume, the total export volume of high-technology products grew faster than gross production, bringing exports to almost 60 percent of production in 2007.

This increase reflects the broadened international base of high-technology manufacturing, the expansion of multinational firms' overseas production, and a shift in the nature of production to increasingly specialized and geographically dispersed suppliers.6

In terms of the composition of global technology trade by field, communications and semiconductors had a share of $445 billion, pharmaceuticals $319 billion, scientific instruments $189 billion, aerospace $153 billion, and computers and office machinery $114 billion of a total $1.2 trillion in 2007.7 With regard to regional specificities, one of the findings of the RAND report entitled The Global Technology Revolution 2020 is pertinent for our purpose here. In the report's foreword, Lawrence K. Gershwin highlighted one of the conclusions of the report as: "regional and country-specific differences in social need and S&T capabilities are resulting in differences in how technology is revolutionizing human affairs around the world."8

TECHNOLOGY TRADE IN INDIA AND CHINA: TWO CONTEXTS

Following the general trajectory of technology and trade as briefly delineated above, China and India, the second and the fourth largest economies respectively, have in the last two decades begun to emulate what Japan and the NIEs managed to accomplish in the 1970s and 1980s, with certain distinctive features in their growth trajectories. With technology as a strong component of their economies, they are on the path to deepening their bilateral trade. This is primarily possible because of their strong foundation of technological capabilities, their specific areas of technology specialization and the growth of their technology-intensive exports to the world.

Technological Capabilities: Foundations and Strengths in Specific Areas

Two factors have played a vital role in building technological capabilities in India and China. First, their respective governments laid the broad framework to enhance technological capabilities using their comparative advantages in specific areas. Second, national and international private enterprises have been crucial to this process. While in India national private firms played a tremendous role, in China it was international multinational corporations (MNCs) that contributed to the growth of technological capabilities and technology trade.

With regard to the first factor, since 1947 the Indian government has pursued the development of S&T with self-reliance as its core operating principle. Though this process led to a substantial gulf between its S&T and that of advanced countries, it facilitated the growth of indigenous technological capabilities to a considerable degree. Since the 1980s and more so after the economic reforms of 1991, the Indian S&T system saw major growth in the areas of ICTs, with a competitive advantage in software, space technology, biotechnology, medicine, semiconductors and a host of other sectors, leading to the present status of an advanced S&T structure.

Similarly, the Chinese government began strengthening the foundations of its S&T system starting in the 1950s by establishing a number of S&T institutions and giving autonomy to scientists to lead them. In doing so, it received tremendous support from the erstwhile USSR. The ideological rift between the two countries led to the beginning of self-reliant and indigenous S&T development into the late 1970s. Thereafter, it pursued an "Open Door" policy that became increasingly driven by foreign direct investment (FDI) and focused on active acquisition of advanced technology. The table below highlights some of the details pertaining to the S&T capabilities of India and China. What is quite evident is that China has a clear lead in most of the indicators. However, India is catching up as a result of the recent surge in its economic growth, which will eventually narrow the gap.

On the issue of the role of private enterprises in the technology trade in India, much has happened in the last two decades. Though private enterprises have been an integral part of India's economic trajectory for more than a century, their role was limited due to the dominant state control during that period. With the opening of the Indian economy since 1991 their contribution to economic growth has been on the rise, as evidenced by their increased share in the overall economy. Sunil Mani argues that

[a]lthough India's RStD intensity increased only slightly between 2003 and 2007, from 0.80% to 0.88% of GDP, the share of the business enterprise sector in gross domestic expenditure on research and development (GERD) leapt from 18% to an estimated 28%. As the government share of GERD remained stable at 0.61% of GDP over the same period, the 10% rise in the GERD/GDP ratio can be attributed to the dynamism of the private sector.9

In addition, "there has been a tremendous increase in the number of foreign R&D center s... Most of these R&D centers relate to ICTs and the automotive and pharmaceutical industries."10 Microsoft, Google, Adobe, Yahoo and other world leaders in IT have established full-fledged R&D centers in India that focus on product innovation. These centers

have been the incubators for some of the most successful products of these companies who now view India, not only as a source for talent, but also as a promising market for their products and services. As a result, the Indian R&D units of many major companies are largest (in terms of number of employees) outside their home country"

The Chinese experience has been somewhat different. Private enterprises moved from being absent in the 1970s to now contributing about 65 percent to the GDP. Huawei, ZTE and Lenovo as well as a host of smaller enterprises and MNCs have been pivotal to the growth of technology and thereby technology trade. Though it is difficult to measure accurately the amount of R&D investment in the private sector, some estimates suggest that it has grown quite substantially over the last few years, leading to the concomitant growth of Chinese technology-intensive exports. We do have some estimates of the contributions of township and village enterprises (TVEs) to exports, which is pegged at 30 percent. More significantly, as Brian Schwarz argues,

the main reason China has increased its high-tech exports in recent years is that more American companies like Dell are setting up shop in China and exporting finished products to the U.S. In fact, around 60% of China's total exports come from the final assembly factories of foreign-invested firms.12

The cumulative impact of these strategies led to the growth of technological readiness in India and China. According to the Global Competitiveness Report 20072008, India's technological readiness ranks 62nd out of 131 countries surveyed while China ranks 73rd.13

In addition, the distinct paths of building technological capacities in India and China over the years have led to the evolution of distinct technology trajectories, with each developing capabilities in certain areas. This in characterizes and shapes the dynamics of both bilateral as well as their global trade. India is strong the service sector, particularly in ICTs, software medical biotechnology, while it has a weak turine sector. Conversely, China is well in the manufacturing sector and weak in ICTs and software. The interesting phenomenon, however, that both are scaling up in the areas in which are weak. India is working on improving its manufacturing capabilities with strong support from the private sector while China is investing heavily in strengthening its software technology.

In space technology, China has a slight edge. Both are commercializing their capacities through space cooperation, including with some of the advanced states such as South Korea and Israel, and their missions to the moon are slowly moving forward.14 In the biotechnology sector, Indian medical technological superiority is well known, as is China's leadership in agricultural biotechnology.15 Indian biotech companies have acquired considerable sophistication, competing with firms in developed countries. Similarly, Chinese agricultural technology, in terms of genetic sequencing and engineering, is at a comparable level to that of advanced countries.

Their respective technological comparative advantages in various sectors have been instrumental in determining the dynamics of their bilateral technology trade, besides their technology trade with advanced and advancing countries. Some of their strengths in specific areas are reflected in their global technology-intensive trade, which the following section delineates.

Technology-Intensive Exports from India and China to the World

Two divergent trajectories are discernible in the technology trade among India, China and the world. Of the two countries, India, with a strong domestic component and a comparative advantage in services, primarily in information technology enabled services (ITeS), has emerged as a major player in technology trade. India moved from twenty-eighth position in 2005 to twenty-fifth in 2008 among the key high-tech exporting countries. India's exports of high-technology products increased from $1.8 billion in 2002 to $3.5 billion in 2006, registering an increase of 96.36 percent. The value of Indian high-tech exports in 2008 was $6 billion, amounting to 5 percent of its manufactured products.16 According to the World Development Indicators, India's receipts of royalty and license fees decreased to $60 million in 2006 from $205 million in 2005. In contrast, India's payments for the same increased to $1.86 billion in 2008 from $671 million in 2005, an increase of 125 percent in only four years.17

Indian technology-intensive exports including high-tech goods were 19.49 percent of gross merchandise exports and services exports during 2002-03, and increased to 26.12 percent during 2006-07. Among the 367 surveyed companies, exports of low-technology products increased approximately seven times from the period 2002-03 to 2007-08 and medium-technology and high-tech products increased more than three times during the same period.18 In the technologyintensive export basket, IT and business process outsourcing (IT-BPO) exports have grown faster than total Indian exports over 2005 to 2009 and account for 14 percent of total exports.19 Indian exports of office and telecommunications equipment in 1990 was just $180 million and this reached $37 billion in 2009. Pharmaceuticals worth $6 billion were exported from India in 2008, making India the seventh largest exporter of these products.

Using a mixed strategy of FDI and joint ventures coupled with robust manufacturing capabilities, China emerged as the largest high-tech exporting country in 2006 when it overtook the United States and the European Union in high-tech exports and contributed to the overall increase of high-tech exports globally.20 One of the reasons for such phenomenal growth was China's export-oriented policy, which "established 25 export bases of high-tech products, six national software export bases and six national export bases of medical products, so as to boost the export of high-tech products...."21 China's share of world high-technology exports increased from 6 percent in 1995 to 20 percent in 2008.22 The share of Chinese high-tech exports in manufactured exports grew at 8.1 percent per year between 2000 and 2008.

But this seemingly remarkable growth has to be viewed with some caution as the bulk of these exports originates from foreign MNCs, which continue to control copyrights. The export of mobile phones from China, for instance, gives us interesting clues into this dimension. Out of a volume of 188 million units exported from China in 2009, only 20 million came from Chinese indigenous companies such as ZTC and Huawei. The rest came from MNCs owned by other countries. Therefore, attributing the growth of high-tech exports to Chinese technological capabilities is a myth.23 One must not overlook, however, the changing technological structure of Chinese firms, which are making some progress.24 FDI and foreign invested companies-driven high-tech exports may be a boon in the short term, but a bane in the long term if what is imported is not used to strengthen indigenous productivity.

Out of the twelve selected indicators, India leads in two while China leads in nine. The two countries are at a similar level in only one. As both countries improve the sectors in which they are weak, their technology trade with the world is likely to see some surprises in future.

TECHNOLOGY TRADE BETWEEN INDIA AND CHINA: DIVERGENT DYNAMICS

Technology trade between India and China is replete with divergent dynamics given their technological capabilities, comparative advantages in different sectors and the broader global and regional processes.

One of the dynamics is that there was a gradual growth of technology trade after the official resumption of bilateral trade in the mid-1970s. The measured rapprochement between India and China in the mid-1970s after a gap of nearly fifteen years eventually culminated in the renewal in 1984 of the 1954 Trade Agreement, providing for Most Favored Nation treatment. In 1988, a ministerial-level forum called the India-China Joint Economic Group on Economic Relations and Trade, Science and Technology (JEG) was established. Six years later, the two countries signed double taxation avoidance agreements. As a result of these developments, bilateral trade between India and China witnessed about 50 percent growth annually in the last decade. The total volume of trade between India and China was only $265 million in 1991, but reached $1.98 billion by 1999 and $2.91 billion by 2000, an increase of 46.4 percent over the previous year.25

In 2008, China became India's largest trade partner when bilateral trade between the two countries touched $51.8 billion. India became China's seventh largest export market and its tenth largest trading partner.26 Despite a dip in trade volume in 2009, the future of bilateral trade looks to be bright; in 2010, the Indian government announced its aim to double bilateral trade with China within four years.27 A more recent agreement to reach $100 billion in bilateral trade by 2015 is a further indication of the potential of bilateral trade between the two countries.28

Within this bilateral trade, the share of technology trade between India and China began to increase only in the 1990s. Prior to 1990, technology trade between the two countries was quite negligible. This is primarily because overall bilateral trade was small and both countries had fledgling technological capabilities at that time. As their technological capabilities began to grow, technology trade followed a similar path. This phenomenon is likely to continue as the political, economic and cultural ties between the two countries find a steady improvement.

Another dynamic is that once technology trade picked up its momentum after 2000, it remained steady on that trajectory. This is largely dependent on, and determined by, the maturation of their technological capabilities and their willingness to institute new mechanisms to facilitate technology trade. For instance, in 2006 former Indian minister of science and technology Kapil Sibal and his Chinese counterpart Xu Guanhua inked a memorandum of understanding to set up a joint steering committee to promote technology cooperation and trade between the two countries.

Third, technology trade between India and China, as a microcosm of their bilateral trade, increased in tandem with their macro global trade. Between 1990 and 2009, India and China respectively witnessed about a ten- and twenty-fold increase in their global trade. Indian exports and imports, which stood at $17.97 billion in 1990, reached $162.62 billion in 2009. During the same period, Chinese trade moved from $62.09 billion to $1,201.79 billion.29 This growing global trade impacts their bilateral trade in general and technology trade in particular. For instance, in 1982, India and China had 0.5 and 1.1 percent shares in the world exports of goods and services, respectively. By 2006, while India's share rose to only 1.4 percent, China's jumped to 7.3 percent.30 Services exports have always had a much larger share of total exports in India than in China. Moreover, services exports in India have grown far more rapidly than goods exports since 1990, with the result that their share in total exports has gone up from 20.2 percent in 1990 to 37.9 percent in 2006. The opposite is true of China: the low share of services in its exports has marginally declined over the period from 10.2 percent in 1990 to 8.7 percent in 2006.31

A fourth dynamic is that China maintains its comparative advantage in its technology trade with India, as is clear from its exports to India. Chinese exports to India are dominated by value-added items, particularly machinery, while the bulk of Indian exports to China comes from iron ore.32

Fifth, a number of Indian and Chinese firms, which are evolving into multinational firms in their character and reach, are leading the technology trade from the front.33 Some of the prominent Indian companies actively pursuing technology trade with China are Ranbaxy Laboratories, Orchid Pharmaceuticals, Dr. Reddy Laboratories, Aurobindo Pharma, Bharat Forge, Infosys, Satyam Computers, Orind Refractories, Essel Packaging and Suzlon Energy. Similarly, many Chinese companies that specialize in electronics, IT and hardware manufacturing are also based in India, including Huawei Technologies, ZTE, Haier, Sinosteel, Shougang International, Chongqing Lifan Industry Ltd, SinoHydro Corporation and others. Major Chinese projects in India are in the field of infrastructure, supply of heavy equipment, industrial projects (mainly in the iron and steel sector) and telecommunications.34 Some of these firms are spread across different parts of India and China. A number of Indian banks either have branch operations or representative offices in China.35 These companies, instead of reinventing the R&D wheel by spending large sums of money in building R&D capabilities from scratch, are adopting a novel strategy to enhance technological sophistication through acquisitions and mergers, which provide them with access to established R&D expertise and innovation. Some of the recent acquisitions and mergers by companies such as Tata Steel and Lenovo do contribute to enhanced technological sophistication. Tata Motors' recent acquisition of Jaguar and Land Rover from Ford Motor Company and Lenovo's acquisition of IBM's computer division increases their footprint in each other's markets. For instance, as a result of its acquisition of Jaguar and Land Rover, Tata "now finds itself with almost $2 billion in revenues from China."36 Likewise, Lenovo is slowly increasing its share in the Indian computer market. It saw its share growing from 4.5 percent of the Indian market to 7.5 percent in 2010.37

Sixth, the structure of bilateral trade is also changing, moving away from trade in primary goods to manufactured and service goods. Some areas like renewable energy, infrastructure and finance have seen robust growth in the last few years as the $20 billion worth of deals from the 2010 India-China bilateral agreement indicate.38

The upshot of these divergent dynamics in the technology trade between India and China is vividly visible through the dramatic increase in technology-intensive exports between the two countries, as the following two figures show.

One phenomenon common to both countries' exports to one another is the substantial growth in exports in the last few years in the selected indicators of nuclear reactors, boilers, machinery, electrical and electronic equipment as reflected in the above two figures. This is due to increasing demand in India and the availability of these products from China. The other point that emerges from the data is that China exports technology-intensive goods to India more than it imports these goods from India, which is indicative of its edge over India.

Another pertinent feature of Indian and Chinese exports to each other and to other countries is that though the Chinese trajectory is effective in the short term, drawing its momentum primarily from external inputs such as FDI and the active contributions of MNCs, the Indian trajectory will be more enduring in the long term as it is dependent on internal inputs and resources of the national firms. In the event of flight of capital and technology in search of better alternatives by foreign MNCs, the Chinese technology trade will be deeply affected. Therefore, the indigenous technological capability that India possesses will be the real determining factor in the race for technology trade supremacy in the foreseeable future. However, it remains to be seen whether India will capitalize on this strength.

Technology trade in India-China bilateral relations has immense potential for steady and sustained growth in sectors like biotechnology, IT and ITeS, health, education, tourism and finance as these increase their share in the overall composition of bilateral trade. India is particularly keen on China opening its doors to Indian ITeS. Moreover, as both countries are presently grappling with the issue of promoting green economies through green budgeting, given their commitment to maintaining growth without neglecting ecological concerns, there will be many opportunities for further growth of bilateral trade with technology-intensive products at its core.

IMPLICATIONS OF INDIAN AND CHINESE TECHNOLOGY TRADE

The growing technology trade among India, China and the world have multiple implications. These implications are not only for their own domestic economies, but also for other countries, both advanced and advancing. Following the trickle down process, the people on the margins of the development trajectory would benefit. This has been the case in China, which succeeded in lifting about 250 million people out of poverty in the last three decades. Early signs of this are also clearly visible in India, with the dissemination of various technologies that positively impact the lives of the poor. However, the benefits thus accrued from the technology trade need to be further expanded to those who are still outside this process. This requires concerted efforts on the part of the two governments at the center, as well as states and provinces.

While technology trade has contributed to their domestic development paradigms, it has led to certain complications in the composition of their exports and imports to and from each other, thus affecting their overall bilateral trade. For instance, Chinese exports to India include a larger share of technology-intensive goods, which has led to a balance of trade in China's favor to the tune of about $19 billion. In addressing this kind of problem, India is striving to strengthen its manufacturing capabilities, which will, in the future, affect Chinese exports to India. Once both countries acquire certain comparable levels of technological sophistication and improve their weak areas, the competition could become fierce in the years to come.

The immediate implication for the advanced countries, as viewed by countries such as the United States, Japan and Germany, is that the Indian and Chinese technology trade is adversely cutting into their share, leading to trade friction.39 Though there is a grain of truth in this, particularly when approached from the vantage point of the immediate future, it is, in fact, good for the overall development of technology and its trade because this development indirectly pushes the frontiers of S&T even further, making the global technology architecture much better and comprehensive. American president Barack Obama's recent call for a "Sputnik moment" to stay ahead of countries like India and China by substantially investing in technology and innovation suggests the enormity of the impact of the rising technological capabilities of India and China on the United States and the other advanced countries.40 One recent U.S. article went even further, describing it as a technology war.41 As countries invest more in S&T development the impact of competition in technology trade will be felt all over the globe in myriad ways.

Another significant implication of the increasing technology trade in India and China is that a bulk of it is reaching many of the advancing countries in Asia, Africa and South America at competitive prices and in large quantities, thus facilitating further economic growth in these countries.42 The benefits from such trade in receiving countries is clearly visible in the development of S&T systems and in collaborations between S&T personnel in these countries and their counterparts in India and China.43 However, there are several pertinent issues that remain to be addressed. One of them is whether the economic growth and the benefits that these technology-recipient countries are reaping are in their national interests. Moreover, whether the S&T development architectures in these countries are evolving their own context-specific innovation systems or just copying what is present in countries like India and China is an issue that is critically important for their future growth. Countries such as Pakistan, Nigeria and Colombia should learn from the development of S&T and technology trade in India and China while evolving their distinct trajectories.

CONCLUSION

Technology trade in India and China is redefining both global and bilateral technology and trade architectures in many ways, raising several issues with which advanced and advancing countries will have to grapple with in the future.

As this process unfolds in Indian and Chinese technology trade, there are three intriguing dynamics at play. The first of these is the element of conflict of interests, primarily in the realm of perceptions, where India and China tend to perceive each other's rise in technological capabilities and growing trade in technology as a zero-sum game. If these perceptions are translated into policies and strategies on the ground, the consequences could be disastrous not only for both, but also for global technology and trade architectures. The second dynamic is actual (rather than perceived) competition, which occurs subtly in some sectors such as space technology and could become debilitating if strategies to foment healthy competition are not pursued. The third is the cooperative dynamic with potential for further development of technology in the two countries. Of the three dynamics, the first and the last are weaker, while the second dominates technology trade in India and China. The challenge for both India and China is to strengthen the cooperative dimension, while addressing the other two by evolving perceptions such that growing technological capabilities and technology trade are not viewed as zero-sum, but as win-win strategies. They also need to be wary about the element of competition and take steps to minimize the possible friction. The most likely scenario is that all three dynamics will characterize technology trade between India and China. It remains to be seen which of the three dynamics will dominate in the years to come.

Sidebar

One of the implications of the growing Indian and Chinese technology trade is that hitherto established technology giants find their technology trade diminished.

Sidebar

Though the Chinese trajectory is effective in the short term, the Indian trajectory will be more enduring in the long term.

Footnote

NOTES

1 Hugo Hollanders and Luc Soete, "The Growing Role of Knowledge in the Global Economy," UNESCO Science Report 2010 (Paris: UNESCO Publishing House, 2010), 1-28.

2 Technology trade in this study covers both imports and exports of technology-intensive goods. Technology-intensive exports and imports include capital goods, computer software services, turnkey projects, engineering services and consultancy services.

3 Gene M. Grossman and Elhanan Helpman, "Technology and Trade" (Working Paper No. 4926, National Bureau of Economic Research, November 1994), 88.

4 Hans Verhulst, "International Trade in Technology-Licensing of Know-How and Trade Secrets," http://www.wipo.int/sme/en/documents/trade_technology.htm (accessed 7 September 2010).

5 Martin Andersson and Olof Ejermo, "Technology Specialization and the Magnitude and Quality of Exports," Economics of Innovation and New Technology 17, no. 4 (lune 2008), 355-75.

6 National Science Board, Science and Engineering Indicators 2010 (National Science Foundation, 2010), 5, http://www.nsf.gov/statistics/seindlO/pdf/overview.pdf.

7 Ibid., 6-17.

8 Richard Silberglitt, Philip S. Antón, David R. Howell and Anny Wong, The Global Technology Revolution 2020 (Santa Monica, CA: Rand Corporation, 2006), v.

9 Sunil Mani, "India," in UNESCO Science Report 2010 (Paris: UNESCO Publishing House, 2010), 363.

10 Ibid.

11 Nasscom, Impact of the IT-BPO Industry: A Decade in Review (Executive Summary), 22 October 2010, 14.

12 Brian Schwarz, "China's Exports in Perspective," Amene« Thinker, 11 February 2011, http://www. americanthinker.com/blog/2005/12/chinas_exports_in_perspective.html.

13 World Economic Forum, The Global Competitiveness Report 2007-2008 (Houndmills: Palgrave Macmillan, 2007), 150, 200.

14 "South Korea Upbeat on Nuke Deal with India; Signs of IT, Space Pacts," Times of India, 25 Ianuary 2010, http://timesofindia.indiatimes.com/india/South-Korea-upbeat-on-nuke-deal-with-Indiasigns-IT-space-pacts/articleshow/5500210.cms; "Space Program Agreement between India and Israel," http://www.jewishvirtuallibrary.org/jsource/Politics/indiaspace.html.

15 D. Varaprasad Sekhar, "Science and Technology Cooperation between India and China," International Studies 43, no. 3 (2005), 319-20.

16 World Bank, "High-Technology Exports (Current USS)," World Development Indicators (2010), http://data.worldbank.org/indicator/TX.VAL.TECH.CD/countries?page=I.

17 Ibid., 6-7.

18 Department of Scientific and Industrial Research and Indian Institute of Foreign Trade, Compendium on Technology Exports: An Illustrative Compilation of Exported and Exportable Technologies from India, Volume IX, New Delhi, January 2010, vii-viii.

19 Nasscom, 9.

20 Tomas Meri, "Science and Technology," Eurostat: Statistics in Focus 25/2009, 1.

21 Xinhua, "China's High-Tech Export Grows Fast in Past Five Years," People's Daily, 29 January 2006, http://english.peopledaily.com.cn/200601/29/eng20060129_239191.html.

22 National Science Board.

23 Xing Yuping, "China's High-Tech Exports: Myth and Reality" (East Asian Institute Background Paper No. 506, National University of Singapore, Singapore, 25 February 2010).

24 Rudai Yang, Yang Yao and Ye Zhang, "Technological Structure and its Upgrading in China's Exports," China Economic Journal 2, no.l (2009), 55-71.

25 Embassy of the People's Republic of China in India, "A Survey Before 2003," http://www.chinaembassy.org.in/eng/jjmy/zymywI/jbxx/t61319.htm; Ananth Krishnan, "India-China Trade Surpasses Target," The Hindu, 27 January 2011, http://www.thehindu.com/news/international/articlell29785. ece.

26 People's Republic of China Ministry of Commerce, "Top Ten Trading Partners (2008/10)," 12 January 2009, http://english.mofcom.gov.cn/aarticle/statistic/ie/20090I/20090105999698.html; People's Republic of China Ministry of Commerce, "Top Ten Export Markets 2008/10)," 12 January 2009, http://english.mofcom.gov.cn/aarticle/statistic/ie/200901/20090105999708.html.

27 Xinhua, "India Aims to Double Trade with China in 4 Years," China Daily, 19 August 2010, http:// www.chinadaily.com.cn/china/2010-08/19/content_l 1 172936.htm.

28 "India and China Set $100bn Trade Target by 2015," BBC News, 16 December 2010, http://www. bbc.co.uk/news/world-south-asia-12006092.

29 United Nations, UNCTAD Handbook of Statistics 2010 (New York: UN Publications, 2010), 4.

30 Arvind Panagariya, "India and China: Trade and Foreign Investment" (Stanford Center for International Development Working Paper No. 302, November 2006), 13.

31 Ibid., 14.

32 "India China Economy, Indo-China Trade Relation," Economy Watch, http://www.economywatch. com/world_economy/china/indo-china-trade-relations.htrnl (accessed 31 January 2011).

33 For more on Indian and Chinese firms see N. S. Siddharthan and K. Narayanan, Indian and Chinese Enterprises: Global Trade, Technology and Investment Regimes (London: Routledge, 2010).

34 Confederation of Indian Industry, "India-China Economic & Commercial Relations," IndiaChina. org, http://www.indiachina.org/resources/India_China_Economic_and_Commercial_Relations.htm (accessed 29 January 201 1).

35 Chris Devonshire-Ellis, "India and China: The Proverbial Hare and Tortoise?" 2point6billion.com, 9 March 2010, http://www.2point6billion.com/news/2010/03/09/china-and-india-the-proverbial-hareand-tortoise-4364.html; People's Republic of China, "Introduction of FiberHome Technologies Group," http://www.chinaembassy.org.in/eng/jjmy/zymywl/zzgs/tl40516.htm (accessed 29 January 2011).

36 Anil Gupta and Haiyan Wang, "Economic Integration between India and China," Globalist, 7 August 2009, http://www.theglobalist.com/storyid.aspx?StoryId=7920.

37 "Lenovo Sees Double Digit India Market Share Soon," Reuters, 23 June 2010, http://www.reuters. com/article/2010/06/23/lenovo-india-idUSSGE65L0GC20100623.

38 Sunil Kashyap, "Trade Deals between India and China," Stock Watch, 13 December 2010, http:// www.stockwatch.in/trade-deals-between-india-and-china-28425.

39 "China's High-Tech Exports Suffer Rising Trade Friction," Xinhuanet, 12 December 2010, http:// news.xinhuanet.com/english2010/china/2010-12/12/c_13645648_2.htm.

40 "Obama Calls for 'Sputnik Moment' to Stay Ahead of India, China," Hindustan Times, 7 December 2010, http://www.hindustantimes.com/Obama-calls-for-Sputnik-moment-to-stay-ahead-ofIndia-China/Hl-Articlel-635340.aspx.

41 John Bussey, "U.S. Firms, and China Are Locked in a Technology War," Wall Street Journal, 2 February 2011, http://online.wsj.com/article/SB10001424052748703439504576116152871912040. html?mod=WSJINDIA_hpp_LEFTTopWhatNews.

42 Laura Freschi, "China in Africa: Myths and Realities," 9 February 2010, http://aidwatchers. com/2010/02/china-http://aidwatchers.com/2010/02/china-in-africa-myths-and-realities/.

43 "Research Collaboration in Science and Technology Programme 201 1 - China," College Scholarships, http://scholarshipsnews.org/research-collaboration-in-science-and-technology-programme201 l-%E2%80%93-china/.